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

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.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of COSCO SHIPPING Development Co., Ltd..

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) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER

(3) APPLICATION FOR WHITEWASH WAIVER

(4) SPECIAL DEAL

(5) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

(6) PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

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 8 to 41 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 42 to 43 of this circular. A letter from Messis Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 44 to 81 of this circular.

A notice convening the EGM to be held at 2:30 p.m. on Friday, 16 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 1 November 2016, which is reproduced on pages EGM-1 to EGM-6 of this circular.

A notice convening the H Shares Class Meeting to be held at 2:30 p.m. on Friday, 16 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 1 November 2016, which is reproduced on pages HCM-1 to HCM-4 of this circular.

For identification purpose only.

1 December 2016

CONTENTS

			Page
DEFINITIONS. . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	THE	BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
LETTER FROM	THE	INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . .	42
LETTER FROM	THE	INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	44
APPENDIX I	–	PROPOSAL IN RESPECT OF THE PROPOSED
		NON-PUBLIC ISSUANCE OF A SHARES . . . . . . . . .	I-1
APPENDIX II	–	FEASIBILITY REPORT ON THE USE OF
		PROCEEDS FROM THE PROPOSED NON-
		PUBLIC ISSUANCE OF A SHARES. . . . . . . . . . . . . .	II-1
APPENDIX III	–	STATEMENT ON THE EXEMPTION FROM THE
		PREPARATION OF A REPORT ON THE
		UTILISATION OF PROCEEDS FROM PREVIOUS
		FUND RAISING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	REMEDIAL MEASURES REGARDING DILUTION
		ON CURRENT RETURNS AND THE IMPACT ON
		THE COMPANY’S MAJOR FINANCIAL
		INDICATORS BY THE PROPOSED NON-PUBLIC
		ISSUANCE OF A SHARES . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	–	PROPOSED AMENDMENTS TO THE
		ARTICLES OF ASSOCIATION. . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI	–	SHAREHOLDERS’ RETURN PLAN . . . . . . . . . . . . . . .	VI-1
APPENDIX VII	–	FINANCIAL INFORMATION OF THE GROUP. . . . . .	VII-1
APPENDIX VIII	–	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . .	VIII-1
NOTICE OF EGM. . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1
NOTICE OF H SHARES CLASS MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .			HCM-1

– 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
“A Shareholder(s)” holder(s) of A Share(s)
“A Shares Class Meeting” the class meeting of the A Shareholders
“A Share Last Trading Day”
27 September 2016
“Announcement”

the announcement of the Company dated 11 October 2016 in relation to, among other things, (i) the Proposed Non-public Issuance of A Shares, (ii) the CS Subscription, (iii) the Specific Mandate, (iv) the Whitewash Waiver, (v) the Special Deal, (vi) the Proposed Amendments to the Articles of Association and (vii) the Shareholders’ Return Plan

“Articles of Association”
the articles of association of the Company
“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(s)”
has the meaning ascribed to it under the Listing Rules
“Average Trading Price”
the average trading price of the A Shares during the 20 trading days immediately preceding the Price Determination Date, which is calculated by dividing the total turnover of the A Shares by the total trading volume of the A Shares during the 20 trading days immediately preceding the Price Determination Date
“Benchmark Price”
RMB3.66 per A Share
“Board”
the board of directors of the Company
“Cap”
3,278,688,524 A Shares

– 1 –

DEFINITIONS

“China Shipping”
“Class Meetings”
“Company”
“connected person(s)”
“controlling shareholder”
“COSCO Shipping”
“COSCO Shipping Leasing”
“CS Maximum Subscription Scenario”

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

the A Shares Class Meeting and the H Shares Class Meeting
COSCO SHIPPING Development Co., Ltd.[*] (中遠海運發展股份有限公司), a joint stock limited company established in the PRC, whose H shares and A shares are listed on Main Board of the Hong Kong Stock Exchange (Stock Code: 2866) and the Shanghai Stock Exchange (Stock Code: 601866), respectively
has the meaning ascribed to it under the Listing Rules

has the meaning ascribed to it under the Listing Rules

China COSCO Shipping Corporation Limited[*] (中國遠洋海運集團有限公司), a PRC state-owned enterprise and the indirect controlling shareholder of the Company

COSCO Shipping Leasing Co., Ltd.[*] (中遠海運租賃有限公司), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of the Company

the scenario where (i) China Shipping subscribes for such number of A Shares for an amount of up to RMB7 billion at the Benchmark Price (being the maximum amount that China Shipping has undertaken to subscribe for pursuant to the CS Subscription Agreement), (ii) the other target subscribers subscribe for such number of A Shares for an aggregate amount of up to RMB5 billion at the Benchmark Price and (iii) there is no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the A Shares pursuant to the Proposed Non-public Issuance of A Shares

– 2 –

DEFINITIONS

“CS Minimum Subscription Scenario”
“CS Subscription”
“CS Subscription Agreement”
“CSRC”
“Director(s)”
“EGM”
“Executive”
the scenario where (i) China Shipping subscribes for such number of A Shares for an amount of up to RMB5 billion at the Benchmark Price (being the minimum amount that China Shipping has undertaken to subscribe for pursuant to the CS Subscription Agreement), (ii) the other target subscribers subscribe for such number of A Shares for an aggregate amount of up to RMB7 billion at the Benchmark Price and (iii) there is no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the A Shares pursuant to the Proposed Non-public Issuance of A Shares
the proposed subscription of A Shares by China Shipping pursuant to the CS Subscription Agreement
the subscription agreement dated 11 October 2016 entered into between the Company and China Shipping, pursuant to which China Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares
China Securities Regulatory Commission (中國證券監督管理委員會)
director(s) of the Company
the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, (i) the Proposed Non-public Issuance of A Shares, (ii) the CS Subscription, (iii) the Specific Mandate, (iv) the Whitewash Waiver, (v) the Special Deal, (vi) the Proposed Amendments to the Articles of Association and (vii) the Shareholders’ Return Plan
the Executive Director of the Corporate Finance Division of the SFC or any delegates of the Executive Director

– 3 –

DEFINITIONS

“FIL” 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 an indirect wholly owned subsidiary of the Company “Group” the Company and its subsidiaries as at the date of this circular “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 “H Shareholder(s)” holder(s) of H Share(s) “H Shares Class Meeting” the class meeting of the H Shareholders “H Share Last Trading Day” 11 October 2016 “HK$” Hong Kong dollar, the lawful currency of Hong Kong “HKFRS” the Hong Kong Financial Reporting Standards “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited “Implementation Rules for the the Implementation Rules for the Non-public Issuance of Non-public Issuance of Shares Shares by Listed Companies 《上市公司非公開發行股票 by Listed Companies” 實施細則》

“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 the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal in accordance with the Listing Rules and the Takeovers Code

– 4 –

DEFINITIONS

“Independent Financial Adviser”
“Independent Shareholders”
“Latest Practicable Date”
“Listing Rules”
“PRC”
“PRC GAAP”
“PRC Legal Advisers”
“Price Determination Date”
“Proposed Amendments to the Articles of Association”
Messis Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, which has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal
Shareholders other than (i) China Shipping and parties acting in concert with it and (ii) all other parties (if any) who are interested or involved in the Proposed Nonpublic Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal
28 November 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
the People’s Republic of China excluding, for the purpose of this circular, Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
the Generally Accepted Accounting Principles in the PRC
the PRC legal advisers to the Company
12 October 2016, being the date of the announcement of the Board resolutions passed at the ninth meeting of the fifth session of the Board

the proposed amendments to the Articles of Association, the full text of the English translation of the proposed amendments to the Articles of Association, which were prepared in the Chinese language, is set out in Appendix V to this circular

– 5 –

DEFINITIONS

“Proposed Non-public Issuance of A Shares” or “Non-public Issuance of A Shares”
the proposed non-public issuance of not more than 3,278,688,524 A Shares by the Company to not more than 10 specific target subscribers, including China Shipping
“Relevant Period”
the period of six months preceding the date of the Announcement and ending on the Latest Practicable Date
“RMB”
Renminbi, the lawful currency of the PRC
“SASAC”
State-owned Assets Supervision and Administration Commission of the State Council of the PRC (中華人民共和國國務院國有資產監督管理委員會)
“SFC”
the Securities and Futures Commission of Hong Kong
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended and supplemented from time to time
“Share(s)”

A Share(s) and H Share(s)

“Shareholder(s)” holder(s) of Share(s)
“Shareholders’ Return Plan”
the shareholders’ return plan for the coming three years (2016 to 2018) of the Company, the full text of the English translation of the Shareholders’ Return Plan, which was prepared in Chinese, is set out in Appendix VI to this circular.
“Special Deal”
the Proposed Non-public Issuance of A Shares which constitutes a special deal under Rule 25 of the Takeovers Code
“Specific Mandate”
the specific mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings to issue the A Shares under the Proposed Non-public Issuance of A Shares
“Supervisor(s)” the supervisor(s) of the Company
“Takeovers Code”
the Hong Kong Code on Takeovers and Mergers

– 6 –

DEFINITIONS

“trading day(s)”

“Whitewash Waiver”

“%”

a day on which the Shanghai Stock Exchange or the Hong Kong Stock Exchange (as the case may be) is open for dealing or trading in securities

a waiver from the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code in respect of the obligations of China Shipping to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by China Shipping and parties acting in concert with it which would otherwise arise as a result of the issue of the A Shares under the Proposed Non-Public Issuance of A Shares and the CS Subscription Agreement

per cent

For identification purpose only.

– 7 –

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 Legal address in the PRC Ms. Sun Yueying Room A-538 Mr. Wang Daxiong International Trade Center Mr. Liu Chong China (Shanghai) Pilot Free Trade Zone Mr. Xu Hui Shanghai The PRC Non-executive Directors Mr. Feng Boming Principal place of business in the PRC Mr. Huang Jian Maritime Research Building Mr. Chen Dong 628 Minsheng Road Pudong New Area Independent Non-executive Directors Shanghai Mr. Cai Hongping The PRC Mr. Tsang Hing Lun Ms. Hai Chi Yuet Principal place of business in Hong Kong Mr. Graeme Jack 31/F, Tower 2, Kowloon Commerce Centre 51 Kwai Cheong Road Kwai Chung New Territories Hong Kong

1 December 2016

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER

(3) APPLICATION FOR WHITEWASH WAIVER

(4) SPECIAL DEAL

(5) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

(6) PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

I. INTRODUCTION

Reference is made to (i) the Announcement, (ii) the announcement of the Company dated 31 October 2016 in relation to the delay in despatch of circular, (iii) the notice of the EGM dated 1 November 2016 and (iv) the notice of the H Shares Class Meeting dated 1 November 2016.

– 8 –

LETTER FROM THE BOARD

As disclosed in the Announcement, on 11 October 2016, the Board has approved the Proposed Non-public Issuance of A Shares, pursuant to which the Company will issue a maximum of 3,278,688,524 A Shares (subject to adjustment) to not more than 10 specific target subscribers, including China Shipping, which would raise a gross proceeds of up to RMB12 billion.

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

(a) further details of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver, the Special Deal, the Proposed Amendments to the Articles of Association and the Shareholders’ Return Plan;
(b) the letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal; 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 Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

II. PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

On 11 October 2016, the Board has approved the Proposed Non-public Issuance of A Shares, pursuant to which the Company will issue a maximum of 3,278,688,524 A Shares (subject to adjustment) to not more than 10 specific target subscribers, including China Shipping, which would raise a gross proceeds of up to RMB12 billion.

– 9 –

LETTER FROM THE BOARD

The details of the Proposed Non-public Issuance of A Shares are set out below.

1. Details of the Proposed Non-public Issuance of A Shares

Class and par value of Shares to be issued:

A Shares with a par value of RMB1.00 each.

Method and time of issuance:

The Proposed Non-public Issuance of A Shares will be carried out by way of non-public issue of A Shares to not more than 10 specific target subscribers, including China Shipping. The Company will complete the Proposed Nonpublic Issuance of A Shares within six months after obtaining the approval from the CSRC.

Number of A Shares to be issued:

A maximum of 3,278,688,524 A Shares will be issued under the Proposed Non-public Issuance of A Shares, which represents:

(i) approximately 41.33% of the existing issued A Shares and approximately 28.06% of the existing total issued share capital of the Company as at the Latest Practicable Date; and
(ii) approximately 29.25% of the enlarged issued A Shares and approximately 21.91% of the enlarged total issued share capital of the Company upon completion of the Proposed Non-public Issuance of A Shares.

Q = Q0 x (P0/P)

where,

(i) Q is the Cap after adjustment for any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares;

– 10 –

LETTER FROM THE BOARD

(ii) Q0 is the Cap;
(iii) P is the Benchmark Price after adjustment for any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares; and
(iv) P0 is the Benchmark Price.

On 11 October 2016, the Board has approved the Proposed Non-public Issuance of A Shares and passed resolutions that the gross proceeds to be raised from the Proposed Non-public Issuance of A Shares shall be not more than RMB12 billion and that the Cap and the Benchmark Price shall be adjusted if there occurs any ex-right or exdividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares. As such, notwithstanding any adjustment to the Cap and/or the Benchmark Price, the maximum gross proceeds of RMB12 billion to be raised from the Proposed Non-public Issuance of A Shares as approved by the Board will in any event not exceed RMB12 billion.

According to the Company Law of the PRC and the Articles of Association, the Company may only distribute dividends out of its distributable profits, being the Company’s profit after income tax after offsetting (i) the accumulated losses brought forward from the previous years and (ii) the allocations to the statutory surplus reserve fund and, if any, the discretionary common reserve (in such order of priorities) before payment of any dividend on shares.

– 11 –

LETTER FROM THE BOARD

As disclosed in the audited consolidated financial statements of the Group for the year ended 31 December 2015 as set out in Appendix VII to this circular, the Company has accumulated losses as at 31 December 2015 and as such, the Company is of the view that the possibility of adjusting the Benchmark Price and the Cap as a result of ex-right or ex-dividend events for the Proposed Nonpublic Issuance is relatively low.

Subject to the Cap, the Board proposes that the Shareholders at the EGM and the Class Meetings grant to the Board and its authorised person(s) such authority as necessary for determining the final number of A Shares to be issued based on the market conditions and negotiations with the sponsor (the lead underwriter) with reference to the amount of proceeds to be raised and the actual amount of subscription received.

China Shipping undertakes to subscribe for such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Nonpublic Issuance of A Shares.

The Proposed Non-public Issuance of A Shares is not underwritten.

Target subscribers:

The target subscribers for the Proposed Non-public Issuance of A Shares will be not more than 10 specific subscribers (including China Shipping). The target subscribers other than China Shipping include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other qualified investors in compliance with applicable laws and regulations. Securities investment fund management companies, which subscribe for the A Shares with two or more of the funds managed by them, shall each be taken as one single subscriber. Trust companies may only subscribe for the A Shares with their own funds.

– 12 –

LETTER FROM THE BOARD

The H Shareholders (other than China Shipping) are not entitled to subscribe for A Shares under the Proposed Non-public Issuance of A Shares. Please refer to the section headed “VII. Implications under the Takeovers Code – 2. Special Deal in relation to the Proposed Non-public Issuance of A Shares” below for further details.

The final list of subscribers (other than China Shipping) will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the EGM and the Class Meetings and the sponsor (the lead underwriter) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.

As at the Latest Practicable Date, apart from the CS Subscription Agreement, the Company has not entered into any agreement with any potential subscribers in respect of the Proposed Non-public Issuance of A Shares. The Company currently expects that, with the exception of China Shipping: (i) the A Shares to be issued under the Proposed Non-public Issuance of A Shares will only be issued to subscribers who and whose ultimate beneficial owners are third parties independent of the Company and its connected persons, and none of them will become substantial shareholders of the Company nor, together with parties acting in concert with it, would trigger mandatory general offer obligation under the Takeovers Code, upon completion of their respective subscriptions of the A Shares under the Proposed Non-public Issuance of A Shares; and (ii) the subscribers will not be parties acting in concert with China Shipping. The Company will comply with all the relevant requirements of the Listing Rules and the Takeovers Code should there be any changes or if otherwise necessary.

– 13 –

LETTER FROM THE BOARD

Price Determination Date, issue price and pricing principles:

The Price Determination Date of the Proposed Non-public Issuance of A Shares is the date of the announcement of the Board resolutions passed at the ninth meeting of the fifth session of the Board, being 12 October 2016.

The issue price shall not be lower than the Benchmark Price, being 90% of the Average Trading Price, which is RMB3.66 per A Share. The final issue price will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the EGM and the Class Meetings and the sponsor (the lead underwriter) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.

The Benchmark Price represents:

(i) a premium of approximately 207.56% to the latest net asset value of RMB1.19 per Share (based on the unaudited net asset value of the Company as at 30 September 2016 as disclosed in the quarterly report of the Company for the third quarter of 2016 and rounded to the nearest two decimal places);
(ii) a discount of approximately 19.38% to the closing price of RMB4.54 per A Share as quoted on the Shanghai Stock Exchange as at the Latest Practicable Date;
(iii) a discount of approximately 8.04% to the closing price of RMB3.98 per A Share as quoted on the Shanghai Stock Exchange as at the A Share Last Trading Day;
(iv) a discount of approximately 8.50% to the average closing price of RMB4.00 per A Share as quoted on the Shanghai Stock Exchange for the last five trading days up to and including the A Share Last Trading Day; and

– 14 –

LETTER FROM THE BOARD

(v) a discount of approximately 8.50% to the average closing price of RMB4.00 per A Share as quoted on the Shanghai Stock Exchange for the last 10 trading days up to and including the A Share Last Trading Day.

All the target subscribers will subscribe for the A Shares under the Proposed Non-public Issuance of A Shares at the same issue price in cash. China Shipping will not participate in the price inquiry exercise for the Proposed Non-public Issuance of A Shares, and will accept the price inquiry results and subscribe for the A Shares at the same issue price as other target subscribers.

The Benchmark Price will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalisation of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of the A Shares. The formula for the adjustment is set out below:

P = (P0 – Div)/(1 + N)

where,

(i) P is the Benchmark Price after adjustment for any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares;
(ii) P0 is the Benchmark Price;
(iii) Div is the amount of cash dividend per Share in RMB distributed by the Company between the Price Determination Date and the date of the Proposed Non-public Issuance of the A Shares; and
(iv) N is the number of (a) Shares being issued upon capitalisation of capital reserves for each Share, and/or (b) Shares being issued upon distribution of share dividend for each Share by the Company between the Price Determination Date and the date of the Proposed Non-public Issuance of the A Shares.

– 15 –

LETTER FROM THE BOARD

Please refer to the section headed “II. Proposed Nonpublic Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Number of A Shares to be issued” for further details of the adjustment.

Conditions precedent of the Proposed Non-public Issuance of A Shares:

The Proposed Non-public Issuance of A Shares is conditional upon:

(i) the obtaining of the approval from the Shareholders at the EGM and the Class Meetings;
(ii) the obtaining of the approval from the SASAC;
(iii) the obtaining of the approval from the CSRC; and
(iv) the obtaining of the Whitewash Waiver and the consent to the Special Deal from the Executive.

According to the PRC Legal Advisers, none of the conditions above may be waived by any party to the Proposed Non-public Issuance of A Shares and therefore, if any of the conditions above is not satisfied, the Company will not proceed with the Proposed Non-public Issuance of A Shares.

An application for the approval of the Proposed Nonpublic Issuance of A Shares has been submitted to the SASAC on 7 November 2016 by COSCO Shipping.

As at the Latest Practicable Date, no application for the approval of the Proposed Non-public Issuance of A Shares has been submitted to the CSRC by the Company. The Company will submit the application for approval to the CSRC following the approval by the SASAC and by the Independent Shareholders of the Proposed Non-public Issuance of A Shares at the EGM and the Class Meetings, in accordance with applicable laws and regulations in the PRC.

– 16 –

LETTER FROM THE BOARD

An application has been made by China Shipping to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code on 10 November 2016 and an application has been made by the Company to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeovers Code on 8 November 2016.

Lock-up period:

China Shipping shall not transfer the A Shares subscribed under the Proposed Non-public Issuance of A Shares within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares. All other target subscribers shall not transfer the A Shares subscribed under the Proposed Non-public Issuance of A Shares within 12 months from the date of completion of the Proposed Non-public Issuance of A Shares.

Place of listing of the A Shares to be issued:

The Company will apply to the Shanghai Stock Exchange for the listing of, and permission to deal in, the A Shares to be issued under the Proposed Non-public Issuance of A Shares. The A Shares to be issued under the Proposed Non-public Issuance of A Shares can be traded on the Shanghai Stock Exchange upon the expiration of the lock-up period.

Use of proceeds:

The gross proceeds to be raised from the Proposed Non-public Issuance of A Shares will be not more than RMB12 billion (inclusive of the subscription for an amount of not less than RMB5 billion and not more than RMB7 billion by China Shipping pursuant to the CS Subscription Agreement). The net proceeds from the Proposed Non-public Issuance of A Shares (after deducting all applicable costs and expenses incurred in connection with the Proposed Non-public Issuance of A Shares) are intended to be used in the following manner:

(i) as to approximately RMB6 billion to be used for the capital injection in COSCO Shipping Leasing, which in turn will be used by COSCO Shipping Leasing to invest in financial leasing assets during 2017 to 2019 for the purpose of expanding its businesses into new areas like medical treatment, energy, education and innovation;

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(ii) as to approximately RMB2.4 billion to be used for the capital injection in FIL, which in turn will be used by FIL to purchase containers during 2017 to 2019 for the purpose of maintaining and expanding container scale and securing competitive position in the market;
(iii) as to approximately RMB1.8 billion to be used for repayment of maturing corporate bonds (which are held by persons other than the existing Shareholders), the principal terms of which are as follows:

Issuer: The Company Date of first issuance: 12 June 2007 Maturity date: On the date falling upon the expiry of 10 years after the date of first issuance, (i.e. 12 June 2017) Principal amount: RMB1.8 billion Interest: 4.51% per annum

(iv) as to the remaining proceeds of approximately RMB1.8 billion to be used to replenish working capital of the Company.

Please refer to the “Feasibility Report on the Use of Proceeds from the Proposed Non-public Issuance of A Shares” as set out in Appendix II to this circular for further details of the use of proceeds.

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LETTER FROM THE BOARD

If the actual proceeds to be raised from the Proposed Non-public Issuance of A Shares are less than the aggregate amount of the proceeds as per the above allocation, the Company will make up for the shortfall by its self-raised fund. The Board may make adjustments as to the specific projects, the order of priority and the specific amount allocated for each project based on the net proceeds actually raised. Before the receipt of the proceeds to be raised from the Proposed Non-public Issuance of A Shares, the Company will, depending on the status of the projects, finance these projects by funds raised through its self-raised fund, which will be substituted by the proceeds raised from the Proposed Non-public Issuance of A Shares in accordance with relevant procedures as required by applicable laws and regulations once the same becomes available.

Specific Mandate to issue A Shares:
The Company will issue the A Shares under the Specific Mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings.
Distribution of profit:

Upon completion of the Proposed Non-public Issuance of A Shares, the existing and new Shareholders will be entitled to share the Company’s cumulative undistributed profits at the time of the Proposed Non-public Issuance of A Shares.

Rights of the A Shares The A Shares to be issued under the Proposed Non-public to be issued: Issuance of A Shares, when fully paid and issued, will rank pari passu in all respects amongst themselves and with the A Shares in issue at the time of the issuance of such A Shares.
Validity period of the resolution:
The resolution regarding the Proposed Non-public Issuance of A Shares shall be valid for 12 months from the date of the passing of the resolution at the EGM and the Class Meetings.

2. Proposal in relation to the Proposed Non-public Issuance of A Shares

Each of the following 10 resolutions in the proposal in relation to the Proposed Non-public Issuance of A Shares will be submitted, by way of special resolutions, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

(i) class and par value of shares to be issued;
(ii) method and time of issuance;

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(iii) target subscribers;
(iv) Price Determination Date, issue price and pricing principles;
(v) number of A Shares to be issued and method of subscription;
(vi) lock-up period;
(vii) place of listing of the A Shares to be issued;
(viii)use of proceeds;
(ix) distribution of profit prior to the Proposed Non-public Issuance of A Shares; and
(x) validity period of resolution.

3. Proposal in relation to the satisfaction of the criteria for non-public issuance of A Shares

Pursuant to the Company Law of the PRC, the Securities Law of the PRC, the “Measures for Administration of the Issuance of Securities by Listed Companies” (《上市公司證券發行管理辦法》) and the Implementation Rules for the Non-public Issuance of Shares by Listed Companies, the Company, following self-examination and verification of the actual situation and relevant matters of the Company, considers that the Company satisfies all the criteria for non-public issuance of A Shares.

The proposal in relation to the satisfaction of the criteria for non-public issuance of A Shares will be submitted, by way of ordinary resolution, for the Shareholders’ consideration and approval at the EGM.

4. Proposal in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares”

The “Proposal in respect of the Proposed Non-public Issuance of A Shares”, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of the “Proposal in respect of the Proposed Non-public Issuance of A Shares” is set out in Appendix I to this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares” will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

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5. Proposal in relation to the “Feasibility Report on the Use of Proceeds from the Proposed Non-public Issuance of A Shares”

The “Feasibility Report on the Use of Proceeds from the Proposed Non-public Issuance of A Shares”, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of the “Feasibility Report on the Use of Proceeds from the Proposed Non-public Issuance of A Shares” is set out in Appendix II to this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the “Feasibility Report on the Use of Proceeds from the Proposed Non-public Issuance of A Shares” will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM.

6. Proposal in relation to the exemption from the preparation of a report on the utilisation of proceeds from previous fund raising

The “Statement on the Exemption from the Preparation of a Report on the Utilisation of Proceeds from Previous Fund Raising”, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of the “Statement on the Exemption from the Preparation of a Report on the Utilisation of Proceeds from Previous Fund Raising” is set out in Appendix III to this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the exemption from the preparation of a report on the utilisation of proceeds from previous fund raising will be submitted, by way of ordinary resolution, for the Shareholders’ consideration and approval at the EGM.

7. Proposal in relation to the “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”

Pursuant to the requirements set out in the “Opinion of the State Council on Further Facilitating the Healthy Development of the Capital Markets” (《國務院關於進一步促進資本市場健康發展的若干意見》), the “Opinions of the General Office of the State Council on Further Strengthening the Protection of the Legitimate Rights and Interests of Minority Investors in the Capital Markets” (《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》) and the “Guidance Opinion on Matters Pertaining to Dilution of Return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Restructuring” (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》), the Company has prepared the “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”.

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LETTER FROM THE BOARD

The “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares” is set out in Appendix IV to this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”, will be submitted, by way of ordinary resolution, for the Shareholders’ consideration and approval at the EGM.

8. Proposal in relation to the undertakings by the Company’s controlling shareholders, Directors and senior management with regards to the remedial measures regarding dilution on current returns by the Proposed Non-public Issuance of A Shares

Pursuant to the requirements set out in the “Guidance Opinion on Matters Pertaining to Dilution of Return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Restructuring” (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》), each of (i) China Shipping, (ii) COSCO Shipping and (iii) the Directors and senior management of the Company has provided an undertaking to the Company to ensure the due implementation of the “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”.

The form of the aforementioned undertakings was set out in the “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”, which was prepared in the Chinese language and disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of “Remedial Measures Regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares” is set out in Appendix IV to this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the undertakings by the Company’s controlling shareholders, Directors and senior management with regards to the remedial measures regarding dilution on current returns by the Proposed Non-public Issuance of A Shares, will be submitted, by way of ordinary resolution, for the Shareholders’ consideration and approval at the EGM.

9. Proposal in relation to the Specific Mandate

As stated in the section headed “II. Proposed Non-public Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Specific Mandate to issue A Shares”, the Company will issue the A Shares under the Proposed Non-public Issuance of A Shares pursuant to the Specific Mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings.

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LETTER FROM THE BOARD

In this connection, the Board proposes to seek the approval from the Independent Shareholders at the EGM and the Class Meetings for granting the Specific Mandate to the Board to issue not more than 3,278,688,524 A Shares at an issue price of not less than RMB3.66 per A Share to not more than 10 specific target subscribers, including China Shipping, under the Proposed Non-public Issuance of A Shares (including the issue of such number of A Shares to China Shipping pursuant to the CS Subscription Agreement).

The Cap, being 3,278,688,524 A Shares, represents (i) approximately 41.33% of the existing issued A Shares and approximately 28.06% of the existing total issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 29.25% of the enlarged issued A Shares and approximately 21.91% of the enlarged total issued share capital of the Company upon completion of the Proposed Non-public Issuance of A Shares.

The proposal in relation to the Specific Mandate will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

10. Proposal in relation to the authorisation to the Board and any person authorised by the Board to handle all matters in connection with the Proposed Non-public Issuance of A Shares

In order to ensure effective and efficient implementation of the Proposed Non-public Issuance of A Shares, the Board proposes to seek approval from the Shareholders at the EGM and the Class Meetings for authorisation to the Board and any person authorised by the Board to handle all matters in connection with the Proposed Non-public Issuance of A Shares in accordance with the relevant laws and regulations, including but not limited to the following:

(i) authorise the Board to formulate and implement specific proposals for the Proposed Non-public Issuance of A Shares in accordance with the proposals as approved by the Shareholders and specific circumstances at the time of issuance, including but not limited to the target subscribers, timing of the issuance, number of A Shares to be issued, the commencement date and end date of the issuance, the subscription price, method of subscription and other matters relating to determination of the subscription price;
(ii) authorise the Board to supplement, review and adjust the specific proposals for the Proposed Non-public Issuance of A Shares in accordance with the requirements of relevant laws and regulations, changes in polices, changes in market conditions and requirements of relevant authorities;
(iii) authorise the Board to handle the filing and registration matters relating to the Proposed Non-public Issuance of A Shares, prepare, revise and submit the application materials for to the Proposed Non-public Issuance of A Shares in accordance with the requirements of the relevant securities regulatory authorities;
(iv) authorise the Board to determine and engage intermediaries such as the sponsor (lead underwriter), revise, supplement, sign, submit, report and execute all

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agreements and documents relating to the Proposed Non-public Issuance of A Shares, including without limited to, underwriting and sponsoring agreement, subscription agreement, material contracts involved in implementing the investment projects with the proceeds raised;

(v) authorise the Board to set up a designated account for the Proposed Non-public Issuance of A Shares which shall be used solely for depositing, management and use of the proceeds raised (and for no other purposes), and execute tripartite custodian agreement with the sponsor and the relevant commercial bank within one month after the proceeds become available;
(vi) authorise the Board to increase the registered capital of the Company, amend the Articles of Association and handle relevant registration and filing procedures in accordance with the results of the Proposed Non-public Issuance of A Shares;
(vii) authorise the Board to handle registration, lock-up and listing of the A Shares with the Shanghai Stock Exchange and the Shanghai branch of China Securities Depository and Clearing Co., Ltd. upon completion of the Proposed Non-public Issuance of A Shares;
(viii) authorise the Board to make adjustments to the specific arrangement on the use of the proceeds raised within the scope permitted in the Shareholders’ resolutions;
(ix) if there is any new requirement under the law or by the securities regulatory authorities or if there is any change to the market condition, authorize the Board to adjust the Proposed Non-public Issuance of A Shares and the use of proceeds raised and continue to handle matters relating to the Proposed Non-public Issuance of A Shares (other than those matters requiring Shareholders’ approval in accordance with the relevant laws, regulations or Articles of Association or as requested by the regulatory authorities) in accordance with the requirements of relevant laws and regulations, and by relevant governmental authorities and securities regulatory authorities;
(x) authorise the Board to handle the filing, listing and other relevant matters relating to the Proposed Non-public Issuance of A Shares within the scope permitted under the laws, regulations, normative documents and the Articles of Association;
(xi) authorise the Board to determine whether to continue with the Proposed Non-public Issuance of A Shares in the event of material change in market condition, polices or laws;
(xii) authorise the Board to handle all other matters in connection with the Proposed Non-public Issuance of A Shares not listed in (i) to (xi) above; and
(xiii) authorise the Board to authorise the chairman of the Company or any person authorised by him/her to exercise the authority granted to the Board herein (provided that the Board is duly authorised for the above matters), unless otherwise provided under the laws, regulations, normative documents and the Articles of Association.

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LETTER FROM THE BOARD

The aforementioned authorisation shall be valid for 12 months from the date of the approval by the Shareholders.

The proposal in relation to the authorisation to the Board and any person authorised by the Board to handle all matters in connection with the Proposed Non-public Issuance of A Shares will be submitted, by way of special resolution, for the Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

III. CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF A SHARES BY CHINA SHIPPING

The principal terms of the CS Subscription Agreement are set out below.

1. Principal terms of the CS Subscription Agreement

Date: 11 October 2016

Parties: (1) The Company, as the issuer; and (2) China Shipping, as the subscriber.

Number of A Shares to be issued:

Subject to the Cap, the number of the A Shares to be issued to China Shipping under the CS Subscription Agreement will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the EGM and the Class Meetings, based on the market conditions and negotiations with the sponsor (the lead underwriter) with reference to the amount of proceeds to be raised and the actual amount of subscription received.

The Cap will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares. Please refer to the section headed “II. Proposed Non-public Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Number of A Shares to be issued” for further details of the adjustment.

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Subscription price and pricing principles:

Pursuant to the CS Subscription Agreement, China Shipping undertakes to subscribe for such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Nonpublic Issuance of A Shares. The subscription price shall not be lower than the Benchmark Price, being 90% of the Average Trading Price, which is RMB3.66 per A Share.

The final subscription price will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the EGM and the Class Meetings and the sponsor (the lead underwriter) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.

China Shipping (including the senior management who are also Directors) will not participate in the pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target subscribers.

The Benchmark Price will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares. Please refer to the section headed “II. Proposed Non-public Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Price Determination Date, issue price and pricing principles” for further details of the adjustment.

The aggregate subscription price under the CS Subscription Agreement will be paid by China Shipping to the Company in cash by bank transfer on the specific payment date as confirmed by the sponsor (the lead underwriter) in the notice of payment.

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Conditions precedent of the CS Subscription:

The CS Subscription is conditional upon:

(i) the obtaining of the approval from the Board and the Shareholders at the EGM and the Class Meetings;
(ii) the obtaining of the approval from the SASAC;
(iii) the obtaining of the approval from the CSRC; and
(iv) the obtaining of the Whitewash Waiver and the consent to the Special Deal from the Executive.

According to the PRC Legal Advisers, none of the conditions above may be waived by either party to the CS Subscription Agreement and therefore, if any of the conditions above is not satisfied, the Company will not proceed with the CS Subscription.

An application for the approval of the CS Subscription has been submitted to the SASAC on 7 November 2016 by COSCO Shipping.

As at the Latest Practicable Date, no application for the approval of the CS Subscription has been submitted to the CSRC by the Company. The Company will submit the application for approval to the CSRC following the approval by the SASAC and by the Independent Shareholders of the CS Subscription at the EGM and the Class Meetings, in accordance with applicable laws and regulations in the PRC.

Lock-up period:

Pursuant to the CS Subscription Agreement, China Shipping shall not transfer the A Shares subscribed by it under the Proposed Non-public Issuance of A Shares within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares.

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Distribution of profit:

Upon the completion of the CS Subscription, the existing Shareholders and China Shipping will be entitled to share the Company’s cumulative undistributed profits at the time of the issuance of the A Shares under the CS Subscription Agreement.

2. Information on the parties to the CS Subscription Agreement

The Company

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.

China Shipping

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

3. Proposal in relation to the CS Subscription Agreement and the transactions contemplated thereunder

The proposal in relation to the CS Subscription Agreement and the transactions contemplated thereunder will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

4. Proposal in relation to the CS Subscription constituting a connected transaction under the relevant PRC laws and regulations

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5. Proposal in relation to the waiver of China Shipping’s obligation to make a general offer of the securities of the Company as a result of the CS Subscription under the relevant PRC laws and regulations

Immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Minimum Subscription Scenario, the aggregate shareholding of China Shipping and its associates in the Company will increase to approximately 39.60% of the then enlarged total issued share capital of the Company. Accordingly, China Shipping will trigger the obligation to make a general offer of the securities of the Company to other Shareholders pursuant to the relevant requirements of “Measures for the Administration of the Takeover of Listed Companies” (《上市公司收購管理辦法》) issued by CSRC.

In order to satisfy the relevant conditions for obtaining a waiver of China Shipping’s obligation to make a general offer of the securities of the Company as a result of the CS Subscription, China Shipping undertakes that the A Shares to be subscribed by it under the Proposed Non-public Issuance of A Shares shall not be transferred within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares. Please refer to the sections headed “II. Proposed Non-public Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Lock-up period” and “III. Connected Transaction – Proposed Subscription of A Shares by China Shipping – 1. Principal terms of the CS Subscription Agreement – Lock-up period” for further details of the lock-up undertakings.

The proposal in relation to the waiver of China Shipping’s obligation to make a general offer of the securities of the Company as a result of the CS Subscription under the relevant PRC laws and regulations will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM.

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IV. EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

1. Effect of the Proposed Non-public Issuance of A Shares and the CS Subscription on the shareholding structure of the Company

As at the Latest Practicable Date, the total issued share capital of the Company is 11,683,125,000 Shares, which comprises 7,932,125,000 A Shares and 3,751,000,000 H Shares.

The shareholding structure of the Company (i) as at the Latest Practicable Date and (ii) immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Minimum Subscription Scenario and (iii) immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Maximum Subscription Scenario is as set out below:

Name of Shareholder Class of Shares China Shipping, and parties acting in concert with it (Note 1) A H Sub-total Public A Shareholders A Public H Shareholders H Total (Note 2)	Shareholding as the La Practicable Date Number of Shares Approximate percentage of the issued A Share capital (%) 4,458,195,175 56.20 100,944,000 – 4,559,139,175 – 3,473,929,825 43.80 3,650,056,000 – 11,683,125,000 100.00	test Approximate percentage of the total issued share capital (%) 38.16 0.86 39.02 29.73 31.24 100.00	Shareholding immediately afte of the Proposed Non-public I A Shares under the CS M Subscription Scenar Number of Shares Approximate percentage of the issued A Share capital (%) 5,824,315,393 51.95 100,944,000 – 5,925,259,393 – 5,386,498,131 48.05 3,650,056,000 – 14,961,813,524 100.00	r completion ssuance of inimum io Approximate percentage of the total issued share capital (%) 38.93 0.67 39.60 36.00 24.40 100.00	Shareholding immediately afte of the Proposed Non-public I A Shares under the CS M Subscription Scenar Number of Shares Approximate percentage of the issued A Share capital (%) 6,370,763,481 56.83 100,944,000 – 6,471,707,481 – 4,840,050,043 43.17 3,650,056,000 – 14,961,813,524 100.00	r completion ssuance of aximum io Approximate percentage of the total issued share capital (%) 42.58 0.67
						43.25 32.35 24.40
						100.00

Notes:

An aggregate of 4,458,195,175 A Shares is held by China Shipping and an aggregate of 100,944,000 H Shares is held by Ocean Fortune Investment Limited, an indirectly wholly-owned subsidiary of China Shipping.
The approximate percentage of the total issued share capital is rounded to the nearest two decimal places and the total percentage of the total issued share capital may not add up to 100% due to rounding.

2. Fund raising activities in the past twelve months

The Company has not conducted any equity fund raising exercises during the 12 months immediately preceding the Latest Practicable Date.

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V. REASONS FOR AND BENEFITS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES AND THE CS SUBSCRIPTION

The Proposed Non-public Issuance of A Shares

The Board considers that the Proposed Non-public Issuance of A Shares is conducive to the comprehensive and sustainable development of the Company’s business and would lay a strong foundation for 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 as core and shipping financing as feature.

Pursuant to the Implementation Rules for the Non-public Issuance of Shares by Listed Companies, where the board of a listed company resolves to issue shares by way of non-public issuance, the board resolution shall specify, among other things, the maximum proceeds to be raised from the non-public issuance and the specific use of the proceeds. Accordingly, on 11 October 2016, the Board has approved the Proposed Non-public Issuance of A Shares and passed resolutions that the gross proceeds to be raised from the Proposed Non-public Issuance of A Shares shall be not more than RMB12 billion and that the net proceeds from the Proposed Non-public Issuance of A Shares (after deducting all applicable costs and expenses incurred in connection with the Proposed Non-public Issuance of A Shares) are intended to be used (i) as to approximately RMB6 billion for the capital injection in COSCO Shipping Leasing; (ii) as to approximately RMB2.4 billion for the capital injection in FIL; (iii) as to approximately RMB1.8 billion for the repayment of the Company’s maturing corporate bonds (which are held by persons other than the existing Shareholders) and (iv) as to approximately RMB1.8 billion for the replenishment of the working capital of the Company. Please refer to the section headed “II. Proposed Non-public Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Use of Proceeds” for further details of the use of proceeds.

The capital injection of approximately RMB6 billion in COSCO Shipping Leasing will be used by COSCO Shipping Leasing to invest in financial leasing assets during 2017 to 2019 for the purpose of expanding its businesses into new areas like medical treatment, energy, education and innovation, whereas the capital injection of approximately RMB2.4 billion in FIL will be used by FIL to purchase containers during 2017 to 2019 for the purpose of maintaining and expanding container scale and securing competitive position in the market. The aforementioned capital injection in COSCO Shipping Leasing and FIL is in line with the business strategy of the Company and would facilitate the transformation of the business and future development of the Company.

The long term capital raised from the Proposed Non-public Issuance of A Shares would also optimize the Company’s capital structure and reduce the Company’s debt-to-asset ratio, which enables the Company to obtain further debt financing and lower the costs of its debt financing. Based on the unaudited consolidated financial statements of the Group for the six months ended 30 June 2016 as set out in Appendix VII to this circular, the debt-to-asset ratio and the liquid ratio of the Company as at 30 June 2016 was 86.03% and 0.50, respectively. Upon completion of the Proposed Non-public Issuance of A Shares, taking into account the

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LETTER FROM THE BOARD

repayment of maturing corporate bonds of approximately RMB1.8 billion and the replenishment of working capital of approximately RMB1.8 billion, which will be accounted as current assets of the Company, the debt-to-asset ratio of the Company will be decreased from 86.03% to 76.55% and the liquid ratio will be increased from 0.50 to 0.77 (without taking into account the costs of Proposed Non-public Issuance of A Shares).

Apart from the Proposed Non-public Issuance of A Shares, as disclosed in the circular of the Company dated 10 June 2016 and as approved by the Shareholders at the annual general meeting of the Company held on 30 June 2016, the Company intends to apply to the National Association of Financial Market Institutional Investors for registering mid-term notes of not exceeding RMB5 billion and super short-term financing bills of not exceeding RMB10 billion. The mid-term notes and the super short-term financing bills are intended to be used for repayment of bank loans, optimizing debt financing structure and/or replenish the liquidity for the needs of daily production and operation of the Company.

As at the Latest Practicable Date, save for (i) the Proposed Non-public Issuance of A Shares, the proceeds of which will be used for the specific purposes of the capital injection in COSCO Shipping Leasing and FIL, the repayment of the maturing corporate bonds and the replenishment of working capital and (ii) the mid-term notes and the super short-term financing bills as approved by the Shareholders, the Company does not have any other specific fund raising plans for the next 12 months from the Latest Practicable Date.

The CS Subscription

As disclosed in the section headed “III. Connected Transaction – Proposed Subscription of A Shares by China Shipping”, China Shipping has undertaken to subscribe for such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance. The CS Subscription demonstrates the confidence China Shipping places in the Company and China Shipping’s support to the development and transformation of the business of the Company.

It is the intention of China Shipping that the Company will maintain its existing business after completion of the Proposed Non-public Issuance of A Shares. China Shipping has currently no intention to introduce any major changes to the existing operation of the Company. As at the Latest Practicable Date, China Shipping and parties acting in concert with it have no intention to re-deploy the fixed assets, or to discontinue the employment of the employees of the Group other than in the ordinary course of business of the Group.

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LETTER FROM THE BOARD

Alternative financing

The Company has considered other fund raising methods such as obtaining debt financing and conducting rights issue or public offering to satisfy the funding needs of the Group.

As disclosed in the interim report of the Group for the six months ended 30 June 2016, the Group’s gearing ratio, being the ratio of net interest-bearing financial liabilities less cash and cash equivalents over total equity, was 476% as at 30 June 2016, which was higher than that as at 31 December 2015. The Directors considered that taking into account the current gearing level of the Group, raising funds by equity financing with interest-free nature could reduce the gearing ratio of the Group. The Directors therefore concluded that equity financing can improve the leverage position of the Group as compared to debt financing.

Given that the issued H Share capital of the Company is significantly lower than the issued A Share capital of the Company, the expected size of the funds to be raised by rights issue, open offer or placement of H Shares will be less than approximately RMB12 billion. Based on the closing prices of the H Shares on the H Share Last Trading Day and the A Shares on the A Share Last Trading Day, the market capitalisation of H Shares and A Shares was approximately HK$6.4 billion (equivalent to approximately RMB5.6 billion) and RMB31.6 billion, representing approximately 15.0% and 85.0% of the total market capitalisation of the Company of approximately RMB37.2 billion, respectively.

In addition, as there is a significant premium of the price of A Shares trading on the Shanghai Stock Exchange over the price of H Shares trading on the Hong Kong Stock Exchange, if the Company were to conduct a fund raising exercise by issuance of new H Shares with a proceed of RMB12 billion, assuming that an equivalent pricing basis is adopted to determine the benchmark price for the H Share issuance (that is, being not lower than 90% of the average trading price of the H Shares during the 20 trading days immediately preceding the Price Determination Date), the number of H Shares to be issued will be substantially more than that required for the Proposed Non-public Issuance of A Shares. This would lead to a greater dilution effect on the shareholding of the existing Shareholders and would not be in the interests of the Independent Shareholders.

Having considered that (i) equity financing can improve the leverage position of the Group as compared to debt financing; (ii) the issued H Share capital of the Company is significantly lower than the issued A Share capital of the Company; and (iii) the greater dilution effect on the shareholding of the existing Shareholders if the Company were to conduct a fund raising exercise by issuance of new H Shares with a proceed of RMB12 billion with the same pricing basis as the Proposed Non-public Issuance of A Shares, the Directors considered that it is in the interests of the Company and the Shareholders as a whole to raise funds by the Proposed Non-public Issuance of A Shares (including the subscription of A Shares by China Shipping).

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LETTER FROM THE BOARD

VI. IMPLICATIONS UNDER THE LISTING RULES

As at the Latest Practicable Date, China Shipping and its associates control or are 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. Accordingly, China Shipping is a controlling shareholder of the Company and therefore a connected person of the Company. The CS Subscription constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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 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 therefore abstained from voting on the relevant Board resolutions approving the Proposed Non-public Issuance of A Shares and the CS Subscription. As at the Latest Practicable Date, none of the aforementioned Directors hold any Shares. Save as aforementioned, none of the other Directors has a material interest in the Proposed Non-public Issuance of A Shares and the CS Subscription and hence no other Director has abstained from voting on such Board resolutions.

VII. IMPLICATIONS UNDER THE TAKEOVERS CODE

1. Application for the Whitewash Waiver

As disclosed in the announcements of the Company dated 11, 14, 15 and 29 December 2015, China Shipping and parties acting in concert with it have during the period from 9 July 2015 to 29 December 2015, cumulatively acquired 47,570,789 A Shares and 100,944,000 H Shares through the trading systems of Shanghai Stock Exchange and Hong Kong Stock Exchange, respectively, representing approximately 1.27% of the total issued share capital of the Company, resulting in an increase of the shareholding of China Shipping and parties acting in concert with it in the Company from approximately 45.08% to approximately 46.35%.

As disclosed in the announcement of the Company dated 12 January 2016, China Shipping has on 12 January 2016 transferred 388,674,125 A Shares, representing 3.33% of the total issued share capital of the Company, and 467,325,000 A Shares, representing 4.00% of the total issued share capital of the Company, held by it to State Development & Investment Corporation and Guoxin Investment Co., Ltd. (國新投資有限公司), respectively, resulting in a decrease of the shareholding of China Shipping and parties acting in concert with it in the Company from approximately 46.35% to approximately 39.02%. Accordingly, the lowest percentage holding of China Shipping and parties acting in concert with it in the Company in the 12-month period ending on and inclusive of the Latest Practicable Date is 39.02%.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, China Shipping and parties acting in concert with it control or are 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 entire issued share capital of the Company. Immediately following completion of the CS Subscription:

(a) under the CS Minimum Subscription Scenario, the aggregate shareholding of China Shipping and parties acting in concert with it in the Company will increase to approximately 39.60% of the then enlarged total issued share capital of the Company; and
(b) under the CS Maximum Subscription Scenario, the aggregate shareholding of China Shipping and parties acting in concert with it in the Company will increase to approximately 43.25% of the then enlarged total issued share capital of the Company.

Accordingly, upon completion of the CS Subscription under the CS Maximum Subscription Scenario, pursuant to Rule 26.1 of the Takeovers Code, China Shipping will be required to make a mandatory general offer for all the issued shares in the Company not already owned or agreed to be acquired by China Shipping and parties acting in concert with it, unless the Whitewash Waiver from strict compliance with Rule 26.1 of the Takeovers Code is obtained from the Executive.

An application has been made by China Shipping to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver, if granted by the Executive, will be subject to (i) the approval of the Whitewash Waiver by the Independent Shareholders taken by way of a poll at the EGM and (ii) the approval of the CS Subscription by the Independent Shareholders taken by way of a poll at the EGM and the Class Meetings. The Executive may or may not grant the Whitewash Waiver.

As at the Latest Practicable Date, the Company does not believe that the Proposed Non-public Issuance of A Shares and the CS Subscription give rise to any concerns in relation to compliance with other applicable rules or regulations (including the Listing Rules). If a concern should arise after the release of this circular, the Company will endeavour to resolve the matter to the satisfaction of the relevant authority as soon as possible but in any event before the despatch of the circular. The Company notes that the Executive may not grant the Whitewash Waiver if the Proposed Non-public Issuance of A Shares and the CS Subscription do not comply with other applicable rules and regulations.

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LETTER FROM THE BOARD

The proposal in relation to the Whitewash Waiver will be submitted, by way of ordinary resolution, for the Independent Shareholders’ consideration and approval at the EGM.

The proposal in relation to the CS Subscription will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM and the Class Meetings. Please refer to the section headed “III. Connected Transaction – Proposed Subscription of A Shares by China Shipping – 3. Proposal in relation to the CS Subscription Agreement and the transactions contemplated thereunder” for further details.

The proposal in relation to the CS Subscription constituting a connected transaction under the relevant PRC laws and regulations will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM. Please refer to the section headed “III. Connected Transaction – Proposed Subscription of A Shares by China Shipping – 4. Proposal in relation to the CS Subscription constituting a connected transaction under the relevant PRC laws and regulations” for further details.

2. Special Deal in relation to the Proposed Non-public Issuance of A Shares

Pursuant to Rules 23 and 24 of the Rules for the Implementation Rules for the Non-public Issuance of Shares by Listed Companies, where the board resolution of the company has not identified specific target subscribers for the non-public issuance of shares, the sponsor shall issue invitation for subscription to eligible specific target subscribers after obtaining approval documents from the CSRC. The list of eligible specific target subscribers shall include: (i) investors who have submitted a letter of intent after the announcement of the board resolution by the company; (ii) the top 20 shareholders of the company; and (iii) not less than 20 securities investment fund management companies, 10 securities companies and five insurance institutional investors, which are eligible under the Measures for the Administration of Securities Offering and Underwriting (《證券發行與承銷管理辦法》).

According to the applicable PRC laws, regulations and regulatory requirements, foreign investors cannot subscribe in non-public issue of A shares of listed companies by way of cash unless they are approved qualified foreign institutional investors or foreign strategic investors. In order to ensure the independence of the H Shareholders, and after considering the applicable PRC laws, regulations and regulatory requirements, the scope of targeted subscribers (other than China Shipping) under the Proposed Non-public Issuance of A Shares will exclude all the H Shareholders (including approved qualified foreign institutional investors, foreign strategic investors and approved PRC investors which could invest in H Shares, including the qualified domestic institutional investors and the southbound trading investors under the Shanghai-Hong Kong Stock Connect). According to the PRC Legal Advisers, the aforementioned scope of targeted subscribers is in compliance with the applicable PRC laws, regulations and regulatory requirements.

The Proposed Non-public Issuance of A Shares, therefore, constitutes a Special Deal under Rule 25 of the Takeovers Code which is not capable of being extended to all Shareholders and requires the consent of the Executive. Such consent, if granted, will be

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LETTER FROM THE BOARD

subject to, among other things, (i) the Independent Financial Adviser publicly states that in its opinion the terms of the Special Deal are fair and reasonable and (ii) the approval of the Special Deal by the Independent Shareholders by way of poll at the EGM and Class Meetings. Accordingly, the resolution in respect of the Special Deal will be submitted, by way of special resolution, for Independent Shareholders’ consideration and approval at the EGM and the H Shares Class Meeting. China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal will abstain from voting on the resolution to be proposed at the EGM and the H Shares Class Meeting to approve the Special Deal.

Pursuant to the Articles of Association and the applicable PRC laws and regulations, if the rights attached to any class of shares are varied, a special resolution shall be passed at the Shareholders’ general meeting and by holders of Shares of the affected class passed at a separate general meeting of the holders of Shares of the class. Accordingly, the resolution in respect of the Special Deal will also be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM and the A Shares Class Meeting. China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal will abstain from voting on the resolution to be proposed at the EGM and A Shares Class Meeting to approve the Special Deal.

If the consent to the Special Deal is not obtained from the Executive or if the Special Deal is not approved by the Independent Shareholders at the EGM and the Class Meetings, the Proposed Non-public Issuance of A Shares and the CS Subscription will not proceed.

An application has been made by the Company to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeovers Code. Such consent, if granted, will be subject to, among other things, (i) the Independent Financial Adviser publicly states that in its opinion the terms of the Special Deal are fair and reasonable and (ii) the approval of the Special Deal by the Independent Shareholders by way of poll at the EGM and the Class Meetings.

The proposal in relation to the Special Deal will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

VIII. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The Board proposes to make certain amendments to the Articles of Association, to take effect subject to and upon the completion of the Proposed Non-public Issuance of A Shares, in order to reflect the latest registered capital and shareholding structure of the Company as a result of the issue of A Shares pursuant to the Proposed Non-public Issuance of A Shares.

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LETTER FROM THE BOARD

In addition, the Board also proposes to make certain other amendments to the Articles of Association in relation to, among other things, (i) proxy at general meetings and (ii) the profit distribution plan of the Company, in accordance with relevant laws and regulations in the PRC, including the Guidance on the Articles of Association of Listed Companies (revised in 2016) (《上市公司章程指引》(2016修訂)) and the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies (《上市公司監管指引第3號 – 上市公司現金分紅》) issued by the CSRC and the Guideline on the Distribution of Cash Dividends by Listed Companies of the Shanghai Stock Exchange (《上海證券交易所上市公司現金分紅指引》) issued by the Shanghai Stock Exchange.

The Proposed Amendments to the Articles of Association, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of the Proposed Amendments to the Articles of Association is set out in Appendix V of this circular. In the event of any discrepancy between the English translation and the Chinese version of the Articles of Association, the Chinese version shall prevail.

The proposal in relation to the Proposed Amendments to the Articles of Association will be submitted, by way of special resolution, for the Shareholders’ consideration and approval at the EGM.

IX. PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

Pursuant to the Notice Regarding Further Implementation of Cash Dividend Distribution of Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) and Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies (《上市公司監管指引第3號 – 上市公司現金分紅》) both issued by the CSRC, the Guideline on the Distribution of Cash Dividends by Listed Companies of the Shanghai Stock Exchange (《上海證券交易所上市公司現金分紅指引》) issued by the Shanghai Stock Exchange and the Articles of Association, the Board has formulated and proposes to adopt the Shareholders’ Return Plan, which was prepared in the Chinese language.

The Shareholders’ Return Plan, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 11 October 2016. The full text of the English translation of the Shareholders’ Return Plan is set out in Appendix VI of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the Shareholders’ Return Plan will be submitted, by way of ordinary resolution, for the Shareholders’ consideration and approval at the EGM.

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LETTER FROM THE BOARD

X. EGM AND CLASS MEETINGS

The Company proposes to convene the EGM, the A Shares Class Meeting and the H Shares Class Meeting at 2:30 p.m. on Friday, 16 December 2016 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the People’s Republic of China.

The EGM will be convened to consider and, if thought fit, approve, among other things, (i) the Proposed Non-public Issuance of A Shares, (ii) the CS Subscription, (iii) the Specific Mandate, (iv) the Whitewash Waiver, (v) the Special Deal, (vi) the Proposed Amendments to the Articles of Association and (vii) the Shareholders’ Return Plan.

The Class Meetings will be convened to consider and, if thought fit, approve, among other things, (i) the Proposed Non-public Issuance of A Shares, (ii) the CS Subscription, (iii) the Specific Mandate and (iv) the Special Deal.

The Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Special Deal and the Proposed Amendments to the Articles of Association will be proposed by way of special resolutions and the Whitewash Waiver and the Shareholders’ Return Plan will be proposed by way of ordinary resolutions at the EGM and/or the Class Meetings to be approved by the Independent Shareholders.

The voting in relation to the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver, the Special Deal, the Proposed Amendments to the Articles of Association and the Shareholders’ Return Plan at the EGM and/or the Class Meetings will be conducted by way of poll.

A notice convening the EGM was despatched to the Shareholders on 1 November 2016, which is reproduced on pages EGM-1 to EGM-6 of this circular.

A notice convening the H Shares Class Meeting was despatched to the Shareholders on 1 November 2016, which is reproduced on pages HCM-1 to HCM-4 of this circular.

China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal will be required to abstain from voting on the resolutions to be proposed at the EGM and/or the Class Meetings. In the event that a Shareholder becomes a subscriber under the Proposed Non-public Issuance of A Shares, such Shareholder will be required to abstain from voting on the relevant resolutions to be proposed at the EGM and/or the Class Meetings. 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 Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal and therefore no other Shareholder is required to abstain from voting at the EGM and/or the Class Meetings.

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LETTER FROM THE BOARD

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

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

If you intend to attend the EGM and the Class Meetings in person or by proxy, you are required to complete and return the reply slip to Directorate Secretary Office of the Company not later than Saturday, 26 November 2016.

XI. RECOMMENDATION

Messis Capital Limited has been appointed by the Company as the Independent Financial Adviser with the approval of the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

The Independent Board Committee, after considering the advice from the Independent Financial Adviser, is of the view that while the Proposed Non-public Issuance of A Shares and the CS Subscription are not conducted in the ordinary and usual course of business of the Group, the terms of the Proposed Non-public Issuance of A Shares and the CS Subscription Agreement are on normal commercial terms and that the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal are fair and reasonable so far as the Independent Shareholders are concerned 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 all the resolutions to be proposed at the EGM and the Class Meetings to approve the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

The Directors (including the non-executive Directors) are of the view that the Proposed Amendments to the Articles of Association and the Shareholders’ Return Plan are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends all the Shareholders to vote in favour of the resolutions to be proposed at the EGM.

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LETTER FROM THE BOARD

XII. FURTHER INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on pages 42 to 43 of this circular, containing its recommendation in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal and (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 44 to 81 of this circular, containing its recommendation in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

The Independent Shareholders are advised to read the aforesaid letters before deciding as to how to vote on the resolutions approving, among other things, the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

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

Joint Company Secretary

For identification purpose only.

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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)

1 December 2016

To the Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER

(3) SPECIFIC MANDATE

(4) APPLICATION FOR WHITEWASH WAIVER AND

(5) SPECIAL DEAL

We refer to the circular of the Company dated 1 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 advise the Independent Shareholders in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal, details of which are set out in the “Letter from the Board” in the Circular. Messis Capital Limited has been appointed as the Independent Financial Adviser with our approval to advise the Independent Board Committee and the Independent Shareholders in this regards.

We wish to draw your attention to the “Letter from the Board” set out on pages 8 to 41 of the Circular and the “Letter from the Independent Financial Adviser” set out on pages 44 to 81 of the Circular and 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 concur with the view of the Independent Financial Adviser and consider that while the Proposed Non-public Issuance of A Shares and the CS Subscription are not conducted in the ordinary and usual course of business of the Group, the terms of the Proposed Non-public Issuance of A Shares and the CS Subscription Agreement are on normal commercial terms and that the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend you to vote in favour of the resolutions to be proposed at the EGM and the Class Meetings for approving the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

Yours faithfully,

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

For identification purpose only.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Messis Capital Limited, the Independent Financial Adviser, for the purpose of inclusion in this circular, to the Independent Board Committee and the Independent Shareholders in respect of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal.

==> picture [44 x 44] intentionally omitted <==

==> picture [235 x 41] intentionally omitted <==

1 December 2016

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

Dear Sir or Madam,

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER

(3) APPLICATION FOR WHITEWASH WAIVER AND

(4) SPECIAL DEAL

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders to advise the Independent Board Committee and the Independent Shareholders in respect of Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company to the Shareholders dated 1 December 2016 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 11 October 2016, the Board approved the Proposed Non-Public Issuance of A Shares, pursuant to which the Company will issue a maximum of 3,278,688,524 A Shares (subject to adjustment) to not more than 10 specific target subscribers, including China Shipping, which would raise a gross proceeds of up to RMB12 billion. As part of the Proposed Non-public Issuance of A Shares, on 11 October 2016, the Company and China Shipping entered into the CS Subscription Agreement pursuant to which China Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares. The issue price of the A Shares to be issued under the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed Non-public Issuance of A Shares shall not be lower than the Benchmark Price, being 90% of the Average Trading Price (being the average trading price of the A Shares during the 20 trading days immediately preceding the Price Determination Date, which is calculated by dividing the total turnover of the A Shares by the total trading volume of the A Shares during the 20 trading days immediately preceding the Price Determination Date), which is RMB3.66 per A Share.

Immediately following completion of the CS Subscription:

(a) under the CS Minimum Subscription Scenario, the aggregate shareholding of China Shipping and parties acting in concert with it in the Company will increase to approximately 39.60% of the then enlarged total issued share capital of the Company; and
(b) under the CS Maximum Subscription Scenario, the aggregate shareholding of China Shipping and parties acting in concert with it in the Company will increase to approximately 43.25% of the then enlarged total issued share capital of the Company.

Accordingly, upon completion of the CS Subscription under the CS Maximum Subscription Scenario, pursuant to Rule 26.1 of the Takeovers Code, China Shipping and parties acting in concert with it will be required to make a mandatory general offer for all the issued shares in the Company not already owned or agreed to be acquired by China Shipping and parties acting in concert with it, unless the Whitewash Waiver from strict compliance with Rule 26.1 of the Takeovers Code is obtained from the Executive. The Whitewash Waiver, if granted by the Executive, will be subject to the approval of the Independent Shareholders taken by way of a poll at the EGM.

The Proposed Non-public Issuance of A Shares constitutes a Special Deal under Rule 25 of the Takeovers Code which is not capable of being extended to all Shareholders and requires the consent of the Executive. An application will be made by the Company to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeovers Code. Such consent, if granted, will be subject to the approval of the Independent Shareholders at the EGM and the Class Meetings by way of poll.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal will be required to abstain from voting on the resolutions to be proposed at the EGM and/or the Class Meetings in relation to the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal. In the event that a Shareholder becomes a subscriber under the Proposed Non-public Issuance of A Shares, such Shareholder will be required to abstain from voting at the EGM and/or the Class Meetings. 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 Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal and therefore no other Shareholder is required to abstain from voting at the EGM and/or the Class Meetings.

The Independent Board Committee (comprising all 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 Listing Rules and Rule 2.8 of the Takeovers Code to advise the Independent Shareholders on the Proposed Non-public Issuance of A Shares, the CS subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal. As all the three non-executive Directors, namely, Mr. Feng Boming, Mr. Huang Jian and Mr. Chen Dong, were nominated by China Shipping to the Board, they are not included as members of the Independent Board Committee. We, Messis Capital Limited, have been appointed as the independent financial adviser with the approval of the Independent Board Committee in accordance with the Listing Rules and the Takeovers Code to advise the Independent Board Committee and the Independent Shareholders in these regards and to give our opinion for the Independent Board Committee’s consideration when making their recommendations to the Independent Shareholders.

As at the Latest Practicable Date, we did not have any relationship with or interest in the Company and any other parties that could reasonably be regarded as relevant to our independence. Apart from normal professional fees payable to us in connection with this appointment as the independent financial adviser, no arrangement exists whereby we will receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence. During the past two years, we were appointed as an independent financial adviser for the Company for three occasions, details on which are set out in the Company’s announcement dated 30 October 2015 and circulars dated 4 December 2015 and 10 June 2016. Notwithstanding the above, the previous engagements with the Company would not affect our independence from the Company and we are independent from the Company pursuant to Rule 13.84 of the Listing Rules, in particular that we did not serve as a financial adviser to (i) the Company, (ii) China Shipping or its subsidiaries, (iii) the Target Company or its subsidiaries, or (iv) any core connected person of the Company or Target Company within 2 years prior to 31 October 2016, being date of making our independence declaration to the Stock Exchange pursuant to Rule 13.85(1) of the Listing Rules. On the other hand, we also submitted independence confirmation to the SFC pursuant to the Practice Note 20 – Guidance Note on Announcements and Documents under the Codes on Takeovers and Mergers and Share Buy-Backs on 31 October 2016.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In arriving at our recommendations, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the management of the Company. We have assumed that all information and representations contained or referred to in the Circular and all information and representations which have been provided by the management of the Company are true and accurate at the time they were made and will continue to be accurate as at the Latest Practicable Date. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Company. Should there be any material changes to our opinion after the despatch of the Circular, Shareholders would be notified as soon as possible. The Independent Shareholders of the Company will also be notified of any material changes to such information provided and our opinion as soon as possible.

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.

The Circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. All the Directors jointly and severally accept full responsibility for the accuracy of the information in this Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Circular have been arrived at after due and careful consideration and there are no other facts not contained in this Circular, the omission of which would make any of the statements in this circular misleading.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any material facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group and any parties in relation to the Proposed Non-public Issuance of A Shares.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions and recommendations, we have taken into consideration the following principal factors and reasons:

1. BACKGROUND AND REASONS FOR THE CS SUBSCRIPTION

1.1 Background information on the Company

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 currently 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.

According to the interim report of the Group for the period ended 30 June 2016 (the “ 2016 Interim Report ”), on 11 December 2015, the Company announced that a notification was received from China Shipping that the SASAC has granted its approval in principle of the restructuring of China Shipping and its subsidiaries (the “ CS Group ”) and China Ocean Shipping (Group) Company and its subsidiaries (the “ COSCO Group ”) in relation to their businesses in container shipping, vessel leasing, oil shipping, bulk shipping and the financial sectors (the “ Restructuring ”). The Restructuring was passed at the extraordinary general meeting held on 1 February 2016.

According to the annual report of the Group for the year ended 31 December 2015 (the “ 2015 Annual Report ”), through the reorganization, the Group will change into a listed financial services platform focusing on shipping finance services by leasing its container and container vessels to COSCO Group and disposal of its equity interests in the container shipping supporting business and China Shipping Ports Development Co., Ltd., as well as acquisition of the leasing and financial assets and equity interests of COSCO Group and CS Group. Through this transaction, the Group is to shape its three core business segments, i.e. the diversified leasing segment which consists of container leasing and manufacturing, vessel leasing, medical services, education and new energy services; the investment segment which consists of equity investments and intra-group financial services; the other finance segment which consists of equity interests in China Bohai Bank Co., Ltd., Shanghai Life Insurance Company Ltd., and Helen Insurance Brokers Limited.

Upon completion of the Restructuring, the Group’s vessel leasing operations will become in the forefront of the world in terms of scale, with a scale of container leasing business ranking third in the world and a bright future for its non-shipping finance leasing business. The Group will take full advantage of the Group’s existing resources in the Shipping and logistics industry and financial services industry, and do the best it can to develop integrated financial services and enhance investors return through optimisation of its operating models, economies of scale, efficiency enhancement and profit growth.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 Financial performance on the Group

Set out below is a summary of the consolidated statements of profit or loss of the Group for each of the three years ended 31 December 2013, 2014 and 2015, which are extracted from “Appendix VII – Financial Information”, and for the six months ended 30 June 2015 and 2016, which are extracted from the 2016 Interim Report.

Six months ended

	Six months ended	Six months ended
	30 June		Year ended 31 December
	2016	2015	2015	2014	2013
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(unaudited)	(unaudited)	(audited)	(audited)	(audited)
		(restated)
*Continuing operations*
Revenue	8,375,935	16,654,023	31,834,165	36,077,425	33,917,357
Costs of services	(7,866,192)	(15,318,713)	(32,788,268)	(34,839,333)	(36,004,215)
Gross profit	509,743	1,335,310	(954,103)	1,238,092	(2,086,858)
Profit/(loss) from continuing
operations	(816,712)	879,266	(2,939,135)	1,029,994	(2,864,677)
*Discontinued operation*
Profit from
discontinued operation	9,772	9,419	–	38,756	280,632
Profit/(loss) attributable to
owners of the parent	(834,572)	831,116	(2,950,234)	1,044,036	(2,610,098)

Continuing operations

Revenue increased from approximately RMB33.9 billion to approximately RMB36.1 billion (approximately 6.4%) from 2013 to 2014. This was attributable to the combination of influence of the increase in freight rates during the year given the recovery of and increased demand in international trade lanes in 2014, which was partially offset by the effect of the decrease in volume of loaded cargoes mainly due to the change in marketing strategy of the Company of abandoning some low-value customers.

Profit from continuing operations in 2014 represented an increase of approximately RMB3.9 billion from 2013. The improvement in profit was mainly due to the strengthening of fuel saving measures by the Company and the adding of ports with fuel refill facilities at lower prices given the fall in oil prices in late 2014, leading to a decrease in fuel costs.

Revenue decreased from approximately RMB36.1 billion to approximately RMB31.8 billion (approximately 11.8%) from 2014 to 2015. This was attributable to the decrease in volume of loaded cargoes and freight rates mainly due to a significant slowdown in global economic recovery and an imbalance in supply and demand in 2015.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The loss from continuing operations in 2015 was approximately RMB2.9 billion, representing a decrease of approximately RMB4.0 billion as compared with profit from continuing operations of approximately RMB1.0 billion in 2014. It was attributable to the lower level of revenue and the provision for impairment of fixed assets, which included container vessels and containers, of approximately RMB822.0 million in 2015. In addition, gains on disposal of subsidiaries of approximately RMB947.5 million was recorded in 2014, while there was no similar gain recorded in the corresponding period in 2015.

Revenue decreased from approximately RMB16.7 billion to approximately RMB8.4 billion (approximately 50%) from the six months ended 30 June 2015 to the corresponding period of 2016. The decline in the revenue was attributable to the combination of influence of the decrease in the revenue from the shipping business mainly due to the Company ceased to be engaged in the container liner operations following the restructuring and transformation, which was partially offset by the effect of the increase in the revenue from the shipping-related leasing business mainly due to the Company starting to lease out all its self-owned vessels since March 2016.

The loss from continuing operations for the six months ended 30 June 2016 was approximately RMB816.7 million, representing a decrease of approximately RMB1.7 billion as compared with profit from continuing operations of approximately RMB879.3 million for the corresponding period in 2015. It was mainly attributable to due to the downturn of the shipping market, and the Company’s liner operations had suffered significant losses during January to February prior to the completion of the Restructuring.

Discontinuing operation

During February 2016, the Restructuring was passed at the extraordinary general meeting. Among the disposed subsidiaries, Shanghai Puhai Shipping Liners Co., Ltd. and its subsidiaries, Universal Shipping (Asia) Co., Ltd., Golden Sea Shipping Pte. Ltd. and China Shipping (Singapore) Petroleum Pte. Ltd. constituted a major line of business of provision of container marine transportation services and related business, which was classified as a discontinued operation. These disposals were completed before 30 June 2016, the assets and liabilities are no longer included in the interim condensed consolidated statement of financial position as at 30 June 2016.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.3 Financial position on the Group

	As at 30 June	As at 31 December	As at 31 December
	2016	2015	2014	2013
	RMB’000	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)	(audited)
NON-CURRENT ASSETS
Property, plant and equipment	58,116,231	38,336,163	36,369,808	32,290,294
Investments in associates	8,710,052	3,954,706	3,754,380	297,303
Finance lease receivables	9,023,724	–	–	–
Other non-current assets	2,258,374	78,210	87,916	646,146
	78,108,381	42,369,079	40,212,104	33,233,743
CURRENT ASSETS
Inventories	590,211	898,955	1,185,498	1,545,370
Prepayments, trade, notes and other
receivables	3,754,950	2,606,588	2,786,464	2,851,647
Finance lease receivables	2,142,961	–	–	–
Loans and receivables	1,830,739	–	–	–
Other current assets	890,119	1,410	1,197	2,100
Cash and cash equivalents	13,965,281	11,001,051	9,355,888	9,014,462
	23,174,261	14,508,004	13,329,047	13,413,579
CURRENT LIABILITIES
Trade and other payables
and accruals	3,467,532	4,421,917	4,484,255	4,647,635
Interest-bearing bank and
other borrowings	29,344,629	10,557,263	8,690,651	8,020,195
Other current liabilities	9,996,360	48,108	81,171	73,833
	42,808,521	15,027,288	13,256,077	12,741,663
Net current (liabilities)/assets	(19,690,159)	(519,284)	72,970	671,916
Total assets less current liabilities	58,418,222	41,849,795	40,285,074	33,905,659
NON-CURRENT LIABILITIES
Interest-bearing bank and
other borrowings	41,779,529	17,807,972	13,463,254	10,917,131
Domestic corporate bonds	1,506,225	1,796,432	1,793,981	1,791,530
Other non-current liabilities	985,543	8,061	150,356	186,624
	44,271,297	19,612,465	15,407,591	12,895,285
Net assets	14,146,925	22,237,330	24,877,483	21,010,374
Discontinued operation
Net (liabilities)/assets of a disposal
group classified as held for sale	(55,899)	–	–	3,207,680

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	As at 30 June	As at 31 December	As at 31 December
	2016	2015	2014	2013
	RMB’000	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)	(audited)
EQUITY
Share capital	11,683,125	11,683,125	11,683,125	11,683,125
Reserves	1,141	17,225,271	16,893,754	16,933,594
Retained profits/
(Accumulated losses)	2,133,734	(6,734,162)	(3,784,442)	(4,845,260)
	13,818,000	22,174,234	24,792,437	23,771,459
Non-controlling interests	328,925	63,096	85,046	446,595
Total equity	14,146,925	22,237,330	24,877,483	24,218,054

As at 31 December 2013, 2014, 2015 and 30 June 2016, property, plant and equipment, cash and cash equivalents, finance lease receivables as well as investments in associates were the major assets of the Group, which accounted for approximately 81.9%, 92.4%, 93.7% and 90.8% of the total assets of the Group as at 31 December 2013, 2014, 2015 and 30 June 2016, respectively. The property, plant and equipment of approximately RMB58.1 billion as at 30 June 2016 mainly comprised of container vessels.

As at 31 December 2013, 2014, 2015 and 30 June 2016, interest-bearing bank and other borrowings, trade and other payables and accruals and corporate bonds were the major liabilities of the Group, which accounted for approximately 95.4%, 99.2%, 99.8% and 89.7% of the total liabilities of the Group as at 31 December 2013, 2014, 2015 and 30 June 2016, respectively.

As at 30 June 2016, the gearing ratio of the Group (i.e., the ratio of net interest-bearing financial liabilities less cash and cash equivalents over total equity) was 476%, which is higher than that as at 31 December 2015. The increase was primarily due to the completion of its acquisitions of subsidiaries at a premium during the six months ended 30 June 2016.

1.4 Background information on China Shipping

As disclosed in the section headed “III. Connected Transaction – Proposed Subscription of A Shares by China Shipping”, China Shipping has undertaken to subscribe for such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares. As at the Latest Practicable Date, China Shipping, being the subscriber of A Shares under the Proposed Non-public Issuance of A Shares, intended to maintain the existing business of the Company after completion of the Proposed Non-public Issuance of A Shares. China Shipping has currently no intention to

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

introduce any major changes to the existing operation of the Company. As at the Latest Practicable Date, China Shipping and parties acting in concert with it have no intention to re-deploy the fixed assets, or to discontinue the employment of the employees of the Group other than in the ordinary course of business of the Group.

1.5 Reasons for and benefits of the Proposed Non-public Issuance of A Shares

By virtue of the Restructuring, the Company had its business focus shifted from container liner operation to integrated financial services consisting of diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing. In light of this, as stated in the Letter from the Board, the Board considered that the Proposed Non-public Issuance of A Shares is conducive to the comprehensive and sustainable development of the Company’s business and would lay a strong foundation for 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 as core and shipping financing as feature. In addition, the CS subscription also demonstrates the confidence China Shipping placed in the Company and China Shipping’s support to the development and transformation of the business of the Group.

The Group’s gearing ratio (i.e. the ratio of net interest-bearing financial liabilities less cash and cash equivalents over total equity) was 476% as at 30 June 2016. The long term capital raised from the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s debt-to-asset ratio, which enables the Company to obtain further debt financing and lower the costs of its debt financing.

Apart from the Proposed Non-public Issuance of A Shares, as disclosed in the Circular of the Company dated 10 June 2016 and as approved by the Shareholders at the annual general meeting of the Company held on 30 June 2016, the Company intends to apply to the National Association of Financial Market Institutional Investors for registering mid-term notes of not exceeding RMB5 billion and super short-term financing bills of not exceeding RMB10 billion. The mid-term notes and the super short-term financing bills are intended to be used for repayment of bank loans, optimizing debt financing structure and/or replenish the liquidity for the needs of daily production and operation of the Company.

As at the Latest Practicable Date, save for (i) the Proposed Non-public Issuance of A Shares, the proceeds of which will be used for the specific purposes of the capital injections in COSCO Shipping Leasing and FIL, the repayment of the maturing corporate bonds and the replenishment of working capital and (ii) the mid-term notes and the super short-term financing bills as approved by the Shareholders, the Company does not have any other specific fund raising plans for the next 12 months from the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the management of the Company, the gross proceeds to be raised from the Proposed Non-public Issuance of A Shares will be not more than RMB12 billion. The net proceeds from the Proposed Non-Public Issuance of A Shares (after deducting all applicable costs and expenses incurred in connection with the Proposed Non-public Issuance of A Shares) are intended to be utilised

(i) as to approximately RMB6 billion to be used for the capital injection in COSCO Shipping Leasing, which in turn will be used by COSCO Shipping Leasing to invest in financial leasing assets during 2017 to 2019 for the purpose of expanding its businesses into new areas like medical treatment, energy, education and innovation;
(ii) as to approximately RMB2.4 billion to be used for capital injection in FIL, which in turn will be used by FIL to purchase containers during 2017 to 2019 for the purpose of maintaining and expanding container scale and securing competitive position in the market;
(iii) as to approximately RMB1.8 billion to be used for repayment of maturing corporate bonds (which are held by persons other than the existing Shareholders), the principal terms of which are as follows:

Issuer: The Company Date of first issuance: 12 June 2007 Maturity date: On the date falling upon the expiry of 10 years after the date of first issuance, i.e. 12 June 2017 Principal amount: RMB1.8 billion Interest: 4.51% per annum

(iv) as to the remaining proceeds of approximately RMB1.8 billion to be used to replenish working capital of the Company. These align with the transformation of business of the Group.

To understand further for the reasons of the Proposed Non-public Issuance of A Shares, we have reviewed the “Feasibility Report on the Use of Proceeds Raised in the Proposed Non-public Issuance of A Shares”, details of which are set out in the Appendix II to the Circular (the “ Feasibility Report ”), provided to us by the Company for the following:

(i) Capital injection in COSCO Shipping Leasing

COSCO Shipping Leasing is a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Company. It principally engaged in providing financial leasing, leasing business, purchase of leased properties from domestic entities and abroad, disposal and maintenance for residual value of leased properties, consultation for financial leasing and guarantee business, business consultation (except brokerage), investment management, financial management consultation (except bookkeeping agency). The customers of COSCO Shipping Leasing served mainly include medium, small and micro-sized enterprises, which are in line with the direction of national supporting policies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Feasibility Report, as the rapid development of financing lease industry under the great support of national policy presents a tremendous market space, COSCO Shipping Leasing is confronted with strategic opportunities of business development. Compared with the lease market penetration of 15%-30% in developed countries in Europe and America, the current lease market penetration in our country is only about 5%, indicating strong development potentials of domestic lease industry and a tremendous growth space of financing lease market. COSCO Shipping Leasing is currently in the strategic window period for business expansion.

In addition, as the competition in the financing lease market is becoming fierce, the Company is in urgent need of capital to reinforce its comprehensive competitiveness. As at the end of 2015, there were 4,508 domestic financing lease enterprises, including 47 financial lease enterprises, 190 domestic lease enterprises and 4,271 foreign-invested enterprises. The total number of lease enterprises was more than 1 time as compared to the number of 2,202 enterprises as at the end of 2014. Various financial capitals and industrial capitals have joined the market competition. Ever since 2014, city commercial banks, insurance companies, brokers and large enterprise groups (including state-owned and private enterprises) have newly established financing lease companies with the registered capital of over RMB1 billion. Financing lease industry is capital intensive. We understand from the management that it is in urgent need of capital to speed up the expansion of the layout of financing lease in key industries and areas, proactively strengthen comprehensive competitiveness and get ready to gradually enhance the market position in the new rebound of industrial development.

As one of the important platforms of the Group for implementation of financial industrial strategies, COSCO Shipping Leasing is mainly engaged in diversified financial leasing and has five business segments, i.e. medical treatment, energy, education, shipping and innovative field. As at 30 June 2016, the total financial leasing assets of COSCO Shipping Leasing amounted to RMB8.292 billion, of which medical treatment, energy, education and shipping represent 27%, 35%, 27% and 11%, respectively. In January to June 2016, the investment in leasing assets increased by RMB4.374 billion, which accounted for the growth of approximately 52.7% during the first half of 2016.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The capital investment in leasing assets of COSCO Shipping Leasing, COSCO Shipping Leasing will use its own funds of RMB13.8 billion to invest in financial leasing assets during 2017 to 2019, of which RMB6 billion of proceeds will be used for capital increase in COSCO Shipping Leasing and the shortfall shall be made up through its self-raised fund. The purpose for the Company to inject the proceeds raised into COSCO Shipping Leasing as capital increase is mainly to expand its businesses into new areas like medical treatment, energy, education and innovation. In accordance with the Feasibility Report, the allocation of the use of own funds according to COSCO Shipping Leasing’s businesses is illustrated as follows:

	2017	2018	2019
Amount of own funds used	RMB3.0	RMB4.8	RMB6.0
(approximately)	billion	billion	billion
Allocation of use of own funds
into its businesses
(approximately):
Medical treatment	26.7%	25.0%	25.0%
Energy	26.7%	29.2%	30.0%
Education	26.7%	25.0%	25.0%
Innovative field	19.9%	20.8%	20.0%

Based on the historical total financial leasing assets of COSCO Shipping Leasing and its growth rate, the management is of the view that the above allocation of use of own funds is fair and reasonable. The business structure of financing lease industry continuously upgrades, imposing higher requirements on the business layout of COSCO Shipping Leasing. Facing the trend of demand upgrade of the financing lease industry, COSCO Shipping Leasing, relying on its accumulated customer resources of principal businesses, in-depth understanding of industry and standard service capacity, aims at ranking the top in the domestic financing lease industry and gives priority to and serves the customers of medical treatment, energy, education and innovative field. It proactively grasps the business opportunity of the emerging field of financing lease, striving to further consolidate and increase its market share.

(ii) Capital injection in FIL

FIL is a company incorporated under the laws of the British Virgin Islands with limited liability and an indirect wholly owned subsidiary of the Company. At the beginning of 2016, the former Florens Container Holdings Limited merged with the former Dong Fang International Investment Limited (the “ Dong Fang International ”). It principally engaged in container leasing, container management, container trade and other leasing, etc.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As a platform for container leasing business under the Group, FIL is mainly responsible for the operation of container leasing, container management and sale of second-hand containers. After thirty years of development and expansion, FIL has established an industry leading brand. Upon its merger with Dong Fang International Investment at the beginning of 2016, its number of containers reached approximately 2.9 million TEUs, becoming the world second container leasing company. The principal business of FIL is container-related operating leasing, financing leasing, management, trade, rental and management fee collection.

With the world economy entering into the cycle of “recession-recovery” since global financial crisis, returns in the container leasing industry have been on continual decline. Despite the overall gloomy condition in the container industry and continuous low profitability in the next one to two years, from the perspective of periodical investment, if we acquire assets at this point, assets prices will be more likely to rise than fall in the future. From the perspective of the macroeconomic environment, although the economies of China and Europe still risk declining, global economy has shown positive signs of recovering led by the US and the future economic condition is turning to the bright. Therefore, proper container purchase project enjoys greater opportunity to achieve capital increment both in second-hand container disposal and capital market.

According to the Feasibility Report, global container scale will grow at a rate of approximately 4.6% from 2016 to 2018. It is expected to increase from 38.52 million TEUs at the end of 2015 to approximately 44.1 million TEUs in 2018, of which, the container scale of container leasing companies is expected to increase by 5% on a yearly basis, increasing from 18.35 million TEUs in 2015 to approximately 21.00 million TEUs by the end of 2018. On the other hand, as we discussed with the management, it is calculated that FIL will dispose and lease an annual average of 250,000 expired containers in 2017 and thereafter. With 5 million containers in terms of container scale and RMB50 billion in terms of assets scale, the expiration of the containers will be accounted for approximately 5% of the total number of containers. To fill in retired and expired containers, and to secure the competitive position in the industry, FIL needs to keep up purchasing containers.

At the beginning of 2016, the number of containers owned by FIL reached approximately 2.90 million TEUs. FIL plans to purchase an aggregate of approximately 0.9836 million TEUs so as to maintain and expand container scale, secure competitive position in the market and increase shareholder returns from 2017 to 2019. Total investment in expansion plan as capital injection amounted to RMB2.4 billion. A total of approximately RMB2.99 billion self-raised funds was planned to use to purchase containers, of which the capital injection of RMB2.4 billion in the expansion plan of FIL was planned to be financed from the proceeds, and the rest was settled through self-raised fund.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) Repayment of maturing corporate bonds (which are held by persons other than the existing Shareholders) and replenishment of working capital of the Company

In addition to the above projects, not more than RMB3.6 billion of the proceeds from the Proposed Non-Public Issuance of A Shares (deducting the issue fee) will be used to repay the maturing corporate bonds and supplement working capital, of which RMB1.8 billion will be used to repay the due debts and RMB1.8 billion to supplement working capital.

We have checked and the Company has not conducted equity financing since its listing in 2007. Upon the completion of the major assets restructuring in 2015, Long Honour Investments Limited, FIL and Dong Fang International which were newly included into consolidated statements have relatively large amount of long-term liability and meanwhile, the amount of newly added bank current borrowings is enormous, resulting the increase in total liabilities of the Company after the major assets restructuring, significant rise of asset-liability ratio and decrease in finance safety. As of 30 June 2016, short-term borrowing in the consolidated statements of the Company amounts to RMB23.831 billion, long-term borrowing amounts to RMB41.448 billion, bonds payable amount to RMB1.506 billion, borrowings and bonds payable due within one year amount to RMB7.557 billion, total interest-bearing liabilities amount to RMB74.342 billion. Therefore, the Company is under great pressure of short-term repayment.

After proceeds from the Proposed Non-public Issuance of A Shares are in place, the Company will repay RMB1.8 billion of corporate bonds. As we discussed with the management, calculated on Renminbi loan benchmark interest rate (one-year) of financial institutions, the Company will save approximately RMB78.3 million of finance cost each year, reducing the Company’s interest cost to some extent. Therefore, it is necessary for the Company to repay maturing corporate bonds with proceeds from the non-public issue and reduce total liabilities so as to decrease interest cost.

According to the Feasibility Report, to repay debts and supplement working capital with proceeds from the Proposed Non-Public Issuance of A Shares will improve the liquid ratio of the Company, enhance its debt repayment capability, reduce finance risk and consolidate the financial structure of the Company. If calculated based on the Company’s financial data as of 30 June 2016 and not taking into account the issuance costs, after taking into account RMB1.8 billion from the proceeds from the Proposed Non-public Issuance of A Shares will be used to repay maturing corporate bonds and RMB1.8 billion of supplemented liquidity is credited to current assets, the debt-to-asset ratio of the Company will decrease from 86.03% to 76.55% and liquid ratio will increase from 0.50 to 0.77.

In future, the Company may comprehensively use various financing instruments to provide reasonable and proper financing arrangement for the sustainable development of the Company under the precondition of controlling financial risk and maintaining healthy financial structure.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We consider that after the Proposed Non-public Issuance of A Shares, debt-to-asset ratio will be significantly reduced, which will help to improve capital structure and lower financial risk. The Company intends to use the above-mentioned proceeds to repay due liabilities and supplement working capital, which is in line with relevant laws and regulations, the actual situation of the Company and strategy requirements and shareholders interest as a whole, thus beneficial to the long-term and healthy development of the Company. The successful use of the proceeds will further improve the financial condition of the Company and enhance its core competitive and anti-risk capabilities.

Having considered that (i) to finance the abovementioned expansion plans of COSCO Shipping Leasing and FIL, the Group requires to raise the proceeds from the Proposed Non-public Issuance of A Shares, together with the self-raised fund; (ii) the long term capital raised from the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s debt ratio and finance costs; (iii) the amount of proceeds to be raised does not exceed the funding need of the specific purposes of the capital injection in COSCO Shipping Leasing and FIL as abovementioned, repayment of maturing corporate bonds and replenishment of working capital of the Company; and (iv) the proceeds are to be used in projects that are in line with the Group’s principal business, we concur with the view of the Directors that the Proposed Non-public Issuance of A Shares is in the interests of the Company and the Shareholders as a whole.

1.6 Financing alternatives of the Company

As at 30 June 2016, the cash and cash equivalents were approximately RMB13.97 billion, which is expected to meet capital needs of regular operating cash flows of the Group. As such, the Company has considered other fund raising methods such as obtaining debt financing and conducting rights issue or public offering for the abovementioned plans of use of proceeds.

(i) Debt financing

According to the 2016 Interim Report, the Group’s gearing ratio (i.e. the ratio of net interest-bearing financial liabilities less cash and cash equivalents over total equity) was 476% as at 30 June 2016, which is higher than that as at 31 December 2015. The Directors considered that taking into account of the current gearing level of the Group, raising funds by equity financing with interest-free nature could reduce the gearing ratio. The Directors thus concluded that equity financing can improve the leverage position of the Group as compared to debt financing.

(ii) Other equity financing alternatives

Given that the issued H Share capital of the Company is significantly lower than the issued A Share capital of the Company, the expected size of the fund to be raised by rights issue, open offer or placement of H Shares will be less than approximately RMB12 billion. Based on the closing prices of the last trading day before the Proposed Non-public

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Issuance of A Shares was announced on the Hong Kong Stock Exchange on H Share Last Trading Day and on the Shanghai Stock Exchange on A Share Last Trading Day, the market capitalisation of H Shares and A Shares was approximately HK$6.4 billion (or approximately RMB5.6 billion) and RMB31.6 billion, representing approximately 15.0% and 85.0% of the Company’s total market capitalisation of approximately RMB37.2 billion, respectively.

As detailed in the section headed “2.2.2 Historical price trend analysis” below, the closing price of H Shares was significantly lower than that of A Shares during the Review Period (as defined below). If the Company conducts a fund raising exercise by issuance of new H Shares in Hong Kong with a proceed of RMB12 billion, assuming a pricing basis of not lower than 90% of the Average Trading Price, the number of H Shares to be issued will be substantially more than that required for the Proposed Non-public Issuance of A Shares, which will lead to a greater dilution effect to the shareholding of the existing Shareholders and will not be in the interests of the Independent Shareholders.

Having considered that (i) equity financing can improve the leverage position of the Group as compared to debt financing; (ii) the issued H Share capital of the Company is significantly lower than the issued A Share capital of the Company; and (iii) the greater dilution effect to the shareholding of the existing Shareholders if the Company conducts a fund raising exercise by issuance of new H Shares in Hong Kong with a proceed of RMB12 billion with the same pricing basis as the Proposed Non-public Issuance of A Shares, we concur with the Directors’ view that it is in the interests of the Company and the Shareholders as a whole to raise funds by the Proposed Non-public Issuance of A Shares (including the subscription of A Shares by China Shipping).

2. THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

2.1 Details of the Proposed Non-public Issuance of A Shares

The details of the Proposed Non-public Issuance of A Shares are summarised and set out below:

Class and par value of Shares A Shares with a par value of RMB1.00 each. to be issued:

Method and time of issuance: The Proposed Non-public Issuance of A Shares will be carried out by way of non-public issue of A Shares to not more than 10 specific target subscribers, including China Shipping. The Company will complete the Proposed Non-public Issuance of A Shares within six months after obtaining the approval from the CSRC.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Number of A Shares to be issued:

A maximum of 3,278,688,524 A Shares will be issued under the Proposed Non-public Issuance of A Shares, which represents:

(i) approximately 41.33% of the existing issued A Shares and approximately 28.06% of the existing total issued share capital of the Company as at the Latest Practicable Date; and
(ii) approximately 29.25% of the enlarged issued A Shares and approximately 21.91% of the enlarged total issued share capital of the Company upon completion of the Proposed Non-public Issuance of A Shares. The formula for the adjustment is set out below:

Q = Q0 x (P0/P)

where,

(i) Q is the Cap after adjustment for any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares;
(ii) Q0 is the Cap;
(iii) P is the Benchmark Price after adjustment for any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) P0 is the Benchmark Price.

Pursuant to the Implementation Rules for the Proposed Non-public Issuance of A Shares by Listed Companies, where the board of a listed company resolves to issue shares by way of non-public issuance, the board resolution shall specify, among other things, the maximum proceeds to be raised from the non-public issuance, the specific use of the proceeds and whether the number of shares to be issued and the minimum issue price shall be adjusted if there occurs any ex-right or ex-dividend event between the date of determining the minimum issue price and the date of issue of the shares.

On 11 October 2016, the Board has approved the Proposed Non-public Issuance of A Shares and passed resolutions that the gross proceeds to be raised from the Proposed Non-public Issuance of A Shares shall be not more than RMB12 billion and that the Cap and the Benchmark Price shall be adjusted if there occurs any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares. As such, notwithstanding any adjustment to the Cap and/or the Benchmark Price, the maximum gross proceeds of RMB12 billion to be raised from the Proposed Non-public Issuance of A Shares as approved by the Board will in any event not exceed RMB12 billion.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the audited consolidated financial statements of the Group for the year ended 31 December 2015 as set out in Appendix VII to this Circular, the Company has accumulated losses as at 31 December 2015 and as such, the Company is of the view that the possibility of adjusting the Benchmark Price and the Cap as a result of ex-right or ex-dividend events for the Proposed Non-public Issuance of A Shares is relatively low.

The Cap will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares, details of which are set out in the section head “II. Proposed Non-public Issuance of A Shares” in the Letter from the Board.

China Shipping undertakes to subscribe for such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares.

The Proposed Non-public Issuance of A Shares is not underwritten.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Target subscribers:

The target subscribers for the Proposed Non-public Issuance of A Shares will be not more than 10 specific subscribers (including China Shipping).

The H Shareholders (other than China Shipping) are not entitled to subscribe for A Shares under the Proposed Non-public Issuance of A Shares. Please refer to the section headed “Special Deal” below for further details.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Price Determination Date, issue price and pricing principles:

The Benchmark Price represents:

(i) a premium of approximately 207.56% to the latest net asset value of RMB1.19 per Share (based on the unaudited net asset value of the Company as at 30 September 2016 as disclosed in the quarterly report of the Company for the third quarter of 2016 and rounded to the nearest two decimal places);
(ii) a discount of approximately 19.38% to the closing price of RMB4.54 per A Share as quoted on the Shanghai Stock Exchange as at the Latest Practicable Date;
(iii) a discount of approximately 8.04% to the closing price of RMB3.98 per A Share as quoted on the Shanghai Stock Exchange as at the A Share Last Trading Day;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) a discount of approximately 8.50% to the average closing price of RMB4.00 per A Share as quoted on the Shanghai Stock Exchange for the last five trading days up to and including the A Share Last Trading Day; and
(v) a discount of approximately 8.50% to the average closing price of RMB4.00 per A Share as quoted on the Shanghai Stock Exchange for the last 10 trading days up to and including the A Share Last Trading Day.

The Benchmark Price will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalisation of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares. The formula for the adjustment is set out below:

P = (P0 – Div ) / (1 + N)

where,

(i) P is the Benchmark Price after adjustment for any ex-right or ex-dividend event between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares;
(ii) P0 is the Benchmark Price;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) Div is the amount of cash dividend per Share in RMB distributed by the Company between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares; and
(iv) N is the number of (a) Shares being issued upon capitalisation of capital reserves for each Share, and/or (b) Shares being issued upon distribution of share dividend for each Share by the Company between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares.

Please refer to the section headed “II. Proposed Non-public Issuance of A Shares – 1. Details of the Proposed Non-public Issuance of A Shares – Number of A Shares to be issued” in the Circular for further details of the adjustment.

Conditions precedent The Proposed Non-public Issuance of A Shares is of the Proposed conditional upon: Non-public Issuance of A Shares: (i) the of the from the

(i) the obtaining of the approval from the Shareholders at the EGM and the Class Meetings;
(ii) the obtaining of the approval from the SASAC;
(iii) the obtaining of the approval from the CSRC; and
(iv) the obtaining of the Whitewash Waiver and the consent to the Special Deal from the Executive.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

An application for the approval of the Proposed Non-public Issuance of A Shares and the CS Subscription has been submitted to the SASAC on 7 November 2016 by COSCO Shipping.

As at the Latest Applicable Date, no application for the approval of the Proposed Non-public Issuance of A Shares has been submitted to the CSRC by the Company. The Company will submit the application for approval to the CSRC following the approval by the SASAC and by the Independent Shareholders of the Proposed Non-public Issuance of A Shares at the EGM and the Class Meetings, in accordance with applicable laws and regulations in the PRC.

Lock-up period:

Distribution of profit:

China Shipping shall not transfer the A Shares subscribed under the Proposed Non-public Issuance of A Shares within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares. All other target subscribers shall not transfer the A Shares subscribed under the Proposed Nonpublic Issuance of A Shares within 12 months from the date of completion of the Proposed Non-public Issuance of A Shares.

Upon the completion of the Proposed Non-public Issuance of A Shares, the existing and new Shareholders will be entitled to share the Company’s cumulative undistributed profits at the time of the Proposed Non-public Issuance of A Shares.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Place of listing of the A Shares The Company will apply to the Shanghai Stock to be issued: Exchange for the listing of, and permission to deal in, the A Shares to be issued under the Proposed Nonpublic Issuance of A Shares. The A Shares to be issued under the Proposed Non-public Issuance of A Shares can be traded on the Shanghai Stock Exchange upon the expiration of the lock-up period.

Specific Mandate to issue The Company will issue the A Shares under the A Shares: Specific Mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings.

2.2 Subscription price of the A Shares under the CS Subscription Agreement and the Specific Mandate

2.2.1 Principle terms of the CS Subscription Agreement

As part of the Proposed Non-public Issuance of A Shares, on 11 October 2016, the Company and China Shipping entered into the CS Subscription Agreement pursuant to which China Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares. China Shipping will not participate in the pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target. In other words, the pricing basis of the subscription price agreed by China Shipping is the same as the pricing principles as described in “2.1 Details of the Proposed Non-public Issuance of A Shares” in this letter. In addition, the Company will issue the A Shares under the Specific Mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings.

2.2.2 Historical price trend analysis

The minimum subscription price of RMB3.66 per A Share represents:

(a) a discount of approximately 19.38% to the closing price of RMB4.54 per A Shares as quoted on the Shanghai Stock Exchange on the Latest Practicable Date;
(b) a discount of approximately 8.0% to the closing price of RMB3.98 per A Share as quoted on the Shanghai Stock Exchange on the A Share Last Trading Day (i.e. 27 September 2016);
(c) a discount of approximately 8.5% to the average closing price of RMB4.00 per A Share as quoted on the Shanghai Stock Exchange for the last 5 trading days up to and including the A Share Last Trading Day;
(d) a discount of approximately 8.5% to the average closing price of RMB4.00 per A Share as quoted on the Shanghai Stock Exchange for the last 10 trading days up to and including the A Share Last Trading Day;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(e) a discount of approximately 9.2% to the average closing price of RMB4.03 per A Share as quoted on the Shanghai Stock Exchange for the last 20 trading days up to and including the A Share Last Trading Day;

The chart below illustrates a comparison between the minimum subscription price of RMB3.66 per A Share and (I) the daily closing prices of the H Shares (presented in RMB equivalent based on an exchange rate of RMB1.00 to HK$1.15); and (II) the daily closing prices of the A Shares from 1 January 2016 up to and including the Latest Practicable Date (the “ Review Period ”):

==> picture [359 x 180] intentionally omitted <==

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

7.00
6.00
5.00
4.00
A Share
3.00
2.00 H Share
1.00
Subscription
Price
0.00
1/1/20162/1/20163/1/20164/1/20165/1/20166/1/20167/1/20168/1/20169/1/201610/1/201611/1/2016
Daily Closing price (RMB)
----- End of picture text -----

Sources: Websites of the Hong Kong Stock Exchange and www.cninfo.com.cn

Before the suspension on the Shanghai Stock Exchange pending for the publication of the announcement in respect of the Proposed Non-public Issuance of A Shares, the A Share closed at RMB3.98 on 27 September 2016. During the Review Period, the A Shares were traded with closing prices in the range of RMB3.86 to RMB6.34 per A Share with an average closing price of approximately RMB4.36 per A Share. During the Review Period, the daily closing price of the H Shares followed the trend of the daily closing price of the A Shares in general.

Although the minimum subscription price of RMB3.66 per A Share represents (a) a discount of the closing prices of A Share as at the Latest Practicable Date, the A Share Last Trading Day, the last 5 trading days up to and including the A Share Last Trading Day, the last 10 trading days up to and including the A Share Last Trading Day, and the last 20 trading days up to and including the A Share Last Trading Day; and (b) a discount of approximately 16.1% to the average daily closing price of the A Shares of RMB4.36 during the Review Period, having considered that the minimum subscription price (i) represents a premium to the closing prices of H Shares throughout the Review Period; (ii) the requirements of Measures for the Administration of Issuance on setting the minimum subscription price of A Shares; and (iii) the subscription price in the Proposed Non-public Issuance of A Shares offered to China Shipping will be the same as the subscription price offered to the other target subscribers which are third parties independent of the Company and its connected persons, and none of them will become substantial shareholders of the Company nor, together with parties acting in concert with it, would trigger mandatory general offer obligation under the Takeovers Code, we concur with the Directors’ view that the subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.2.3 Market comparable analysis

In order to further assess the fairness and reasonableness of the subscription price, we have tried to search for transactions in relation to subscription by connected person(s) involving issue of new A shares pursuant to the specific mandate announced by company listed on both Hong Kong Stock Exchange and Shanghai Stock Exchange. As we have only identified 2 transactions of such transactions during the Review Period, we extend our sample search to the period between January 2015 and the Latest Practicable Date (the “ Comparable Period ”). We have identified 6 transactions regarding subscription of new A shares under specific mandate conducted by companies listed on both Hong Kong Stock Exchange and Shanghai Stock Exchange announced during the Comparable Period (the “ Market Comparables ”).

We believe that the samples represent the latest available information in the market and the Market Comparables are exhaustive. Independent Shareholders should note that the businesses, operations and prospects of the Group are not the same as the Market Comparables and thus their respective terms are only used to provide a general reference for the common market practice in recent subscriptions of new A shares of the companies listed on the both Hong Kong Stock Exchange and Shanghai Stock Exchange by connected person(s). The table below summarises our relevant findings:

			Discount of		Discount of
			subscription		subscription
			price to average	Discount of	price to average
		Discount of	closing price of	subscription	closing price of
		subscription	5 trading days	price to average	20 trading days
		price to closing	up to and	closing price on	up to and
		price on the last	including the	the 10 last	including the
Date of announcement	Company	trading day	last trading day	trading days	last trading day
		(approximate %)	(approximate %)	(approximate %)	(approximate %)
14/11/2016	Shanghai Electric	10.3	11.4	11.4	9.6
	Group Company
	Limited
	(H share stock
	code: 2727)
	(A share stock
	code: 601727)
11/7/2016 22/7/2016	Zijin Mining	17.7	13.2	12.1	9.3
(adjustment of	Group Co., Ltd.
minimum subscription	(H share stock
price)	code: 2899)
	(A share stock
	code: 601899)
25/2/2016	Jiangxi Copper	12.8	8.5	6.8	9.3
	Company Limited
	(H share stock
	code: 0358)
	(A share stock
	code: 600362)
	(Note)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Discount of		Discount of
			subscription		subscription
			price to average	Discount of	price to average
		Discount of	closing price of	subscription	closing price of
		subscription	5 trading days	price to average	20 trading days
		price to closing	up to and	closing price on	up to and
		price on the last	including the	the 10 last	including the
Date of announcement	Company	trading day	last trading day	trading days	last trading day
		(approximate %)	(approximate %)	(approximate %)	(approximate %)
11/12/2015	Beijing Jingcheng	18.3	27.8	34.1	30.6
	Machinery Electric
	Company Limited
	(H share stock
	code: 187) (A
	share stock code:
	600860) (Note)
5/12/2015	Shanghai Electric	7.3	9.1	10.0	9.7
	Group Company
	Limited (H share
	stock code: 2727)
	(A share stock
	code: 601727)
28/7/2015 11/12/2015	Air China Limited	2.7	5.3	5.7	9.4
(Revised)	(H share stock
	code: 753)
	(A share stock
	code: 601111)
	Average	11.5	12.5	13.3	13.0
	Minimum	2.7	5.3	5.7	9.3
	Maximum	18.3	27.8	34.1	30.6
Minimum subscription price	offered to China	8.0	8.5	8.5	9.2
Shipping and other target	subscribers of
RMB3.66 per A Share

Source: Website of Hong Kong Stock Exchange and www.cninfo.com.cn

Note: The companies also announced application for whitewash waiver in relation to their issues of new A shares under the same announcements.

During the search for transactions, we noted two of the companies identified also applied for whitewash waiver and none of the companies involve a mandatory general offer. However, any elimination of the Market Comparables will reduce the sample size and as such may result in a less thorough comparison.

As shown in the above table, the subscription price of the Market Comparables (a) as compared to their respective closing price on the last trading day ranges from a discount of approximately 2.7% to a discount of approximately 18.3%, with an average of a discount of approximately 11.5%; (b) as compared to the 5 trading days up to and including the last trading day ranges from a discount of approximately 5.3% to a discount of approximately 27.8%, with an average of a discount of approximately 12.5%; (c) as compared to the 10 trading days up to and including the last trading day ranges from a discount of approximately 5.7% to a discount of approximately 34.1%, with an average of a discount of approximately 13.3%; and (d) as compared to the 20 trading days up to and including the last trading day ranges from a discount of approximately 9.3% to a

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

discount of approximately 30.6%, with an average of a discount of approximately 13.0%. The discount represented by the minimum subscription price of RMB3.66 per A Share offered to China Shipping and other target subscribers to the (average) closing price of the A Shares on each of (a) the A Share Last Trading Day, (b) the 5 trading days up to and including the A Share Last Trading Day, and (c) the 10 trading days up to and including the A Share Last Trading Day, is within the range of discounts of the Market Comparables; while the discount represented by the minimum subscription price of RMB3.66 per A Share offered to China Shipping and other target subscribers was slightly lower than the minimum of that of the average closing price of the 20 trading days up to and including the A Share Last Trading Day. The discount offered to China Shipping and other target subscribers to the closing price of the A Shares on each of (a) the A Share Last Trading Day, (b) the 5 trading days up to and including the A Share Last Trading Day, (c) the 10 trading days up to and including the A Share Last Trading Day, and (d) the 20 trading days up to and including the A Share Last Trading Day, is lower than the average discounts of the Market Comparables.

Based on the aforesaid and our analysis set out in the section headed “2.2.2 Historical price trend analysis” in this letter, we concur with the Directors’ view that the subscription price of the A Shares under the CS Subscription Agreement which will be issued under Specific Mandate is fair and reasonable so far as the Independent Shareholders are concerned.

3. POSSIBLE EFFECTS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

3.1 Financial effects to the Group

As advised by the Directors, the Proposed Non-public Issuance of A Shares and the CS Subscription would have the following financial effects to the Group:

(i) Net assets value

As referred to in the 2016 Interim Report, the unaudited consolidated net assets value of the Group attributable to the Shareholders as at 30 June 2016 was approximately RMB13.8 billion. The Directors expected that the Group’s net assets value would increase immediately after completion of the Proposed Non-public Issuance of A Shares as the net proceeds from the Proposed Non-public Issuance of A Shares will bring in additional funds to the Group.

(ii) Gearing

The Directors expect that the Group’s debt to assets ratio will be reduced immediately after the completion of the Proposed Non-public Issuance of A Shares, in view of the fact that additional funds will be brought to the Group without any increase in debt.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) Working capital

As the net proceeds from the Proposed Non-public Issuance of A Shares will increase the Group’s cash position, the Directors expect that the Group’s working capital position would be improved immediately after completion of the Proposed Non-public Issuance of A Shares.

Based on the above, we concur with the Directors’ view that the Proposed Non-public Issuance of A Shares would not have any material adverse impact on the Group’s financial position.

It should be noted that the aforementioned analysis is for illustrative purposes only and do not purport to represent how the financial position of the Group will be upon completion of the Proposed Non-public Issuance of A Shares.

3.2 Potential dilution to the shareholding of the existing Shareholders

As at the Latest Practicable Date, the total issued share capital of the Company is 11,683,125,000 Shares, which comprises 7,932,125,000 A Shares and 3,751,000,000 H Shares.

The shareholding structure of the Company (i) as at the Latest Practicable Date and (ii) immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Minimum Subscription Scenario; and (iii) immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Maximum Subscription Scenario is as set out below:

Name of Shareholder Class of Shares China Shipping, and parties acting in concert with it (Note 1) A H Sub-total Public A Shareholders A Public H Shareholders H Total (Note 2)	Shareholding as Number of Shares 4,458,195,175 100,944,000 4,559,139,175 3,473,929,825 3,650,056,000 11,683,125,000	the Latest Practicable Date Approximate percentage of the issued A Share capital (%) Approximate percentage of the total issued share capital (%) 56.20 38.16 – 0.86 – 39.02 43.80 29.73 – 31.24 100.00 100.00	Shareholding immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Minimum Subscription Scenario Number of Shares Approximate percentage of the issued A Share capital (%) Approximate percentage of the total issued share capital (%) 5,824,315,393 51.95 38.93 100,944,000 – 0.67 5,925,259,393 – 39.60 5,386,498,131 48.05 36.00 3,650,056,000 – 24.40 14,961,813,524 100.00 100.00	Shareholding immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Maximum Subscription Scenario Number of Shares Approximate percentage of the issued A Share capital (%) Approximate percentage of the total issued share capital (%) 6,370,763,481 56.83 42.58 100,944,000 – 0.67 6,471,707,481 – 43.25 4,840,050,043 43.17 32.35 3,650,056,000 – 24.40 14,961,813,524 100.00 100.00	Shareholding immediately after completion of the Proposed Non-public Issuance of A Shares under the CS Maximum Subscription Scenario Number of Shares Approximate percentage of the issued A Share capital (%) Approximate percentage of the total issued share capital (%) 6,370,763,481 56.83 42.58 100,944,000 – 0.67 6,471,707,481 – 43.25 4,840,050,043 43.17 32.35 3,650,056,000 – 24.40 14,961,813,524 100.00 100.00
					43.25 32.35 24.40
					100.00

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Note :

An aggregate of 4,458,195,175 A Shares is held by China Shipping and an aggregate of 100,944,000 H Shares is held by Ocean Fortune Investment Limited, an indirectly wholly-owned subsidiary of China Shipping.
The approximate percentage of the total issued share capital is rounded to the nearest two decimal places and the total percentage of the total issued share capital may not add up to 100% due to rounding.

Upon completion of the Proposed Non-public Issuance of A Shares (assuming there is no adjustment to the issue price of A Shares and no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the Shares pursuant to the Proposed Non-public Issuance of A Shares), (i) the shareholding of the public A Shareholders will be increased from approximately 29.73% to approximately 32.35%; and (ii) the shareholding of the public H Shareholders will be decreased from approximately 31.24% to approximately 24.40%.

Although there will be dilution effect to the shareholding interest of existing public shareholders of H Shares as a result of the Proposed Non-public Issuance of A Shares, we have, however taken into account (i) the reasons for and benefits of the Proposed Non-public Issuance of A Shares, the CS Subscription and proposed use of proceeds as set out in the section headed “1.5 Reasons for and benefits of the Proposed Non-public Issuance of A Shares”; (ii) the alternative fund raising methods available to the Company as set out in the section headed “1.6 Financing alternatives of the Company”; (iii) the fairness and reasonableness of the subscription price of the A Shares to be issued as set out in the section headed “2. The Terms of the Proposed Non-public Issuance of A Shares”, we consider that the Proposed Non-public Issuance of A Shares is an acceptable means of funds raising by the Company and the shareholding dilution effects upon completion of the Proposed Non-public Issuance of A Shares is acceptable so far as the Independent Shareholders are concerned.

4. THE WHITEWASH WAIVER

(a) under the CS Minimum Subscription Scenario, the aggregate shareholding of China Shipping and parties acting in concert with it in the Company will increase to approximately 39.60% of the then enlarged total issued share capital of the Company; and
(b) under the CS Maximum Subscription Scenario, the aggregate shareholding of China Shipping and parties acting in concert with it in the Company will increase to approximately 43.25% of the then enlarged total issued share capital of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

China Shipping has made an application to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code. The Whitewash Waiver, if granted by the Executive, will be subject to (i) the approval of the Whitewash Waiver by the Independent Shareholders taken by way of a poll at the EGM and (ii) the approval of the CS Subscription by the Independent Shareholders taken by way of a poll at the EGM and the Class Meetings. The Executive may or may not grant the Whitewash Waiver.

In order to satisfy the relevant conditions for obtaining a waiver of China Shipping’s obligation to make a general offer of the securities of the Company as a result of the CS Subscription under the relevant PRC laws and regulations, China Shipping undertakes that the A Shares to be subscribed by it under the Proposed Non-public Issuance of A Shares shall not be transferred within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares. The proposal in relation to the waiver of China Shipping’s obligation to make a general offer of the securities of the Company as a result of the CS Subscription under the relevant PRC laws and regulations will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM.

Completion of the Proposed Non-public Issuance of A Shares and the CS Subscription is conditional upon, among other things, the Whitewash Waiver being granted by the Executive and approved by the Independent Shareholders. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Proposed Non-public Issuance of A Shares and the CS Subscription will not proceed. Accordingly, the Company will lose all the benefits that are expected to be brought by the CS Subscription, including but not limited to, the availability of funds out of the net proceeds to be raised from the CS Subscription.

Having considered the benefits of the Proposed Non-public Issuance of A Shares as mentioned in the previous sections in this letter, in particular, (i) the Proposed Non-public Issuance of A Shares is a reasonable financing means available to the Group; (ii) the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s debt ratio to obtain further debt financing and lower the costs of its debt financing; (iii) the Proposed Non-public Issuance of A Shares would provide funding for capital injections in COSCO Shipping Leasing and FIL, the repayment of the Company’s maturing corporate bonds (which are held by persons other than the existing Shareholders) and the replenishment of the working capital of the Company; (iv) the dilution effect to the Independent Shareholders as a result of the Proposed Non-public Issuance of A Shares is acceptable due to the reasons as elaborated under the section headed “Potential dilution to the shareholding of the existing Shareholders” of this letter; (v) the Proposed Non-public Issuance of A Shares would have an overall positive effect on the financial position of the Group in

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

terms of net asset value, cash flows and gearing upon completion of the Proposed Non-public Issuance of A Shares; and (vi) all other factors as discussed under the section headed “1.5 Reasons for and benefits of the Proposed Non-public Issuance of A Shares” above, we are of the view that the granting of the Whitewash Waiver, which is a prerequisite for the completion of the CS Subscription and the Proposed Non-public Issuance of A Shares, is fair and reasonable, and in the interests of the Company and the Shareholders as a whole, and we are of the view that the CS Subscription, the Proposed Non-public Issuance of A Shares and the approval of the Whitewash Waiver by the Independent Shareholders at the EGM is fair and reasonable, and in the interests of the Independent Shareholders as a whole.

5. SPECIAL DEAL

As set out in the section headed “Special Deal in relation to the Proposed Non-Public Issuance of A Shares” in the “Letter from the Board” contained in this Circular, according to the applicable PRC laws, regulations and regulatory requirements, foreign investors cannot subscribe in non-public issue of A shares of listed companies by way of cash unless they are approved qualified foreign institutional investors or foreign strategic investors. In order to ensure the independence of the H Shareholders, and after considering the applicable PRC laws, regulations and regulatory requirements, the scope of targeted subscribers (other than China Shipping) under the Proposed Non-Public Issuance of A Shares will exclude all the H Shareholders (including approved qualified foreign institutional investors, foreign strategic investors and approved PRC investors which could invest in H Shares, including the qualified domestic institutional investors and the southbound trading investors under the Shanghai-Hong Kong Stock Connect). According to the PRC Legal Advisers, the aforementioned scope of targeted subscribers is in compliance with the applicable PRC laws, regulations and regulatory requirements.

The Proposed Non-public Issuance of A Shares, therefore, constitutes Special Deal under Rule 25 of the Takeover Codes which is not capable of being extended to all Shareholders and requires the consent of the Executive. An application will be made by the Company to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeovers Code. Such consent, if grant, will be subject to, among other things, (i) the Independent Financial Adviser publicly states that in its opinion the terms of the Special Deal are fair and reasonable and (ii) the approval of the Special Deal by the Independent Shareholders by way of a poll at the EGM and the Class Meetings. Accordingly, the resolution in respect of the Special Deal will be submitted, by way of special resolution, for H Shareholders’ consideration and approval at the EGM and the H Shares Class Meeting. China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal will abstain from voting on the resolution to be proposed at the EGM and the H Shares Class Meeting to approve the Special Deal.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the Letter from the Board, we are given to understand that,

(i) pursuant to Rules 23 and 24 of the Implementation Rules for the Non-public Issuance of Shares by Listed Companies, where the board resolution of the Company has not identified specific target subscribers for the non-public issuance of shares, the sponsor shall issue invitation for subscription to eligible specific target subscribers after obtaining approval documents from the CSRC. The list of eligible specific target subscribers shall include: (i) investors who have submitted a letter of intent after the announcement of the board resolution by the company; (ii) the top 20 shareholders of the company; and (iii) not less than 20 securities investment fund management companies, 10 securities companies and five insurance institutional investors, which are eligible under the Measures for the Administration of Securities Offering and Underwriting (《證券發行與承銷管理辦法》). As at the Latest Practicable Date, the Company has yet to obtain approval from CSRC and no invitation documents have been delivered;
(ii) according to the relevant provisions such as the Implementation Rules for the Proposed Non-public Issuance of A Shares by Listed Companies, the final price of the Proposed Non-public Issuance of A Shares shall be determined by the Board (as authorised at the general meeting) and by its authorized persons as well as the sponsor (lead underwriter) through acceptance of market quotations built upon the Benchmark Price and with reference to bid prices of targeted subscribers in a higher-to-lower priority, after obtaining the approval from CSRC regarding the Proposed Non-public Issuance of A Shares.

Pursuant to the “Letter from the Board”, China Shipping will not participate in the pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target subscribers.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) in addition, every existing A Shareholder who is interested in participating in the Proposed Non-public issuance of A Shares are entitled to express their interests to the Company and submit a letter of intent to subscribe for new A Shares after the announcement of the board resolution by the company. The interested investors will be invited to participate in the book-building process and priority will be given based on the price quoted by the relevant investors. The existing Shareholders will not have preferential right of priority over other investors to subscribe for the A Shares under the Proposed Non-public Issuance of A Shares.

As at the Latest Practicable Date, the Company is not aware of other existing Shareholders out of the 10 specific target subscribers (other than China Shipping);

(iv) the H Shareholders (other than China Shipping) are not entitled to subscribe for A Shares under the Proposed Non-public Issuance of A Shares; and
(v) China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or Special Deal will abstain from voting on the resolution to be proposed at the EGM and the Class Meetings to approve the Special Deal.

The Company has applied to the Executive for the consent, under Rule 25 of the Takeovers Code in respect of Special Deal which will be subject to the approval of the Special Deal by the Independent Shareholders by way of poll at the EGM and the Class Meetings. The consent, if granted, would be subject to, among other things, (i) the Independent Financial Adviser publicly states that in its opinion the terms of the Special Deal are fair and reasonable and (ii) the approval of the Special Deal by the Independent Shareholders by way of poll at the EGM and the Class Meetings.

Taking into account (i) the Special Deal is in compliance with the Implementation Rules for the Proposed Non-public Issuance of A Shares by Listed Companies; (ii) China Shipping will not participate in pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target subscribers; (iii) all the A Shareholders, who are interested to participate in the Proposed Non-public Issuance of A Shares, are entitled to express interest and receive invitation documents; (iv) all the H Shareholders (other than China Shipping) are not entitled to subscribe for A Shares under the Proposed Non-public Issuance of A Shares to ensure the independence of H Shareholders; (v) China Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal will abstain from voting in respect of the resolutions to approve the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and the Special Deal at the EGM and the Class Meetings; (vi) greater dilution effect to the shareholding of the existing Shareholders would be resulted if the Company conducts a fund raising exercise by issuance of new H Shares in Hong Kong, as explained in the section of “1.6 Financing

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

alternatives of the Company” in this letter; and (vi) all Independent Shareholders are entitled to vote at the EGM and the Class Meetings for or against the special resolution in relation to the Special Deal, we are of the view that the approval of the Special Deal by the Independent Shareholders at the EGM and the Class Meetings is fair and reasonable, and in the interests of the Independent Shareholders as a whole.

RECOMMENDATION AND CONCLUSION

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

the information of the Group and China Shipping as set out in the section headed “1.1 Background Information on the Company” and “1.4 Background Information on China Shipping;
the reasons for and benefits of the Proposed Non-public Issuance of A Shares and CS Subscription and the financing alternatives considered by the Company as set out in the section headed “1.5 Reasons for and benefits of the Proposed Non-public Issuance of A Shares”;
the details of the Proposed Non-public Issuance of A Shares as set out in the section headed “2.1 Details of the Proposed Non-public Issuance of A Shares”;
the financing alternatives considered by the Company as set out in the section headed “1.6 Financing alternatives of the Company”;
our analysis on the fairness and reasonableness of the subscription price and the lock-up arrangement under the CS Subscription and under Specific Mandate as set out in the section headed “2.2. Subscription price of the A Shares under the CS Subscription Agreement and the Specific Mandate”;
the potential effects on the Group’s financial and the shareholding of the existing Shareholdings as set out in the section headed “3. Possible Effects of the Proposed Non-public Issuance of A Shares”,
the analysis on fairness and reasonableness of granting the Whitewash Waiver as set out in the section headed “4. The Whitewash Waiver”; and
the analysis on fairness and reasonableness on approving the Special Deal as set out in the section headed “5. Special Deal”;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

we are of the opinion that although the CS Subscription in the Proposed Non-public Issuance of A Shares are not in the ordinary and usual course of the business of the Company, the entering into of the CS Subscription Agreement and the transactions contemplated thereunder is in the interests of the Company and the Shareholders as a whole, and the terms of the CS Subscription Agreement and the transactions contemplated thereunder are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the resolutions to be proposed at the EGM and the Class Meetings (if applicable) to approve (i) the Proposed Non-public Issuance of A Shares; (ii) the CS Subscription; (iii) the Specific Mandate; (iv) the Whitewash Waiver; and (v) the Special Deal.

Note: In this letter from the Independent Financial Adviser, currency translation has been made at the rate of RMB1.00 to HK$1.15

For identification purpose only

Yours faithfully, For and on behalf of

Messis Capital Limited Thomas Lai Vincent Cheung Managing Director Managing Director

Mr. Thomas Lai is a licensed person registered with the Securities and Futures Commission and regarded as a responsible officer of Messis Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 20 years of experience in corporate finance industry.

Mr. Vincent Cheung is a licensed person registered with the Securities and Futures Commission and regarded as a responsible officer of Messis Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 9 years of experience in corporate finance industry.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

This English translation is for reference only. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

STATEMENT OF THE COMPANY

The Company and all members of the board of directors (the “ Board ”) warrant the truthfulness, accuracy and completeness of the information herein without any false representations, misleading statements or material omissions.
Following the completion of the Non-public Issuance of A Shares described herein, the Company shall be responsible for any of its changes in operation and profits, and the investors shall be responsible for investment risks caused by the Non-public Issuance of A Shares.
The Proposal is the representation made by the Board for the Non-public Issuance of A Shares, and any statement against the information herein shall be deemed as misrepresentation.
Any information herein shall not represent judgment, confirmation or approval of competent authorities for the Non-public Issuance of A Shares herein. The effectiveness and completion of any matters relevant to Non-public Issuance of A Shares have not yet been approved or verified by the competent authorities.
In case of any doubts, the investors shall consult their own stock brokers, lawyers, professional accountants or other professional advisers.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

SPECIAL NOTES

The matters relevant to the Non-public Issuance of A Shares were approved at the ninth meeting of the fifth session of the Board convened on 11 October 2016, and are subject to approval by the State-owned Assets Supervision and Administration Commission (“SASAC”), consideration and approval at the general meeting, A shares class meeting and H shares class meeting, and verification and approval by the China Securities Regulatory Commission (“CSRC”).
The target subscribers of the Non-public Issuance of A Shares are no more than 10 specific subscribers meeting the conditions as stipulated by the CSRC including China Shipping (Group) Company (hereafter, “China Shipping”), the controlling shareholder of the Company.
In addition to China Shipping, other target subscribers include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified offshore institutional investors and other qualified investors that meet the provisions of laws and regulations in compliance with the provisions of the CSRC. A securities investment fund management company subscribing through over two funds managed by it will be regarded as one target subscriber. Trust investment companies may only pay the subscription price with their own funds. The H shareholders of the Company (excluding China Shipping) are not allowed to subscribe for the shares under the Non-public Issuance of A Shares. (In case of other provisions on the target subscribers under laws, administrative regulations, administrative rules of the CSRC or normative documents, such provisions shall prevail.)
The pricing benchmark date of the Non-public Issuance of A Shares is the date of the announcement of resolution of the ninth meeting of the fifth session of the Board of the Company. The issuance price under the Non-public Issuance of A Shares will be not less than 90% of the average trading price of A shares of the Company over the 20 trading days preceding the pricing benchmark date (the average trading price of A shares over the 20 trading days preceding the pricing benchmark date = the total turnover of A shares over the 20 trading days preceding the pricing benchmark date/the total trading volume of A shares over 20 trading days preceding the pricing benchmark date), i.e. not less than RMB3.66 per share. The final price of the Issuance shall be determined by the Board (as authorized by the general meeting) and by its authorized persons as well as the sponsor (underwriter) by accepting market quotations built upon the said Benchmark Price and with reference to bid prices of targeted subscribers in a higher-to-lower priority pursuant to relevant provisions such as Implementation Rules, after obtaining the approval from CSRC regarding the Non-public Issuance.

China Shipping will not participate in market quotations process but is subject to the result of market quotations. The subscription price attributable to it is the same as to other targeted subscribers.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

The Benchmark Price of the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend matters of A shares of the Company; such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the pricing benchmark date to the date of the Issuance.

The number of A shares under the Non-public Issuance shall be no more than 3,278,688,524 shares, all the investors, including China Shipping shall subscribe the A shares under the Non-public Issuance in cash. As such, China Shipping undertakes that the amount used by it to subscribe for the shares under the Non-public Issuance of A Shares shall be no less than RMB5 billion and no more than RMB7 billion.

To the extent of the Issuance mentioned above, the number of shares to be issued under the Non-public Issuance of A Shares shall be determined by the Board and its authorized persons as authorized by the general meeting after consultation with the sponsor (lead underwriter) based on the quotation results and market conditions as well as the total amount of proceeds and actual subscription situation.

The maximum number of shares under the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend matters of A shares of the Company; such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the pricing benchmark date to the date of the Issuance.

All of the shares under the Non-public Issuance of A Shares to be subscribed by China Shipping shall not be transferred within 36 months from the completion of the Issuance; and the shares to be subscribed by other target subscribers shall not be transferred within 12 months from the completion of the Issuance.
The gross proceeds from the Non-public Issuance shall not exceed RMB12 billion. Excluding issuance expenses, the net proceeds will be used for capital increase in COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of working capital.
The resolutions with respect to the Non-public Issuance of shares will be valid within 12 months from the date of approval of such resolutions at the general meeting, A shares class meeting and H shares class meeting of the Company.
Upon completion of the Non-public Issuance, the proportion of publically held shares of the Company shall not be less than 10%. Thus, the Non-public Issuance will not cause any share distribution of the Company which fails to meet the listing requirements.
The Non-public Issuance will not cause changes in the controlling shareholder or de facto controller of the Company.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

The undistributed accumulated profits of the company before the Issuance shall be shared by the existing and new shareholders upon completion of the Issuance.
Investors shall pay attention to the details on the Company’s existing profit distribution policy, specific implementation of cash dividend and profit distribution for the last three years and the Shareholders’ Return Plan for the Next Three Years (2016-2018) under “Section V Profit Distribution” herein.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

Definitions

In the proposal, unless the context requires otherwise, the capitalised terms used in this proposal shall have the following meanings:

CSCL/Issuer/Company/ Listed Company

China Shipping Container Lines Co., Ltd.

China COSCO China COSCO Shipping Corporation Limited
China Shipping/ China Shipping (Group) Company Controlling Shareholder
COSCO Group China Ocean Shipping (Group) Company
Non-public Issuance of the Non-public Issuance and listing of A shares of CSCL A Shares/Non-public Issuance/Issuance

Plan

Plan on the Non-public Issuance of A Shares by China Shipping Container Lines Company Limited

Price Determination Date the date that the resolution of the Board on the Non-public Issuance of A Shares is announced

Issuance Date

the first date of the issuance period of the Non-public Issuance of A Shares
Board Meeting the ninth meeting of the fifth session of the Board of the Issuer

Articles of Association the Articles of Association of China Shipping Container Lines Co., Ltd. as promulgated and amended from time to time by the Issuer

Share Subscription Agreement the Share Subscription Agreement between China Shipping Container Lines Co., Ltd. and China Shipping (Group) Company as entered into between the Issuer and China Shipping on 11 October 2016

CSRC

China Securities Regulatory Commission

SFC

The Securities and Futures Commission of Hong Kong

– I-5 –

PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

Takeovers Code Hong Kong Code on Takeovers and Mergers Executive the Executive Director of the Corporate Finance Division of the SFC or any authorized person of such Executive Director Special Deal the Non-public Issuance which constitutes a special deal under Rule 25 of the Takeovers Code Whitewash Waiver a waiver granted by the Executive pursuant to the Exemption Note 1 to Rule 26 of the Takeovers Code on the obligation of China Shipping to make a mandatory general offer to acquire all the securities of CSCL that are not owned or agreed to acquire by China Shipping and its concert parties, which arises from the Issuance of A Shares under the Non-public Issuance and the Share Subscription Agreement SSE The Shanghai Stock Exchange SASAC State-owned Assets Supervision and Administration Commission of the State Council Company Law the Company Law of the People’s Republic of China Securities Law the Securities Law of the People’s Republic of China Listing Rules the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (2014 Revision) Issuance Administration the Measures for Administration of the Issuance of Measures Securities by Listed Companies (《上市公司證券發行管理辦法》) Implementation Rules the Implementation Rules for the Non-public Issuance of Shares by Listed Companies (《上市非公開發行股票實施細則》) COSCO Shipping Leasing COSCO Shipping Leasing Co., Ltd. (中遠海運租賃有限公司) CSCL Hong Kong China Shipping Container Lines (Hong Kong) Co., Limited

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

Florens Florens International Limited Long Honour Long Honour Investments Limited CIMC China International Marine Containers (Group) Co., Ltd. Dong Fang International Dong Fang International Investment Limited (東方國際投資有限公司) COSCO Container COSCO Container Lines Co., Ltd. COSCO Bulk Group China COSCO Bulk Shipping (Group) Co., Ltd. COSCO Shipping Bulk COSCO Shipping Bulk Co., Ltd. Fortune COSCO (Cayman) Fortune Holding Co., Ltd. Drewry Drewry Shipping Consultants Ltd. TAL TAL International Group Inc (a world-famous container leaser) Triton Triton International Limited (a world-famous container leaser) Seaco Seaco SRL (a world-famous container leaser) RMB, RMB10,000 and Renminbi 1 Yuan, Renminbi 10,000 Yuan, Renminbi 100 RMB100 million million Yuan, respectively

– I-7 –

PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

SECTION I SUMMARY OF THE PROPOSAL FOR THE NON-PUBLIC ISSUANCE OF A SHARES

I. Basic Information of the Issuer

Legal name: 中海集裝箱運輸股份有限公司[1]

English name: CHINA SHIPPING CONTAINER LINES CO., LTD

Registered address: Room A-538, International Trade Center, Pilot Free Trade Zone, Shanghai, China
Office address: Maritime Research Building, 628 Minsheng Road, Pudong New Area, Shanghai

A shares listed: The Shanghai Stock Exchange

Abbreviation for A shares: CSCL[2]

Code of A shares: 601866

H shares listed: The Stock Exchange of Hong Kong Limited

Abbreviation for H shares: CSCL

Code of H shares: 02866

Legal representative: Sun Yueying

Incorporation (Business Registration) date: 3 March 2004

Postal code: 200135

Tel.: 021-65966105 Fax: 021-65966498

Company website: www.cscl.com.cn

E-mail: [email protected]

Upon the consideration and approval at the 2016 Third Extraordinary General Meeting of CSCL, CSCL proposed to change its Chinese name from “中海集裝箱運輸股份有限公司” into “中遠海運發展股份有限公司” and its English name from “China Shipping Container Lines Company Limited” to “COSCO SHIPPING Development Co., Ltd.”. The new Chinese name of the Company have been pre-approved by the State Administration for Industry & Commerce, and the Company is currently proceeding with the registration procedures thereof with the competent industry and commerce authorities.
Upon the consideration and approval at the Eighth Meeting of the Fifth Session of the Board of CSCL, CSCL proposed to change its abbreviated Chinese securities name for A shares and H shares from “中海集運” into “中遠海發” and the abbreviated English securities name from “CSCL” into “COSCO SHIP DEVP”, with the A Share Stock Code “601866” and H Share Stock Code “02866” unchanged. Upon registration of the new name of the Company with the relevant industry and commerce authorities, CSCL will apply to the Shanghai Stock Exchange and the Hong Kong Stock Exchange for change of abbreviated securities names, and adjust the said abbreviated securities names according to the opinions of regulators.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

II. Background and Purposes of the Non-public Issuance

(I) Background of the Non-public Issuance

1. Transformation and upgrade of shipping industry accelerated its reform

On 3 September 2014, the State Council issued the Certain Opinions of the State Council Concerning the Promotion of the Healthy Development of Marine industry (《國務院關於促進海運業健康發展的若干意見》) (the “Opinions”), which sets forth seven important tasks, i.e. optimizing maritime fleet composition, improving global maritime network, promoting transformation and upgrade of marine enterprises, vigorously developing modern shipping service industry, deepening the reform and development of marine industry, enhancing international competitiveness of marine industry and boosting safe and green development, which marks that marine development has become a national strategy. The Opinions play an important role in shoring up the confidence in maritime transport, creating synergies, deepening reform and speeding up the construction of a powerful maritime and shipping country. On the 31 October 2014, the Ministry of Communications issued the Plan for Implementation of the Certain Opinions of the State Council Concerning the Promotion of the Healthy Development of Marine Industry (《貫徹落實<國務院關於促進海運業健康發展的若干意見>的實施方案》), detailing specific supportive measures. It marks that the development of shipping industry has become a national strategy and will provide new development opportunities for the shipping industry.

Relevant national strategies and specific supportive measures explicitly put forward the intention to promote the transformation, upgrade and innovation in terms of technology, product and services, and expedite merge and restructuring of marine enterprises, to improve their anti-risk capability and international competitiveness. Marine enterprises are encouraged to moderately carry out diversified operation while making their principal business of maritime transport stronger and better.

2. The Company implemented reform and restructuring plans to transform the Company into an integrated platform in providing shipping finance

In order to implement the spirits of the 18th Party CPC National Congress and the Third, Fourth and Fifth Plenary Sessions of the Eighteenth Central Committee of CPC and the overall requirements of the SASAC on further implementation to the adjustment of the structure of the national economy, deepening reform of stateowned assets and enterprises, improving modern enterprise system and reinforcing the construction of the Party in enterprises, COSCO Group and China Shipping, with the focus of becoming stronger, better and larger, implemented restructuring and consolidation programme to build a maritime and comprehensive logistics enterprise

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group with international competitiveness, aiming at further propel of the goal of building and realising a powerful maritime country in respect of maritime development and providing powerful support for the implementation of “one belt and one road” strategy.

In the context of group integration, the Company has implemented material assets restructuring in 2015 and transformed from a shipping enterprise mainly engaged in the business of container transport into an integrated platform providing shipping finance; mainly engaging in diversified lease businesses including vessel leasing, container leasing and non-shipping financial leasing.

(II) Purposes of the Non-public Issuance

1. To consolidate the foundation for the business transformation of the Company

Upon transformation into an integrated platform providing shipping finance mainly engaged in lease business, the Company take will give play to the advantages in of shipping and logistics industries to integrate resources of the industrial chain and develop various financial businesses so as to achieve combination of shipping and finance, combination of financing and finance, and synergetic development of a number of businesses and facilitate rapid development of four pillar businesses, i.e. leasing, investment, banking and insurance. The replenishment of equity capital can strengthen the Company’s capital strength and is conducive to consolidate the foundation for the business transformation of the Company and enlarging the space for business development.

2. To lessen finance cost burden and optimize capital structure

In recent years, the Company’s liabilities increased with the rapid expansion of the Company and implementation of material assets restructuring. As at 30 June 2016, the consolidated liabilities of the Company amounted to RMB87.47 billion and the debt-to-asset ratio was up to 86.03%. As the Company develops various lease and financial businesses, the Company’s liabilities may further increase. Through the non-public issuance, the Company will raise stable long-term capital, lessen financial cost burden and optimize capital structure. Besides, it will broaden debt financing potential and maintain lower debt financing cost, thus contributing to the overall performance of the business and sustainable development of the Company.

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3. The Issuance reflects the Group’s powerful support for the Company’s development

China COSCO attaches great importance to shipping, logistics, finance, equipment manufacturing, shipping services, socialized industry and the innovated “6+1” industrial cluster of Internet and related business based its commercial model, so as to further enhance integration of shipping factors and spare no efforts to establish a world-leading comprehensive logistics supply chain provider. The Company is an integral component of the shipping finance industrial cluster of China COSCO. Participation of China Shipping in the non-public issuance and active increase of shareholding in the Company demonstrate the strong support from the controlling shareholder in the development of the Company and China COSCO’s firm confidence in the long-term development of the Company.

III. Target Subscribers of the Non-public Issuance and Their Relationships with the Company

The target subscribers of the Non-public Issuance of A Shares are no more than 10 specific subscribers including China Shipping, the controlling shareholder of the Company. In addition to China Shipping, other target subscribers include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other qualified investors that meet the provisions of laws and regulations in compliance with the provisions of the CSRC. A securities investment fund management company subscribing with over two funds managed by it will be regarded as one subscriber. Trust investment companies may only subscribe with their own funds. The H shareholders of the Company (excluding China Shipping) are not allowed to subscribe for the shares under the Non-public Issuance of A Shares (If otherwise prescribed in laws, administrative regulations, administrative rules and regulative documents of the CSRC with respect to the target subscribers, those relevant provisions shall be observed).

Other target subscribers other than China Shipping will be determined by the Board and its authorized persons and the sponsor (lead underwriter) in accordance with relevant provisions under the Implementation Rules, and other requirements after obtaining the written approval for the Non-public Issuance from the CSRC, having considered to the bid prices offered by the subscribers and based on the price priority principle.

The above specific target subscribers shall subscribe for the shares under the Non-public Issuance in cash at the same price. China Shipping will not participate in market auction but accept market quotations results, and its subscription price is the same as that for other target subscribers.

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China Shipping, the controlling shareholder of the Company, undertakes that the amount used by it to subscribe for the shares under the Non-public Issuance of A Shares shall not be less than RMB5 billion and no more than RMB7 billion. The specific quantity of shares to be subscribed for shall be subject to the finalized amount of subscription and issuance price. Upon completion of the Non-public Issuance, there will be no changes in the de facto controller of the Company.

IV. Summary of the Proposal for the Non-Public Issuance

(I) Class and nominal value of the Shares to be issued

The Shares to be issued under the Non-Public Issuance are domestically listed in RMB denominated ordinary shares (A Shares) with a nominal value of RMB1.00 each.

(II) Method of issuance and date of issue

The A shares will be issued by way of Non-Public Issuance to target investors. The Company will, within six months following the approval of the CSRC, issue the A shares to no more than ten specific target investors, including China Shipping, in due course. It will be subject to adjustment according to the new requirements under the laws, administrative regulations, and administrative rules of the CSRC or regulative documents.

(III) Target subscribers and ways of subscription

The target subscribers of the Non-Public Issuance shall not be more than ten which fulfill the conditions as required by the CSRC, including China Shipping. The other target subscribers except China Shipping will include securities investment and fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors and qualified foreign institutional investors approved by the CSRC or other qualified investors in compliance with relevant laws and regulations. A securities investment fund management company subscribing through over two funds managed by it will be regarded as one subscriber. Trust investment companies acted as the target subscribers may only pay the subscription price with their own funds. The H shareholders of the Company (except China Shipping) shall not be allowed for subscribe A shares under the Non-Public Issuance (If otherwise prescribed in laws, administrative regulations, administrative rules and regulative documents of the CSRC with respect to the target subscribers, those relevant provisions shall be observed).

After the target subscribers (except for China Shipping) obtain the approval in respect of the Non-Public Issuance from the CSRC, the Board and its authorized representatives and the sponsor (lead underwriter) will decide the ultimate subscribers based on the relevant requirements of the Implementation Rules and other requirements, as well as the price offered by target subscribers, in accordance to the price priority principle.

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(IV) Pricing benchmark date, issuance price and pricing principles

The pricing benchmark date of the Non-Public Issuance is the date of the announcement of the resolution passed at the ninth meeting of the fifth session of the Board of Company (i.e. 12 October 2016). In accordance with the requirements of Measures for the Administration of Issuance, the issuance price will be not less than 90% of the average trading price of the A shares of the Company over the 20 trading days immediately preceding the pricing benchmark date, being RMB3.66 per Share. (Note: the average trading price of A shares over the 20 trading days preceding the Price Determination Date equals the total turnover of shares over the 20 trading days preceding the Price Determination Date divided by the total trading volume of shares over 20 trading days preceding the Price Determination Date).

The final price of the Non-public Issuance shall be determined by the Board (as authorized at the general meeting) and by its authorized persons as well as the sponsor (lead underwriter) through acceptance of market quotations built upon the Benchmark Price described in the preceding paragraph and with reference to bid prices of targeted subscribers in a higher-to-lower priority pursuant to relevant provisions such as the Implementation Rules, after obtaining the approval from CSRC regarding the Non-public Issuance. China Shipping will not participate in market bid but is subject to the result of market quotations. The subscription price attributable to it is the same as to other targeted subscribers.

The Benchmark Price of the Non-public Issuance of A Shares is subject to adjustment according to ex-dividend or ex-right events such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the pricing benchmark date to the date of Issuance.

(V) Number of shares to be issued and ways of subscription

Not more than 3,278,688,524 A shares will be issued under the Non-Public Issuance. To the extent of the Issuance above, the Board and its authorized representative(s) shall determine the final number of the A shares to be issued in accordance with the authorization granted by the Shareholders at the general meeting and based on the total raising funds, actual subscription condition after consultation with the sponsor (lead underwriter).

The maximum number of shares under the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend events of A Shares of the Company, such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the pricing benchmark date to the date of the Issuance.

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China Shipping committed that, the amount for subscription of A shares under the Non-Public Issuance shall not be less than RMB5 billion, and not more than RMB7 billion. The actual number of A shares to be subscribed will be determined based on the final determined subscription amount and issuance price.

(VI) Arrangement of lock-up period

All of the shares to be subscribed by China Shipping shall not be transferred within 36 months from the completion of the Non-public Issuance for China Shipping; the shares to be subscribed by other target subscribers shall not be transferred within 12 months from the completion of the Non-public Issuance.

(VII) Place of listing

After the expiration of the lock-up period of the Non-Public Issuance, The Company will apply to the Shanghai Stock Exchange for the listing of, and permission to deal in, the A shares to be issued under the Non-Public Issuance.

(VIII) Arrangement relating to the accumulated undistributed profits of the Company prior to the Non-Public Issuance

All the existing and new shareholders upon completion of the Non-Public Issuance will be entitled to the accumulated undistributed profits of the Company prior to the Non-Public Issuance.

(IX) Validity Period of the resolution with respect to the Non-Public Issuance

The resolution with respect to the Non-Public Issuance shall be valid for 12 months from the date of consideration and approval at the shareholders’ general meeting, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting.

V. Amount and use of proceeds from the Non-Public Issuance of A Shares

The total proceeds from the Non-Public Issuance of A Shares is expected to be not more than RMB12 billion. The net proceeds after deducting issuance fees and expenses will be used for capital increase in COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of liquidity.

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VI. Whether the Non-Public Issuance Constitutes a Connected Transaction

Before the Issuance, China Shipping who proposes to participate in the subscription was the controlling shareholder of the Company, and directly and indirectly held 39.02% equity interest in the Shares of the Company, Thus, the Issuance will constitute a connected transaction. The Company will strictly comply with the regulations to fulfill the procedures for reviewing the connect transaction and consider and approve that China Shipping should abstain from voting at the shareholders’ general meeting, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting relating to the Issuance.

VII. Whether the Non-Public Issuance Causes the Change in the Control of the Company

Before the Issuance, China Shipping directly and indirectly held 39.02% equity interest in the Shares of the Company and thus China Shipping was the controlling shareholder of the Company. According to the proposal of the Non-Public Issuance, and assuming that the price for the Non-Public Issuance is the Benchmark Price, the total raising funds will amount to RMB12 billion, and the subscription amount from China Shipping will amount to RMB5 billion. Thus, upon the completion of the Issuance, the shareholding of China Shipping in the Company will increase to 39.60%, and China Shipping shall remain as the controlling shareholder of the Company. Therefore, the Issuance will not result in the change in control of the Company.

VIII. Approval Obtained and to be Obtained for the Non-Public Issuance

The Non-Public Issuance proposal has been considered and approved at the ninth meeting of the fifth session of the Board of the Company and shall be finalized subject to the approval of the procedures as follows:

The Non-Public Issuance shall be subject to the approval of the SASAC of the State Council;
The Non-Public Issuance shall be subject to approval from the shareholder’s general meeting, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting of the Company; and
The Non-Public Issuance shall be subject to the approval of CSRC.

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SECTION II PARTICULARS OF THE TARGET SUBSCRIBERS OF THE NONPUBLIC ISSUANCE AND SUMMARY OF THE SHARE SUBSCRIPTION AGREEMENT

The Non-public Issuance of A Shares are proposed to be issued to no more than 10 specific investors (including China Shipping) which meet the requirements of the CSRC. In addition to China Shipping, the target subscribers are securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors that meet the requirements of the CSRC and other qualified investors that meet the requirements of laws and regulations. A securities investment fund management company subscribing through over two funds managed by it will be regarded as one subscriber. Trust investment companies may only pay the subscription price with their own funds. The holders of H shares of the Company (excluding China Shipping) shall not participate in the subscription of the Non-public Issuance of A Shares. If the laws, administrative regulations, administrative rules or regulatory documents of the CSRC have other provisions on the target subscribers at the time of issuance, such provisions shall be observed.

China Shipping is the controlling shareholder of the Issuer, the basic information of which is as follows:

I. Basic Information of China Shipping

(I) Profile of the controlling shareholder

Company name: China Shipping (Group) Company

Registered address: 700 East Daming Road, Shanghai

Legal representative: Xu Lirong

Registered capital: RMB9,736,363,219

Unified creditability code: 913100001322852476

Scope of business: coastal, ocean and direct commodities transport across domestic rivers and seas, container transport (valid until 30 June 2018). import and export; international commodities transport agency; investment in terminals and harbors; lease and repair of vessels; communication and navigation, manufacturing and repair of relevant equipment and products; warehouse and depot; manufacture, repair and sale of containers; sale of vessels and related parts; sale of steels; technology consultation and communication and IT services in connection with the above businesses (business item that requires permission under laws may only be conducted after obtaining the approvals with the relevant authorities).

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The predecessor of China Shipping is China Seaman Foreign Technology Services Company established on August 9, 1984. Its registered capital at its establishment was RMB1 million.

On September 10, 1991, the registered capital of China Seaman Foreign Technology Services Company increased to RMB22 million.

On 28 October 1996, according to the “Approval of the establishment of the China Shipping Group” (Guo Jing Mao Qi [1996] No. 748) issued by State Economic and Trade Commission, China Seaman Foreign Technology Services Company changed its name to China Shipping.

On 4 June 1997, the registered capital of China Shipping increased to RMB6,611,950,000.

On 28 May 2004, the registered capital of China Shipping increased to RMB6,620,227,000.

On 21 June 2012, the registered capital of China Shipping increased to RMB6,919,963,000.

According to the Notice on the Restructuring of China Ocean Shipping (Group) Company and China Shipping (Group) Company (Guo Zi Fa Gai Ge [2015] No. 165) issued by the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”), the gratuitous transfer of China Shipping in its entirety into China COSCO were procured by SASAC. China COSCO holds 100% equity interest in China Shipping, being the controlling shareholder of China Shipping.

On 20 June 2016, the registered capital of China Shipping increased to RMB9,736,363,219.

(II) Shareholding and control of the controlling shareholder

As at 30 June 2016, China Shipping directly holds 4,410,624,386 A shares of CSCL and holds 47,570,789 A shares of CSCL through a collective scheme, and indirectly holds 100,944,000 H shares of CSCL, respectively, accounting for 39.02% of the total Shares of CSCL, being the controlling shareholder of the Issuer.

The sole shareholder of China Shipping is China COSCO. China COSCO is affiliated to the SASAC, and the central enterprise directly managed by the SASAC. SASAC is the only investor and actual controller of China COSCO.

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As of the disclosure date of the Plan, the shareholding and control relation of the Issuer was as follows:

State-owned Assets Supervision and Administration Commission of the State Council 100.00% China COSCO Shipping Corporation Limited 100.00% China Shipping (Group) Company 39.02% China Shipping Container Lines Company Limited

(III) Developments of main businesses in the last three years of the controlling shareholder

China Shipping is an extra large-scale integrated enterprise group with shipping as its main business that is cross-industry, trans-regional, cross-ownership and multinational. China Shipping mainly engages in five maritime shipping business including container, oil shipping, freight transportation, passenger transportation and special transportation. It also engages in terminal operation, comprehensive logistics, shipping agency, global air transport, ship building, crew management, container manufacturing, trade supply, financial investment, information technology and other shipping-related businesses. China Shipping formed a coordinated development pattern of diversified industries including shipping and shipping finance, logistics, docks, shipbuilding and ship-repairing, technological information and others through the extension into the downstream and upstream businesses of shipping industry. As at the end of 2015, the total assets of China Shipping amounted to RMB232.159 billion, the annual operating income in 2015 amounted to RMB79.911 billion.

In August 2015, COSCO Group and China Shipping started the implementation of reform and restructuring; On 18 February 2016, China COSCO Shipping Corporation Limited was formally established in Shanghai; In May 2016, SASAC gratuitously transferred 100% of the equity interest of COSCO Group held by it and 100% equity interest of China Shipping held by it to China COSCO, the relevant equity transfer registration has been completed.

COSCO Group and China Shipping became the wholly-owned subsidiaries of China COSCO by way of gratuitous transfer. With the main focus on four aspect of its strategy of “expand its scale, enhance its profitability, strengthen its ability to overcome cyclical effect and become an international company”, the new established China COSCO has

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built its “6+1” industrial cluster including areas of Shipping, logistics, finance, equipment manufacturing, shipping services, social industries and innovative internet based on the business models and related businesses, became a multi-industry cluster and the world’s leading integrated logistics supply chain services group with shipping, integrated logistics and related financial service as its pillar.

(IV) Brief financial statements in last year of the controlling shareholder

According to the Audit Report (Xin Kuai Shi Bao Zi [2016] No. 122830) issued by BDO China Shu Lun Pan Certified Public Accountants LLP, the brief financial statements in last year of the Controlling Shareholder are as follows:

1. Main data of consolidated balance sheets for the year of 2015

	Unit: RMB1,000,000
	Consolidated
Items	Statements
Total assets	232,158.80
Total debts	141,555.25
Owner’s equity	90,603.55

2. Main data in consolidated statement of profit for the year of 2015

	Unit: RMB1,000,000
	Consolidated
Items	Statements
Total operating revenue	79,910.56
Total operating costs	84,854.93
Total profit	1,550.83
Net profit	290.18

3. Main data in consolidated statement of cash flow for the year of 2015

	Unit: RMB1,000,000
	Consolidated
Items	Statements
Net cash flow generated from business activities	5,420.36
Net cash flow from investing activities	-12,539.11
Net cash flow from financing activities	9,430.59
Net increase in cash and cash equivalents	2,919.22

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(V) Punishments imposed on the target subscribers and its directors, supervisors and senior executives in the last five years

China Shipping and its directors, supervisors and senior executives have neither been subject to administrative punishments (except for those obviously unrelated to the securities market) and criminal punishments nor involved in the major civil suit or arbitration related to economic disputes in the last five years.

(VI) Horizontal competition and connected transactions

1. Horizontal competition

At present, CSCL is undergoing material assets restructuring. Upon completion of restructuring, CSCL and its subsidiaries will be principally engaged in providing integrated financial services with diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing. Currently, the containers and vessel of enterprises under CSCL are leased to COSCO Container, an enterprise controlled by COSCO Group. In future, CSCL will actively explore new customer base other than COSCO Container. Its business model is to guarantee stable cash flows by developing relatively long-term vessel and container leasing business so as to gain reasonable and steady return on investment.

China Shipping conducts shipping business, integrated logistics, shipping agency, vessel management, shipping maintenance and other auxiliary industries through subsidiaries controlled by it, instead of engaging in financial services such as vessel leasing, container leasing and non-shipping finance leasing directly. Therefore, there is no substantial horizontal competition between China Shipping and CSCL as well as its subsidiaries upon restructuring.

China COSCO wholly owns the COSCO Group and China Shipping. In addition, its wholly-owned subsidiary COSCO Shipping Bulk is principally engaged in international and domestic dry bulk shipping business. COSCO Group mainly conducts shipping, logistics and ship maintenance. Its controlling enterprises COSCO Container and COSCO Bulk Group is principally engaged in international and domestic container and vessel shipping as well as dry bulk shipping business.

As required by the business model of shipping transportation, COSCO Container will conduct leasing business with other enterprises in the shipping industry to optimize resource allocation of each shipping line, make full use of resources and address the problem of over-supply. COSCO Shipping Bulk and COSCO Bulk Group, based on the bulk transportation business model, will provide tailored services to different customers, including voyage charter, whole vessel charter and period leasing so as to promote diversity of its business model, thus improving the competitiveness and business income. Therefore, the vessel and

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container leasing business of COSCO Container, COSCO Shipping Bulk and COSCO Bulk Group is based on its basic necessities of shipping transportation business model. Such business belongs to primary business and is different from the container and vessel leasing business of CSCL in nature and operation model. Therefore, there exists no competitive relationship.

Meanwhile, Fortune (the subsidiary of COSCO Group) is also engaged in the container and vessel leasing business to some extent. Fortune was established in November 1997, which was an overseas platform company established for the purpose of expanding vessel finance channel and optimizing finance cost. During operation, its container and vessel leasing business is mainly targeted at COSCO Container and each single-vessel holding company will not conduct any other new business upon expiration of useful life of its containers and vessel. Since the business of Fortune results from historical reasons, its container and vessel leasing business is specially targeted at COSCO Container, which differs from CSCL in business positioning and proposed target customer base. Therefore, there exists no competitive relationship between Fortune and CSCL.

In view of the above, upon completion of the issue, there will be no substantial horizontal competition in the primary business of the China COSCO and its controlled enterprises, China Shipping and its controlled enterprises, COSCO Group and its controlled enterprises as well as the Company.

2. Connected transaction

The Company has made adequate disclosure about the existing connected parties, connected relationship and connected transactions. The connected transaction are based on business needs and are acts of making compensation of equal value principle according to the actual situations at arm’s length, the prices are fair without deviating from the comparable market price and the necessary procedures have been performed. The connected transactions do not affect the business independence of the Company, nothing to the detriment of the interest of minority shareholders.

China Shipping proposes to subscribe for A shares under the Non-public Issuance, which constitutes a connected transaction of the Company. The Company will perform connected transaction procedures in accordance with laws, regulations and other requirements. In addition, China Shipping and its controlled enterprises will not incur new connected transactions with the Company as a result of the Non-public Issuance.

(VII) Material transactions between the company and the target subscribers for the 24 months before the proposal for issuance is disclosed

For the 24 months as of the date of the proposal, save for transactions disclosed by the Company in periodic reports and temporary announcements, the Company has not conducted any other material connected transactions with China Shipping and its controlled enterprises.

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II. Summary of Share Subscription Agreement

The Company entered into the conditional Share Subscription Agreement with China Shipping, details of which are set out below:

(I) Parties and date

Issuer: China Shipping Container Lines Company Limited

Subscriber: China Shipping (Group) Limited

Date: 11 October 2016

(II) Share Issuance

If all the preconditions as required in this agreement are satisfied, CSCL agrees to issue A shares to China Shipping through Non-public issuance and China Shipping agrees to subscribe for the same issued by CSCL.

The shares of CSCL to be issued under the Non-public issuance are domestic listed Renminbi ordinary shares (A shares) at a nominal value of RMB1.00 per share.

Both parties agree that, CSCL will issue A shares at an issue price of not less than 90% of the average trading prices (i.e. not lower than RMB3.66 per share) of A shares for the 20 trading days preceding the pricing benchmark date of the Non-public Issuance to China Shipping. The final issuance price of the Non-public Issuance shall be determined by the Board and its authorized persons, who accept enquiry on the basis of Benchmark Price as determined in the last paragraph according to relevant provisions under the Implementation Rules, and the sponsor (lead underwriter) in accordance with the authorization granted by the general meeting of CSCL upon obtaining the written approval for the Issuance from the CSRC based on the bid prices offered by the subscribers and according to the price priority principle. China Shipping will not participate in market auction but accept market quotations results, and its subscription price is the same as the other issuance targets. The number of shares under the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend matters of A shares of CSCL such as distribution of dividend, bonus issue, and conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the price determination date to the date of the Issuance.

China Shipping agrees to subscribe for the A shares from CSCL in cash at the final determined price.

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Both parties agree that, the number of A shares under the Non-public issuance shall be determined by the Board and its authorized persons as authorized by the general meeting after consultation with the sponsor (lead underwriter) in accordance with the final results of quotations for the Issuance and based on the total amount of proceeds and actual subscription situation. The number of shares under the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend matters of A shares of CSCL such as distribution of dividend, bonus issue, and conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the price determination date to the date of the Issuance. China Shipping undertakes that the amount it proposes to use for subscribing for the A shares under the Non-public issuance will not be less than RMB5 billion and not more than RMB7 billion. The specific quantity of subscription will be determined based on the amount of subscription and issuance price as finally determined.

China Shipping undertakes that upon completion of the issue, it will not transfer the A shares for a period of 36 months from the date of Non-public Issuance. China Shipping agrees to issue lock-up commitment and complete lock-up procedures for A shares subscribed for under the Non-public issuance in accordance with relevant laws, regulations and relevant requirements of CSRC, the Shanghai Stock Exchange as well as CSCL.

Upon expiration of the lock-up period, A shares issued to China Shipping under the Non-public issuance will be listed and traded on the Shanghai Stock Exchange.

(III) Preconditions

The Non-public issuance shall be conditional upon:

Internal approval of CSCL. The Non-public Issuance has been effectively approved by the board of directors, general meeting, A share class meeting and H share class meeting of CSCL.
Approval of the State-owned Assets Supervision and Administration Department. Relevant matters concerning the Non-public Issuance have been approved by the State-owned Assets Supervision and Administration Department.
Approval of CSRC. Relevant matters concerning the Non-public Issuance have been approved by CSRC.
Approval of the SFC. Relevant matters concerning the Non-public Issuance have acquired the whitewash waiver issued by executive staff and permission for special deal.

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(IV) Method of payment

China Shipping agrees, provided that all the precedent conditions set forth in the Agreement are fulfilled, the proceeds raised from this Non-Public Issuance of A Shares shall be paid by China Shipping in full to the account specially opened for the Non-Public Issuance by the sponsor (the lead underwriter) on the designated payment date determined by the sponsor (the lead underwriter).

The sponsor (the lead underwriter) shall notify China Shipping at least two working days in advance of the designated payment date.

CSCL will designate a certified public accountant firm with qualifications for securities and futures trading to verify the subscription capital paid by China Shipping.

(V) Arrangement for the undistributed accumulated profits

The undistributed accumulated profits of the Company before this Non-Public Issuance will be shared by both the new shareholders and the existing shareholders after this Non-Public Issuance.

(VI) Responsibility for breach of the agreement

Except for the force majeure, non-performance or failure to properly perform the obligations, or breach of any representation and/or warranty, under the agreement by any party to the Agreement, shall be deemed as a default. Such party (the “Defaulting Party”) shall remedy its default within 30 days (the “Remedy Period”) upon receipt of the notice demanding the remedy issued by the non-defaulting party to the agreement (the “Non-Defaulting Party”). If the Defaulting Party fails to remedy its default upon expiration of the Remedy Period, the Non-Defaulting Party has the right to demand the Defaulting Party to bear the liability for breach of the agreement and to compensate the Non-Defaulting Party for all the losses caused by it.

Upon the effective of the Agreement, if China Shipping fails to pay the Subscription money in accordance with the provisions of the agreement on schedule, it shall pay a penalty at 0.5% of the Subscription amount to CSCL every delayed day, and China Shipping shall compensate CSCL for all direct economic losses arising from the delayed payment, and continue to fulfill its obligations of payment under the Agreement.

Upon the effective of the agreement, if China Shipping expressly disclaims any subscription or fails to pay the Subscription amount within 30 days upon receipt of the notice demanding the subscription money issued by CSCL, CSCL shall have the right to cancel the agreement unilaterally by written notice without any responsibility, and the agreement will be cancelled on the next day from the date of written notice to terminate the agreement issued by CSCL. China Shipping shall pay an overdue fine to CSCL for its

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delayed payment as well as a penalty equivalent to 1.5% of the Subscription amount under the agreement. Besides, China Shipping shall compensate CSCL all the losses suffered or incurred by CSCL as a result of such default (including but not limited to the underwriting fees, attorneys’ fees and auditors’ fees paid by CSCL for this Non-Public Issuance).

Upon the signing of the agreement, if the agreement is not effective due to the precedent conditions set forth in the agreement were not fulfilled, the parties shall not pursue any responsibility of each other.

Terms of the responsibility for breach of the agreement shall survive after the rescission or termination of the agreement. SECTION III FEASIBILITY ANALYSIS BY BOARD ON THE USE OF PROCEEDS RAISED IN THE ISSUANCE

I. Plan on the Use of Proceeds Raised in the Issuance

The total proceeds to be raised from the Non-public Issuance shall be no more than RMB12.00 billion and will be used for the following purposes after deducting the cost of Issuance:

No. Project name 1 Capital Increase in COSCO Shipping Leasing Co., Ltd. (“COSCO Shipping Leasing”) 2 Capital Increase in Florens 3 Repayment of maturing corporate bonds 4 Replenishment of working capital Total	Unit: RMB10,000 Total investment in the project The amount of proceeds to be used in the project 600,000 600,000 240,000 240,000 180,000 180,000 180,000 180,000 1,200,000 1,200,000	Unit: RMB10,000 Total investment in the project The amount of proceeds to be used in the project 600,000 600,000 240,000 240,000 180,000 180,000 180,000 180,000 1,200,000 1,200,000
		1,200,000

Before receiving the proceeds, the Company will, depending on the actual situations of the progress of the projects, finance these projects by its self-raised fund which shall be replaced once the proceeds have been received according to procedures required by relevant regulations. If the net amount of the proceeds is less than the aggregate amount of the proceeds proposed to be invested in the aforementioned projects, the Company will make up for the shortfall through its self-raised fund. Based on the actual net proceeds raised from the Issuance, the Board may adjust and eventually decide the projects to be invested in, the priorities of and the investment amount of each project, in compliance with relevant laws and regulations.

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II. Analysis on the Feasibility of the Proceeds Raised in the Issuance

(I) Capital increase in COSCO Shipping Leasing

1. Basic information of the project

In order to proactively grasp the development opportunities in the financing lease industry, expand the business scale of the diversified financing Leasing of CSCL and improve the core competitiveness and brand influence of COSCO Shipping Leasing, the Company proposes to invest RMB6 billion in COSCO Shipping Leasing for its further expansion of the layout of financing lease, additional investment in financial leasing assets and key development of medical treatment, energy, education and innovative fields.

In accordance with the 2017-2019 plan on capital investment in leasing assets of COSCO Shipping Leasing, COSCO Shipping Leasing will use its own funds of RMB13.8 billion to invest in financial leasing assets in 2017-2019, of which RMB6 billion of proceeds will be used for capital increase in COSCO Shipping Leasing and the shortfall shall be made up through its self-raised fund.

2017-2019 Plan on Capital Investment in Leasing Assets of COSCO Shipping Leasing

Industry Medical treatment Energy Education Innovative field Total	2017 Increase in leasing assets Amount of own funds used 400,000 80,000 400,000 80,000 400,000 80,000 300,000 60,000 1,500,000 300,000	2018 Increase in leasing assets Amount of own funds used 600,000 120,000 700,000 140,000 600,000 120,000 500,000 100,000 2,400,000 480,000	Unit: RMB10,000 2019 Increase in leasing assets Amount of own funds used 750,000 150,000 900,000 180,000 750,000 150,000 600,000 120,000 3,000,000 600,000	Unit: RMB10,000 2019 Increase in leasing assets Amount of own funds used 750,000 150,000 900,000 180,000 750,000 150,000 600,000 120,000 3,000,000 600,000
				600,000

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2. Basic Information of COSCO Shipping Leasing

(1) Overview of COSCO Shipping Leasing

Company name: COSCO Shipping Leasing Co., Ltd.

Registration No./Unified social credit code: 91310000076478553L

Legal representative: Liu Chong

Domicile: Room 3E, No. 450 Fushan Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC

Registered capital: RMB1.5 billion

Date of establishment: 29 August 2013

Type of company: one-person limited liability company (wholly owned by a foreign invested enterprise)
Scope of business: financial leasing, leasing business, purchase of leased properties from domestic entities and abroad, disposal and maintenance for residual value of leased properties, consultation for financial leasing and guarantee business, business consultation (except brokerage), investment management, financial management consultation (except bookkeeping). [For items subject to approval by law, operational activities shall be subject to approval from the relevant authorities]
(2) Equity structure of COSCO Shipping Leasing

As at the date of announcement on the plan, CSCL held 100% equity interest of COSCO Shipping Leasing.

(3) Business development of COSCO Shipping Leasing

As one of the important platforms of CSCL for implementation of financial industrial strategies, COSCO Shipping Leasing is mainly engaged in diversified financial leasing and has five business segments, i.e., medical treatment, energy, education, shipping and innovative field. As at 30 June 2016, the total financial leasing assets of COSCO Shipping Leasing amounted to RMB8.292 billion, of which medical treatment, energy, education and shipping represent 27%, 35%, 27% and 11%, respectively. In January – June 2016, the investment in leasing assets increased by RMB4.373 billion.

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(4) Financial position of COSCO Shipping Leasing

The audited financial data for the last three years of COSCO Shipping Leasing is as follows:

			Unit: RMB10,000
	As at	As at	As at
	31 December	31 December	31 December
Items	2015	2014	2013
Total assets	517,999.78	51,699.13	50,400.11
Total liabilities	358,943.98	588.33	140.58
Total owners’
equity	159,055.80	51,110.80	50,259.53
Items	2015	2014	2013
Total revenue	22,396.93	0.00	0.00
Operating profit	10,314.29	1,137.24	346.06
Total profit	10,714.35	1,137.24	346.06
Net profit	7,945.00	851.27	259.53

3. Necessity of the Project

(1) As the rapid development of financing lease industry under the great support of national policy presents a tremendous market space, COSCO Shipping Leasing is confronted with strategic opportunities of business development

As an industry that is closely combined with the real economy, financing lease, against the backdrop of deepening financial reform by the state, is playing an increasing important role in propelling the industrial innovation and upgrade of national economy, broadening the financing channels for medium, small and micro-sized enterprises, driving the development of emerging industries and promoting the adjustment of economic structure.

Ever since the second half of 2015, due to the slow growth of domestic macro economy and increasing difficulties with financing of real economy, particularly middle and small-sized enterprises, the State Council, the Ministry of Commerce and other national ministries and commissions have continuously studied and published guiding opinions to encourage and promote standard, sound and rapid development of the financial lease industry. The overall contract balance of the domestic financing lease industry for 2015 amounted to RMB4.44 trillion, representing a substantial year-on-year increase of 38.75%.

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Compared with the lease market penetration of 15%-30% in developed countries in Europe and America, the current lease market penetration in our country is only about 5%, indicating strong development potentials of domestic lease industry and a tremendous growth space of financing lease market. COSCO Shipping Leasing is currently in the strategic window period for business expansion.

(2) As the competition in the financing lease market is becoming fierce, the Company is in urgent need of capital to reinforce its comprehensive competitiveness

As of the end of 2015, there were 4,508 domestic financing lease enterprises, including 47 financial lease enterprises, 190 domestic-funded enterprises and 4,271 foreign-funded enterprises. The total number of enterprises was doubled as compared to the number of 2,202 enterprises as at the end of 2014. Various financial capitals and industrial capitals have joined the market competition. Ever since 2014, city commercial banks, insurance companies, brokers and large enterprise groups (including state-owned and private enterprises) have newly established financing lease companies with the registered capital of over RMB1 billion.

Financing lease industry is capital intensive. The business size and comprehensive competitiveness of financing lease companies are closely related to their capital strength. As of the end of 2015, the total amount of register capital of domestic financing lease enterprises reached RMB1.52 trillion, representing a year-on-year increase of over 100 percent. The registered capital of each of the top ten financing lease companies as shown by the statistics of China Leasing Alliance is over RMB6 billion.

COSCO Shipping Leasing is currently facing unprecedented market development opportunities and challenges from more competitors and is in urgent need of capital to speed up the expansion of the layout of financing lease in key industries and areas, proactively strengthen comprehensive competitiveness and get ready to gradually enhance the market position in the new rebound of industrial development.

(3) The business structure of financing lease industry continuously upgrades, imposing higher requirements on the business layout of COSCO Shipping Leasing

Under the influence of structural adjustment of macro economy of our country and the guidance of policy planning, the business structure of financing lease presents the trend of diversified balanced development. On the basis of continuously maintaining business development of large fixed assets

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including traditional airplane, ship, machinery and equipment, etc., a larger layout is being accelerated for high-grade, precision and advanced industries including life and health, energy saving and environmental protection, new energy, electronic information, etc. to promote the development and upgrade of relevant strategic industries. Business is developed in a number of fields including education, culture, science and technology, venture capital investment, agricultural machinery, health, infrastructure, etc. Therefore, the situation of the heavy reliance of the construction of domestic public fields on government investment has been gradually changed. The continuous upgrade of business structure promotes the accelerated expansion of the business scope of financing lease industry and further expedites industrial connection.

COSCO Shipping Leasing aims at providing flexible and innovative comprehensive solutions for financing lease to customers in a market-oriented way and in a mode integrating industry and finance. Facing the trend of demand upgrade of the financing lease industry, COSCO Shipping Leasing, relying on its accumulated customer resources of principal businesses, in-depth understanding of industry and standard service capacity, aims at ranking the top in the domestic financing lease industry and gives priority to and meets the needs of the customers in medical treatment, energy, education and innovative field. It proactively grasps the business opportunity of the emerging field of financing lease, striving to further consolidate and increase its market share.

4. Feasibility analysis of the Project

(1) The development of diversified financing lease businesses is subject to powerful support in terms of construction and innovation of industrial systems and encouragement of national policy

In recent years, the financing lease industry of our country has achieved greater progress in respect of construction of external environment, including regulation, law, tax, accounting, etc. Four pillars that support industrial development, i.e. industrial regulatory policy, transaction rules, tax system, accounting criteria, etc. have been gradually consolidated in order. The business practices of financing lease enterprises have also been continuously developed in terms of pilot free trade zone and assets securitization. The steady progress of the construction and innovation of industrial systems has laid a solid foundation for the future continued growth of financing lease market.

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於促進金融租賃業健康發展的指導意見》(國辦發[2015]69號)), which set out the support for development of lease industry as a national support for the first time and clearly proposed that “financing lease companies are encouraged to become larger and stronger in traditional fields including airplane, ship, engineering machinery, and proactive efforts will be made for development of strategic emerging industries and markets including new generation of information technology, high-end equipment manufacturing, new energy, energy saving and environmental protection and biology, and broaden the investment and financing channels of cultural industries; financing lease companies are encouraged to give play to the advantages of financing convenience, flexible term, financial optimization, etc. to provide products and services meeting the characteristics of medium, small and micro-sized enterprises”.

The proceeds used for capital increase in COSCO Shipping Leasing by the Company will be mainly used for expanding the business layout of medical treatment, energy, education and innovative area. The customers served mainly include medium, small and micro-sized enterprises, which are in line with the guidance of national support policies. In the meantime, COSCO Shipping Leasing, Far Eastern Leasing, AVC International Leasing and other large financing lease companies are based on China (Shanghai) Pilot Free Trade Zone and benefit from the cluster advantage brought about by the development of leading enterprises in the industry.

(2) The development and operation of the financing lease business of medical treatment, energy, education and innovative field endows COSCO Shipping Leasing with competitive advantages and implementation basis
a. Medical treatment field

The Medical Treatment Business Department of COSCO Shipping Leasing provides working capital solutions in terms of equipment, consumables, medicine procurement and relevant sections for hospitals, pharmaceutical enterprises, health institutions and medical equipment suppliers. The most of target customers are mainly public hospitals of level 2 and above and share reform hospitals and the few are health centers of townships, armed police hospitals, private hospitals, pharmaceutical enterprises, elderly care and health institutions, etc.

COSCO Shipping Leasing provides standard “Huiyizu” medical equipment financing lease proposal for medium and small clinic customers. The main business advantages include: (a) relatively high return on investment is guaranteed through selection of customers and projects; (b) the highly standard service model shortens business cycle

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and saves marketing costs for customers; (c) the setting of reasonable access thresholds effectively control the non-performing loan rate. With the help of “Huiyizu” innovative business, COSCO Shipping Leasing is able to engage in differentiated competition with commercial banks and operating lease companies, to create its first-mover advantages in the blue ocean market composed of medium, small and micro-sized medical treatment customers. In addition, it will accumulate experience in standard services to ultimately ensure that this type of business model is highly reproducible and will be gradually applied in other diversified industrial fields.

In addition, with the accelerated ageing of people in our country, COSCO Shipping Leasing pays close attention to the difficulties with the society and people’s livelihood brought about by the domestic “ageing” trend and proactively responds to the national policies to develop financing lease business of elderly care industry and explore the innovation of elderly care model.

b. Energy field

The Energy Business Department of COSCO Shipping Leasing focuses on new and clean energy fields including PV, hydropower, etc. The target service customers include leading high quality enterprises and project companies in the professional energy field and local state-owned energy enterprises. The cooperation targets at the current stage are mainly medium and small-sized PV and hydropower enterprises and small project investment and development enterprises in the energy industry which have good brand reputation and business capacity. COSCO Shipping Leasing has a professional mature team composed of those who are experienced and familiar with the development trend of energy demand and policy guidance, as well as long term marketing channels established with relevant energy associations, suppliers, EPC and key customers. At present, it ranks among the top financing lease companies in the domestic clean power energy field. In the future, it will further grasp market opportunities to further consolidate and improve its competitive advantages and market position.

c. Education field

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equipment purchase, construction and development to ensure cash flow optimization of customers and relieve the phased and temporary financial pressure. At present, COSCO Shipping Leasing has established good cooperative relationship with a number of domestic colleges and government organizations including provincial, municipal, district and county level education institutions to provide nationwide customers with teaching equipment financing proposal, infrastructure financing proposal, solution to short-term capital demand and equipment purchase financing proposal for government construction projects. In the future, COSCO Shipping Leasing will continue to develop education and culture financing lease businesses and further enlarge the coverage of customer base.

d. Innovative field

As of the date of announcement of the plan, COSCO Shipping Leasing has established the Innovative Business Department, which mainly carry out financing lease business in the fields of automobile, power, electronic information, heavy industrial machinery and other high-end equipment manufacturing field. Automobile, smartphone and rail transit customers will be taken as the starting point to gradually building a leading comprehensive service operator with the focus placed on vertical integration in the financing lease field of high-end manufacturing industry. Relying on the service idea of industrial ecological system, it will help high-end equipment manufacturing customers to transform and upgrade from “Made in China” to “Intelligent Manufacturing in China”.

5. Total investment and financing arrangement for the project

Total investment as capital increase in the COSCO Shipping Leasing amounted to RMB6 billion. It is intended that funds required by the project will be totally financed by proceeds from the Non-public Issuance of RMB6 billion.

6. Economic benefits of the project

Upon implementation of capital increase in the COSCO Shipping Leasing, it is expected that the operating scale of financial leasing business of COSCO Shipping Leasing will be further enlarged, and the non-shipping leasing business will be promoted.

7. Matters with respect to project registration and environmental evaluation

The project of capital increase in the COSCO Shipping Leasing does not involve such matters as registration with relevant NDRC authorities or obtaining environmental evaluation approval from environmental protection bureau.

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(II) Project of capital increase in Florens

1. Basic information of the project

Florens International Limited is an overseas wholly-owned sub-subsidiary of the Company which is engaged in container leasing business. At the beginning of 2016, the former Florens Container Holdings Limited merged with the former Dong Fang International Investment Limited (東方國際投資有限公司). The new Florens formed upon merger is a world top-three container leasing company. In the upcoming decade, taking gaining benefit from economies of scale, innovating service and improving capability as objectives and global customers as key service targets, it will, in addition to consolidating the existing market share in container leasing, management and sales business, actively expand diversified businesses as well as external markets and continue to increase market share and scale merit through acquisition of suitable companies in the industry at a proper time with a view to becoming a top-ranking container leasing company with 5 million containers in terms of container scale and RMB50 billion in terms of assets scale.

Against the background of gradual market rebound, competition returning back to normal and increase of return on investment, Florens plans to purchase an aggregate of approximately 0.9836 million TEUs during 2017 to 2019 so as to maintain and expand container scale, secure competitive position in the market and increase shareholder returns. A total of approximately RMB2,991.77 million self-owned funds was used to purchase containers, of which the capital increase of RMB2.4 billion in the Florens was planned to be financed from the proceeds, and the rest was settled through its self-raised fund.

Capital investment plan of Florens during 2017 to 2019

					Unit: RMB10,000	Unit: RMB10,000
	2017		2018		2019
		Self-owned		Self-owned		Self-owned
	Proposed	funds	Proposed	funds	Proposed	funds
Item	investment	utilized	investment	utilized	investment	utilized
Purchase of
containers	407,763	101,941	364,030	91,008	424,911	106,228

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2. Basic information of Florens

(1) Description of Florens

Chinese name: 佛羅倫國際有限公司

English name: Florens International Limited

Date of establishment: 16 July 1998

Registered address: Pasea Estate, Road Town, Tortola, British Virgin Islands

Type of company: a company with limited liability under the BVI law

Issued share capital: USD22,014

Scope of business: container leasing, container management, container trade and other leasing, etc.
(2) Equity structure of Florens

As at the date of the announcement of this proposal, CSCL holds 100% equity interest in Florens through CSCL HK.

(3) Business development of Florens

As a platform for container leasing business under CSCL, Florens is mainly responsible for the operation of container leasing, management and sale of second-hand containers. After thirty years of development and expansion, Florens has established an industry leading brand. Upon its merger with Dong Fang International Investment Limited (東方國際投資有限公司) at the beginning of 2016, its number of containers reached approximately 2.9 million TEUs, becoming the second largest container leasing company in the world. The principal business of Florens is container-related operating leasing, financial leasing, management, trade, rental and management fee collection.

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(4) Financial position of Florens

The audited financial data of Florens for the recent three years are set out as below:

			Unit: USD10,000
	31 December	31 December	31 December
Item	2015	2014	2013
Total assets	214,724.70	218,613.50	211,355.90
Total liabilities	96,659.60	108,284.80	110,837.00
Total owner’s
Equity	118,065.10	110,328.70	100,518.90
Item	2015	2014	2013
Total operating
income	31,567.50	35,707.50	34,774.70
Operating profit	10,733.50	12,209.60	15,231.70
Total profit	8,764.40	10,018.80	13,061.90
Net profit	8,487.30	9,744.90	12,749.10

3. Necessity of the Project

(1) To gain capital increment through grasping the unsatisfactory market status

With the world economy entering into the cycle of “recession-rejuvenation” since global financial crisis, returns in the container leasing industry has been on continual decline. Despite the overall gloomy condition in the container leasing industry at present and continuous low profitability in the next one to two years, from the perspective of periodical investment, if we acquire assets at this point, assets prices will be more likely to rise than fall in the future. From the perspective of the macroeconomic environment, although the economies of China and Europe still risk declining, global economy has shown positive sign of recovery led by the US and the future economic condition is turning bright. Therefore, proper container purchase project enjoys greater opportunity to achieve capital increment both in second-hand container disposal and capital market.

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(2) To secure competitive position in the industry through filling in for retired and expired containers

According to the Drury report published in the middle of 2015, global container scale will grow at an annual rate of approximately 4.6% from 2016 to 2018. It is expected to increase from 38.52 million TEUs at the end of 2015 to approximately 44.1 million TEUs in 2018, of which, the container scale of container leasing companies is expected to increase by 5% on a yearly basis, increasing from 18.35 million TEUs in 2015 to approximately 21 million at the end of 2018 TEUs. Major global container leasing companies are actively expanding container scale. It is calculated that Florens will dispose and lease 250,000 TEUs of retired containers annually on average in 2017 and thereafter. To fill in for retired and expired containers, secure the competitive position in the industry and reduce impact on the Company’s operating results, the Company needs to keep up purchasing containers.

4. Feasibility analysis of the project

(1) Global container leasing industry gradually “warming up” driven by the slow recovery of global economy

The container leasing industry is highly correlated with the global container traffic and is also affected by cyclical fluctuations in the macro economy. According to a forecast by the International Monetary Fund (IMF), spurred by the more-than expected recovery of US economy and the continuous growth of emerging economies, global GDP started to pick up against declining trend, which will help the global container leasing industry gradually come out of the industrial trough, and contribute to its “warming up”.

At present, there are three major factors driving the steady growth of container demand: firstly, with the development of international trade and the increase in resident income, international trade and cargo transportation remains frequent, leading to stable demand from container shipping companies and end users for new containers; secondly, there is growing demand for special cargo containers with advanced features which can help provide proper transportation environment for different kinds of special goods so as to meet the special requirements for transport, safety and operating costs; thirdly, it has become a common practice for liner companies to adopt the slow-steaming strategy, which has somehow led to a low turnover of containers, thereby increasing demand for containers; and fourthly, the replacement of old containers with new ones and the increase in old container trade also created a lot of demand for new containers.

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(2) Little room for benefit decline and industry boom hopeful to rebound

Container rental is directly determined by supply-demand relationship with demand playing a more significant role. In their expansion efforts during 2010 and 2011, container leasing companies provided large number of supply to the container leasing industry. Meanwhile, various companies staged fierce competition to fight for high-quality freight customers and low cost financing. Due to change in market supply and demand resulted from such expansion, container rentals fell quickly after 2012, thus put large pressure on the rental and investment return of container leasing companies.

Currently cost of building new containers has fallen near to the record low. Before the economy turns bright, mid to long term market supply and demand reasons will restrict price to the present range. Therefore, there is little room for cost of building new containers and leasing price to fall further. Various companies in the industry have restrained development and regained balance from large-scale structural overcapacity gradually. At the same time, the industry has witnessed several mergers and acquisitions, turning the fragmented competitive market into one dominated by four generally large companies. Besides, although global economic prospects still remain uncertain, the US has started the cycle of interest rate hike. There is little room for return from container leasing companies to drop in the future. With recovery of macroeconomic situation and global trade, the industry boom is hopeful to come.

5. Total Investment and financing arrangement for the project

Total investment as capital increase in Florens amounts to RMB2.4 billion. It is intended that funds required by the project will be totally financed from the proceeds from the Non-Public Issuance of RMB2.4 billion.

6. Economic benefits analysis of the project

As the useful life for containers is long (10-15 years), during which time investment returns may be subject to several uncertain factors. Therefore, the industry generally adopts Cash-On-Cash return as the significant reference index when assessing return on investment for new containers. It is calculated that the cash-on-cash return of purchase of containers during 2017 to 2019 will be 10.7%, 11.0% and 11.0% respectively.

7. Project registration and environmental evaluation

Capital increase in the Florens does not involve such matters as registration with relevant NDRC authorities or obtaining environmental evaluation approval from environmental protection bureau in advance. However, it is required to start the overseas investment registration procedure with NDRC and Ministry of Commerce, as well as complete the capital exit approval/registration with foreign exchange administration departments.

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(III) Repayment of maturing corporate bonds and replenishment of working capital

In addition to the above projects, not more than RMB3.6 billion of the proceeds from the Non-Public Issuance of A Shares (deducting the issuance fee) will be used to repay the maturing corporate bonds (07 CSCL bonds) and replenish working capital, of which RMB1.8 billion will be used to repay the due debts and RMB1.8 billion to replenish working capital.

1. Necessity analysis on repayment of maturing corporate bonds and replenishment of working capital

(1) Satisfying follow-up requirements of all businesses of the Company

Upon completion of material assets restructuring in 2015, the Company had its business focus shifted from container liner operation to integrated financial services mainly consisting of diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing. The Company will take good advantage of its experience in the shipping industry as well as the existing resources of the financial service industry to promote the development of the emerging industries, optimize its business models and achieve the diversified development of its financial business. The Company will strive to establish an integrated financial services platform with leasing business as core supported by shipping industry experience. The rapid development of all follow-up businesses requires the Company to be equipped with corresponding capital strength.

(2) Improving capital structure to reduce debt-to-asset ratio and ease short-term repayment pressure

The Company has not conducted equity financing since its listing in 2007. Upon completion of material assets restructuring in 2015, Long Honour, Florens and Dong Fang International newly included into consolidated financial statements have relatively large amount of long-term liability and meanwhile, the amount of newly added bank current borrowings is enormous after transaction, resulting the increase in total liabilities of the Company after the completion of the material assets restructuring, significant rise of debt-to-asset ratio and decrease in finance safety. The interest-bearing liability scale and debt-to-asset ratio of the Company in the consolidated statement for the recent three years and one period is set out as below:

			Unit: RMB1,000,000	Unit: RMB1,000,000
	As at	As at	As at	As at
	30 June	31 December	31 December	31 December
Item	2016	2015	2014	2013
		(Restated)	(Restated)	(Restated)
Short-term borrowings	23,830.53	12,217.56	4,785.21	4,387.69
Borrowings and bonds payable
due within one year	7,556.90	14,479.69	6,947.81	5,314.37
Long-term borrowings	41,447.97	25,025.09	18,583.10	16,260.21
Bonds payable	1,506.23	3,449.49	3,583.46	2,852.50
Total interest-bearing liabilities	74,341.63	55,171.83	33,899.58	28,814.76
Debt-to-asset ratio (%)	86.03%	64.36%	59.87%	58.63%

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Note: Since the consolidation scope of the Company differs after material assets restructuring due to merger of enterprises under the same control, the scope of consolidated statements of the Company are changed to a large extent. Therefore, the above financial data and subsequent financial analysis involving the financial data of 2013-2015 are retrospectively restated according to relevant accounting principles.

As of 30 June 2016, short-term borrowings of the Company amount to RMB23.831 billion, long-term borrowings amount to RMB41.448 billion, bonds payable amount to RMB1.506 billion, borrowings and bonds payable due within one year amount to RMB7.557 billion, total interest-bearing liabilities amount to RMB74.342 billion in the consolidated financial statement. Therefore, the Company is under great pressure of short-term repayment.

Debt-to-asset ratio of the Company and its comparable companies in the industry is set out as below:

		As at	As at	As at	As at
		30 June	31 December	31 December	31 December
Comparable companies		2016	2015	2014	2013
000415.SZ	Bohai Financial	81.59%	75.33%	81.40%	85.32%
600705.SH	AVIC Capital	80.78%	83.85%	81.68%	87.49%
1606.HK	China Development	89.60%	90.37%	90.02%	91.48%
	Bank Leasing
3360.HK	Far East Horizon	84.50%	83.52%	84.24%	83.63%
Average of	comparable companies	84.11%	83.27%	84.33%	86.98%
Midpoint of comparable companies		83.04%	83.68%	82.96%	86.41%
CSCL		86.03%	64.36%	59.87%	58.63%

Note: The above data are derived from Wind. The financial data of CSCL for 2013 to 2015 were restated.

As of 30 June 2016, the debt-to-asset ratio of the Company was 86.03%, higher than the average level of that of the comparable listing companies. The higher debt-to-asset ratio raised the financial risk of the Company and limited the financing ability of the Company, and prevented the development and expansion of the Company to some extent.

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APPENDIX I

Comparison of the current ratio between the issuer and the comparable listing companies in the industry is as follows:

		As at	As at	As at	As at
		30 June	31 December	31 December	31 December
Comparable companies		2016	2015	2014	2013
000415.SZ	Bohai Financial	0.86	1.27	0.59	0.44
600705.SH	AVIC Capital	0.87	0.92	0.92	0.89
1606.HK	China Development Bank	1.14	0.95	0.99	1.00
	Leasing
3360.HK	Far East Horizon	0.93	0.97	1.18	1.05
Average of	the comparable companies	0.95	1.03	0.92	0.84
Midpoint of the comparable companies		0.90	0.96	0.95	0.94
CSCL		0.50	0.65	0.93	1.07

Note: The above data are derived from Wind. The financial data of CSCL for 2013 to 2015 was restated.

Since 2013, liquid ratio of the Issuer has been declining year by year to 0.50 as of 30 June 2016, far below the average of listed comparable companies in the industry. The short-term repayment capability of the Company is significantly weaker than listed comparable companies in the industry, which shows that the Company is under greater pressure of working capital than its comparable industry peers. Therefore, to repay due liabilities and replenish working capital with proceeds will raise the Company’s liquid ratio, and increase its working capital for its daily operation, which will help improve the capital structure of the Company and reduce its liabilities.

(3) Reducing interest cost

Although debt financing provides capital support and guarantee for the Company’s expansion, it also brings about increasing interest cost. Before completion of the restructuring, as affected by the global recession and overall environment in the shipping industry, profitability of the container liner shipping business of the Company was low with interest cost accounting for a large portion of operating profit. Interest cost expense of the Company during the Reporting Period is set out as below:

			_Unit: _	RMB10,000
Item	Jan – Jun 2016	2015	2014	2013
		(restated)	(restated)	(restated)
Interest cost	68,691.92	89,675.38	73,289.24	70,274.01
Operating profit	-79,874.91	-152,246.27	288,603.88	-119,376.61
Interest cost as a percentage
of operating profit (%)	-86.00%	-58.90%	25.39%	-58.87%

Note: Financial data for 2013 to 2015 were restated.

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APPENDIX I

The interest cost of the Company for 2013-2015 (restated) and January-June 2016 accounted for -58.87%, 25.39%, -58.90% and -86.00% of the corresponding operating profit. The Company cannot make use of the financial leverage to promote business performance. After proceeds from the Non-Public Issuance are in place, the Company will repay RMB1.8 billion of corporate bonds. If calculated according to Renminbi loan benchmark interest rate (one-year) of financial institutions, the Company will save approximately RMB78.3 million of finance cost each year, reducing the Company’s interest cost to some extent. Therefore, it is necessary for the Company to repay maturing corporate bonds with proceeds from the Non-Public Issuance and appropriately reduce total liabilities so as to decrease interest cost.

2. Feasibility analysis on repayment of due liabilities and replenishment of working capital

To repay due debts and replenish working capital with proceeds from the Non-Public Issuance of A Shares will to some extent improve the liquidity indicators of the Company, enhance its debt repayment capability, reduce finance risk and consolidate the financial structure of the Company. If calculated based on the Company’s financial data as of 30 June 2016 and not taking into account the issuance costs, RMB1.8 billion from the proceeds from the Non-Public Issuance of A Shares will be used to repay maturing corporate bonds and RMB1.8 billion will be used to replenish working capital. After the RMB1.8 billion is included in current assets, the debt-to-asset ratio of the Company will decrease from 86.03% to 76.55% and liquid ratio will increase from 0.50 to 0.77.

After the Non-Public Issuance, debt-to-asset ratio will be significantly reduced, which will help to improve capital structure and lower financial risk. In future, the Company may comprehensively use various financing instruments to provide reasonable and proper financing arrangement for the sustainable development of the Company under the precondition of controlling financial risk and maintaining healthy and appropriate financial arrangements.

Therefore, upon completion of the Non-Public Issuance, the Company intends to use the above-mentioned proceeds to repay due liabilities and replenish working capital, which is in line with relevant laws and regulations, the actual situation of the Company and strategy requirements and shareholders interest as a whole, thus beneficial to the long-term and healthy development of the Company. The successful use of the proceeds will further improve the financial position of the Company and enhance its core competitive and anti-risk capabilities.

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III. Impact of the Non-Public Issuance on Business Operation and Financial Position of the Company

(I) Impact of the non-public issue on the Company’s business

Proceeds from the Non-Public Issuance will be mainly used for capital increase in COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of working capital, which is in line with the Company’s business transformation plan (enhance shipping leasing business, container leasing business and non-shipping leasing business) after restructuring, national industrial policy and industry development trend. It is expected that when the proceeds are in place, the core competitive strength will be further enhanced and its anti-risk capability will be effectively strengthened, which is of significant strategic meaning to the long-term sustainable development of the Company and provide strong capital security.

(II) Impact of the non-public issue on the Company’s financial position

As of 30 June 2016, the debt-to-asset ratio of the Company was 86.03%. The higher debt-to-asset ratio raised the financial risk of the Company and limited the financing ability of the Company, and prevented the development and expansion of the Company to some extent. Upon completion of the Non-Public Issuance, the Company’s equity capital will increase, and capital strength will be quickly improved. If calculated based on the Company’s financial data as of 30 June 2016, the proceeds from the Non-Public Issuance will be RMB12 billion. Upon the funds raised from the Issuance (not taking into account the issuance costs) are in place, the consolidated debt-to-asset ratio will reduce to 76.92% from 86.03%, and RMB1.8 billion of the proceeds will be used to repay maturing corporate bonds, as such the debt-to-asset ratio will further reduced to 76.55%.

After the Non-Public Issuance, it will help to improve capital structure and lower financial risk through implementation of the projects to be invested with proceeds. In addition, it may help the Company to comprehensively use various financing instruments in the future to provide reasonable and proper financing arrangement under the precondition of controlling financial risk and maintaining healthy and appropriate financial arrangements.

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SECTION IV DISCUSSION AND ANALYSIS OF BOARD ON THE INFLUENCE OF THE NON-PUBLIC ISSUANCE OF A SHARES ON THE COMPANY

I. Changes in the Businesses, Articles of Association, Shareholding Structure, Senior Management and Business Structure of the Company after the Non-Public Issuance

(1) Impact on the businesses, assets and business structure of the Company

Through material asset restructuring, CSCL is expected to experience a strategic transformation, and change from a container liner operation into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing as core and shipping finance as feature. Upon completion of the Non-Public Issuance, the leasing business capability of the Company will be further consolidated and improved, and its core competitiveness will be enhanced with principal business unchanged. Therefore, the Issuance will not have a material impact on the business and assets of the Company.

(2) Impact on the Articles of Association

The number of Shares to be issued under the Non-Public Issuance will be not more than 3,278,688,524 Shares. The issuer’s share capital will be increased correspondingly after completion of the Non-Public Issuance. The issuer will make necessary amendments to the terms with respect to the share capital and others relating to the Issuance under the Articles of Association based on the actual circumstances of the Issuance and register the change thereof with the industry and business administration.

(3) Impact on the shareholding structure

Before the Non-Public Issuance, as of 30 June 2016, China Shipping directly held 4,410,624,386 A Shares of the Company and held 47,570,789 A Shares through Collective Plan, and held 100,944,000 H Shares through Ocean Fortune Investment Limited, a wholly-owned subsidiary of China Shipping (HK) Holdings which in turn is a whollyowned subsidiary of the Company. China Shipping held in total of 4,559,139,175 Shares of the Company and is the controlling shareholder of the Company, representing 39.02% of the total share capital of the company, making it the actual controller of the company.

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APPENDIX I

Assuming that the price of A Shares to be issued under the Non-Public Issuance will be RMB3.66 per Shares, i.e. the Benchmark Price, the raised funds will be RMB12 billion in total, of which, the subscription amount from China Shipping will be RMB5 billion, 3,278,688,524 A Shares in total are expected to be newly issued by the Company, of which, 1,366,120,219 Shares will be subscribed by China Shipping. The particulars of change in the shareholding structure before and after the Issuance will be as follows:

Shareholder’s name China Shipping and its indirect wholly-owned subsidiary Ocean Fortune Investment Limited Other investors (no more than nine investors) Other public shareholders Total share capital	Shareholding before the Non-public Issuance Number of shares held Shareholding proportion 4,559,139,175 39.02% – – 7,123,985,825 60.98% 11,683,125,000 100.00%	Shareholding after the Non-public Issuance Number of shares held Shareholding proportion 5,925,259,394 39.60% 1,912,568,305 12.78% 7,123,985,825 47.61% 14,961,813,524 100.00%	Shareholding after the Non-public Issuance Number of shares held Shareholding proportion 5,925,259,394 39.60% 1,912,568,305 12.78% 7,123,985,825 47.61% 14,961,813,524 100.00%
			100.00%

Note: The above estimates are based on the share capital structure of the Company as of 30 June 2016; number of shares held by other public shareholders include the numbers of A shares and H shares held by public shareholders.

Upon the completion of the Non-public Issuance, the total shareholding proportion of China Shipping amounts to 39.60%, still being the controlling shareholder of the Company; and the actual controller of the Company still is the SASAC. Therefore, the Non-public Issuance of A Shares will not make any changes to the control right of the Company.

(4) Impact on the structure of the senior management

As of the date of the announcement of this plan, the Company does not have a specific plan with respect to the change of the structure of the senior management. Upon completion of the Non-public Issuance, no other change will occur to the senior management of the Company except for normal human resource reallocation. In the future, if the Company intends to change its senior management structure, it will perform necessary legal procedures and information disclosure obligation in accordance with relevant requirements.

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II. Change in Financial Position, Profitability and Cash Flow of the Company after the Non-public Issuance

After the proceeds from the Non-public Issuance are in place, total assets and net asset scale of the Company will increase accordingly, financial position will be improved to a large extent and debt-to-asset structure will be more rational, thus enhancing the capital strength of the Company.

(I) Impact on financial position

After the proceeds from the Non-public Issuance are in place, both total assets and net assets of the Company will increase, capital structure will be more stable and capital strength will be effectively enhanced. Besides, its working capital will be replenished effectively, which will help to decrease the financial risks of the Company, improve its repayment capability and provide strong guarantee to its sustainable development.

(II) Impact on the profitability

Upon completion of the Non-public Issuance, capital strength of the Company will be enhanced, financial cost will be controlled and its subsequent financing capability will be greatly improved. Certain proceeds will be used for the capital increase in the COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of working capital, which will contribute to the promotion of the Company’s competitiveness in the industry in future.

(III) Impact on cash flow

Upon completion of the Non-public Issuance, cash inflow from financing activities of the Company will be greatly increased. Certain proceeds will be used for the capital increase in the COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of working capital. After the proceeds are in place and commenced utilization, cash outflow of the Company generated from investing activities will be increased to some extent. When the project generates revenue, cash flow from operating activities of the Company will be improved.

III. Change in Business Relationship, Administrative Relationship, Connected Transactions and Industry Competition between the Listed Company and the Controlling Shareholders as well as their Associates

Upon completion of the Non-public Issuance, China Shipping will remain as the controlling shareholder of the Company. No change will occur to the business and management relationship between the Company and the shareholders as well as its associates.

For details of the change in the connected transactions and industry competition, please refer to VI in item 1 of Section II. Except that the Non-public Issuance itself constitutes a connected transaction, no new peer competition or connected transactions among the Company and the shareholders as well as its associates will be incurred as a result of the Non-public Issuance.

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IV. Whether There Is Embezzlement of Funds or Assets by the Controlling Shareholder and Its Affiliates, or Whether Guarantee is Provided by the Listed Company to the Controlling Shareholder and its Affiliates after the Non-public Issuance

Before and after the completion of the Non-public Issuance, capital or assets of the listed company will not be misappropriated by the controlling shareholder or its associates. In addition, there will not be any form of guarantee provided by the listed company to the controlling shareholder or its associates.

V. Change in Debt-to-asset Ratio after the Issuance

As of 30 June 2016, debt-to-asset ratio of the Company in the consolidated statements was 86.03%. Calculated based on the financial information of the Company as of 30 June 2016 and not considering the issuance costs, upon receipt of the proceeds and repayment of maturing corporate bonds with RMB1.8 billion of proceeds, debt-to-asset ratio of the Company in the consolidated statements will be reduced to 76.55%. The Non-public Issuance will not cause increase in the liabilities (including contingent liabilities) of the Company. The capital structure of the Company will be more rational due to the Non-public Issuance, thus increasing the anti-risk and sustainable operating capacities.

VI. Risks Related to the Issuance of Shares

(I) Risks Relating to the Non-public issuance of A Shares

The macro economy and profitability of the listed company are subject to relatively great uncertainty and meanwhile, the capital market is subject to fluctuation. Fluctuation in the capital market and price of A shares of the listed company will cause uncertainty to Non-public Issuance of A Shares.

(II) Risks Relating to the Market

1. Risks relating to the fluctuation in macro economy

The vessel leasing, container leasing and investment businesses in which the listed company engages in are highly related to the macro economic situation in China and worldwide. At present, although the macro economy of China is generally stable, it still faces slow economic growth, structural imbalance and other uncertainties. World macro economy picks up slowly while recovery in different economic entities varies significantly. Debt crisis, trade imbalance and exchange rate dispute will render uncertainty to world economy. Fluctuations in macro economy will result in decrease in world trade demands and poor operation of customers. Despite the fact that the listed company has established a sound risk prediction and management system to ensure operating and asset security to the largest extent, fluctuations in the macro economy will still cause such risks as less customer demand, difficulty in capital turnover and profit decrease to the listed company.

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2. Risks relating to industry competition

At present, the container leasing industry is rather competitive. Upon their merger, TAL and Triton became the world’s largest container leasing company in terms of container scale, which significantly increased their competitiveness. Florens and Dong Fang International Asset Management Ltd. under the Group became the world’s second largest container leasing company upon merger with relatively strong comprehensive capacity in the industry, but are inevitably subject to the effect due to industry competition. Meanwhile, the container leasing industry depends on container-building companies to provide high-quality containers. Although the Company holds certain equity interests in China International Marine Containers (Group) Ltd. and three other container-building plants, which guarantees steady container supply to some extent, it is still subject to the effect brought upon by operating fluctuations of container-building enterprises at the upper-stream of the industry line.

Competitiveness in the vessel leasing industry is highly intense. At present, under the background of demands exceeding supply in the international shipping industry, slow recovery in international trade and shipping capacity exceeding demand, ship owners are competing in rental, renting terms, cargo ship quality, customer service and reliability. The Company faces intensified competition from several vessel leasing companies, including such capabilities as providing rental rate as well as deploying a larger fleet of ships. Certain competitors may penetrate deeper into the market and possess higher finance resources in some shipping lines and regions. Operation pressure in the shipping market will spread to the shipping leasing market, which will indirectly affect the competition in terms of rental rate between the Company and other vessel leasing companies.

Finance leasing industry in China has a shorter history as compared to that of European and American developed companies. Therefore, its future development is subject to certain uncertainties. Meanwhile, as a modern financial instrument, the development of finance leasing is directly linked to the development of macro economy and social fixed assets investment scale and is highly periodic. Sound macro-economic situation and high demands of social fixed assets investment will create favorable conditions for the development of finance leasing industry; otherwise it will be harmful to industry development and thus cause risks.

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3. Risks relating to exchange rate

Florens’ accounts are denominated in US dollars while those of the listed company are denominated in Renminbi in consolidated statements. Therefore, exchange rate change of Renminbi against US dollars will result in foreign currency translation risk in the consolidated statements of the listed company, thereby affecting the profitability of the future consolidated statements of the listed company to some extent. Meanwhile, since the listed company conducts its business around the globe, during transaction, settlement currencies are US dollars or other currencies. Therefore, fluctuation in exchange rate will have an effect on the revenue of certain business of the Company.

(III) Risks relating to business and operation

1. Management risks with respect to business integration

After the material assets restructuring in 2015, principal business of the Company shifts from containers transportation to a comprehensive financial service platform with vessel leasing, container leasing and non-shipping finance leasing at the core, supported by other financial services. The Company has formulated a detailed management adjustment proposal and talent strategy in accordance with business integration. The Company will establish a streamlined, efficient and flat organization and management structure in line with business requirements after restructuring, achieve professional management with relatively high automation while promoting differentiated management based on development stages of various businesses and shareholding level and optimize talent recruiting, assessment as well as incentive scheme so as to attract, select and condense professional financial talents. However, the time and actual outcome of establishing such management structure in line with new business features are subject to uncertainty.

2. Risks in relation to the change in income structure

Before the material assets restructuring in 2015, the principal business of the Company is containers transportation and it mainly generates revenue from shipping line transportation fee. Upon the material assets restructuring, CSCL earns rental income through leasing self-owned or hired vessel and containers. Income structural change before and after transaction may result in significant change in the total revenue of CSCL.

3. Periodic risks

The container shipping industry is periodic, as a result of change in the supply and demand of container shipping service, which will affect the profitability and asset value of the container leasing business of the Company. Decrease in demand of container shipping service or over increase in the industry shipping capacity will cause certain decrease in shipping price and may result in depreciation in the vessel assets of the Company, thus having an adverse impact on the business, financial position and operation results of the Company.

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4. Risks relating to the significant fluctuation in the market value of vessel

The market value of the shipping fleet of the Company may be subject to various factors, including general economic and market condition that affects shipping service demand, competition from other vessel companies, type and size of vessel, prevailing level of rental rate and technique development. If the Company sells vessel when the vessel price drops, the sales price may be lower than its book value in the financial statements of relevant vessel companies.

5. Risks relating to shipping safety

Ships are subject to various accidents during voyage, including running aground, fire, collision, shipwrecks, pirate, environmental incident and severe weather as well as natural disasters, which may cause loss to ships and cargo. In addition, change in international relation, regional dispute, war and terrorist activities may affect the voyage safety and normal operation of ships. During sea voyage, ships may experience oil leak, pirate robbery and other emergent events due to climate or regional factors, thus causing unexpected expense or significant asset loss to the Issuer.

6. Risks relating to the operation of financial leasing business

China’s finance leasing industry is undergoing rapid development and subject to intense market competition. Sufficient capital strength, professional management and service team, sound and efficient risk control system, favorable market image and brand influence are key factors that determine whether the finance leasing enterprise will win in the market competition. Down-stream industry of mainly include medical, education and new energy industries, to which the operation of COSCO Shipping Leasing is highly correlated. Medical, education and new energy industries are emerging industries which develop quickly and is expected to maintain rapid development in future. If COSCO Shipping Leasing cannot effectively grasp business development opportunities to achieve rapid development and keep or expand advantage in above industries, it may be at a disadvantaged position, which will affect its long-term development.

(IV) Management risks resulting from the expansion of company scale

The Non-public issuance will help to improve the debt-to-asset ratio of the Company, optimize capital structure and expand the business of the Company. Therefore, the asset scale and business scale of the Company will be further expanded. However, with the expansion of its business, if the human resource, internal communication, overall collaboration, operation and other internal risk management cannot respond to business development requirement in a timely manner, internal management risk may be incurred.

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(V) Risks relating to the proceeds investment project

Proceeds from the Non-public issuance will be mainly used for capital increase in COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of working capital. Although the Company has conducted sufficient demonstration in macro environment, industry policy, market competition and project technique basis when performing feasibility analysis on the projects to be invested with proceeds. However, since uncertain factors including change in macro environment, adjustment of industry policy, overall situation of industry development, market demands and change in competitive conditions may affect the implementation of relevant projects. If unpredictable and adverse changes occur to such factors, the projects to be invested with proceeds will be subject to risks of uncertain returns.

(VI) Risks relating to fluctuation in business results of the Company

(VII) Other Risks

1. Risks of approval

The Non-Public Issuance of A Shares is considered and approved by the Board of the Company, and is subject to approval by the State Council SASAC, as well as consideration and approval by the Company’s General Meeting, A shares class meeting and H shares class meeting and authorizations by CSRC. The implementation of investment projects funded by the part of proceeds raised from the Non-Public Issuance still pending the approvals from the NDRC, Commerce Department and foreign exchange management department or in the process of completing the filing procedures with those authorities. There are uncertainties in obtaining the approvals and the timing of the final authorization in relation to the Non-Public Issuance.

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2. Risks about share price

Return on stock market investment is accompanied by risks. The Non-public Issuance will have a certain impact on the Company’s production, operation and financial position. Changes in the Company’s fundamentals will affect the price of the stock. Besides, stock price is not only influenced by profitability and development prospects of the Company, but also by investor sentiment, stock supply and demand, development and consolidation in the industry in which the Company is operated, state’s macroeconomic conditions and other factors such as political, economic and financial policies.

3. Risks on the Dilution in Earnings per Share and Return on Asset As a Result of the Issuance

Upon the funds raised from the Issuance are in place, the share capital and the net assets of the Company will increase. Since the implementation of investment projects financed by the proceeds will take some time, and only can achieve the expected level of profit after the projects put into operation and produce a stable income. During this period, the enlarged share capital and net assets may lead to a dilution in earnings per share and return on net asset of the Company in the short term, and therefore the above-mentioned indicators are exposed to risk of decrease in the short term.

In response to the above circumstance, the Company will truly, accurately, timely, completely and fairly disclose material information that may affect the price of the Company’s stock to investors, in accordance with the requirements of Company Law, Securities Law, and Measures for Administration of Information Disclosure by Listed Companies and the Listing Rules, as well as other relevant laws and regulations. The information disclosed supplies a reference for investors to make investment decisions. Meanwhile, investors are advised to note that there may be risks of stock price volatility and in future stock market.

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SECTION V PROFIT DISTRIBUTION

I. Existing Profit Distribution Policy of the Company

In order to standardize and enhance the transparency of cash dividends distribution of the Company, the Resolution Regarding Amendments to the Articles of Association was considered and approved at the ninth meeting of the fifth session of the Board of the Company in accordance with the Company Law, Securities Law, Guidance on the Articles of Association of Listed Companies (revised in 2014) (《上市公司章程指引》(2014修訂)), Notice Regarding Further Implementation of Cash Dividend Distribution of Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》), Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies (《上市公司監管指引第3號–上市公司現金分紅》) and other relevant laws, regulations and normative documents and based on the actual situation of the Company. The amended Articles of Association shall come into force upon being submitted to and approved by the general meeting of the Company. Pursuant to the amended Articles of Association, the profit distribution policy of the Company is as follows:

Article 16.13 The Company may distribute the dividends in the following forms:

(I) Cash;
(II) Shares.

Article 16.14 The basic principles of the profit distribution policy of the Company are as follows:

(I) The Company shall take full account of return to investors and distribute dividend to its shareholders each year in proportion to the distributable profit realized in the year concerned (being the lower of the amounts as stated in the financial statements and the consolidated financial statements of the parent company);
(II) The Company shall devote itself in creating reasonable return to its shareholders, maintain the continuity and stability of its profit distribution policy, and operate its businesses for the long-term interest of the Company, the entire interest of all its shareholders and the sustainable development of the Company; the Company’s profit distribution shall neither exceed the amount of accumulated distributable profit nor undermine its ongoing operation;
(III) The Company shall give priority to dividend distribution in cash.

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Article 16.15 The profit distribution policy of the Company is specified as follows:

(I) Profit shall be distributed in the following manner:

The Company may distribute dividends in cash, in shares, in a combination of both cash and shares or otherwise as permitted by laws and regulations. The Company shall give priority to dividend distribution in cash. Subject to the adherence of the profit distribution principles and conditions, the Company shall in principle distribute profit each year. The Board of the Company may propose interim profit distribution with reference to the Company’s profitability and capital requirements.

(II) Specific conditions and proportions of cash dividend of the Company are as follows:

The following conditions shall be met at the same time in distributing cash dividends by the Company:

If the Company makes profit and the distributable profit realized in the year concerned (i.e. after-tax profits after the Company covers the losses and withdraws the reserve) are positive (according to the financial statements of the parent company) with adequate liquidity, the Company may distribute dividend in cash provided that it shall not undermine the subsequent ongoing operation of the Company.
External auditors had issued a standard unqualified audit report for the financial statements of the Company for year concerned.
The capital needs for the Company’s normal operation are satisfied and there is no such event as significant cash expenditure, excluding projects funded by raised proceeds.

Such significant cash expenditure refers to the proposed external investment, asset acquisition, repayment of debts or acquisition of equipment by the Company with accumulated expenditure within the following 12 months amounting to or exceeding 30% of the latest audited net assets of the Company.

The Company shall comply with the proportions set out as follows when proceeds with distributing cash dividends:

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outlays are expected. In addition, the accumulated profits to be distributed in cash for the three consecutive years concerned shall not be less than 30% of the average annual distributable profit of the Company for the same period. The specific distribution proportion for each year shall be determined by the Board of the Company based on the Company’s operating conditions and relevant rules of the CSRC and submitted to the general meeting for consideration and approval.

The Board of the Company shall take various factors into consideration, including its industry features, development stages, business model and profitability as well as whether it has any substantial capital expenditure arrangements, and differentiate the following circumstances to propose a differentiated policy for cash dividend distribution pursuant to the procedures stipulated in the Articles of Association:

Where the Company is in a developed stage with no substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 80% of the total profit distribution;
Where the Company is in a developed stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 40% of the total profit distribution;
Where the Company is in a developing stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 20% of the total profit distribution.

In the case that it is difficult to distinguish the Company’s development stage but the Company has significant capital expenditure arrangements, the profit distribution may be dealt with pursuant to the preceding provisions.

(III) Specific conditions for distributing dividends in shares by the Company are as follows

Where the Company’s business is in a sound condition, and the Board considers that the share price of the Company does not reflect its share capital size and distributing dividend in the form of shares is in the entire interest of all the shareholders of the Company, the Company may adopt dividend distribution in the form of shares provided that the above conditions for cash dividend are fully satisfied. Should the Company distribute dividends in shares, it should be made on the premise of offering reasonable cash dividend returns and maintaining appropriate capital size, and take into account the growth of the Company and dilution in net assets per share.

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Article 16.16 Procedures for reviewing the profit distribution proposal of the Company and related information disclosure are as follows:

(I) Procedures for consideration of the profit distribution proposal of the Company:
The Company’s profit distribution plan shall be drafted by the management of the Company with reference to investors’ opinions, and shall then be submitted to the Board and the supervisory committee of the Company for consideration, and independent directors shall express their opinions. The Board shall thoroughly discuss the profit distribution plan, keep detailed records of the contents of the recommendations of the management, key points of the speeches of the Directors present at the meeting, voting results of the Board, etc. and prepare written minutes to be properly kept as the Company’s archives. The Board shall thoroughly discuss the rationality of the profit distribution proposal and prepare a specific resolution and submit it to the general meeting for consideration.
If the Board receives a distribution plan from other shareholders that satisfies relevant conditions, the Board shall ask the relevant shareholders for the specific reasons and background of such plan, and publish an announcement setting out the contents and reasons of the plan in accordance with the “Rules of Procedures for General Meeting” of the Company and submit it to the general meeting for consideration.
Independent directors may solicit opinions from minority shareholders, put forth profit distribution plan and submit it directly to the Board for consideration and approval.
Before the cash dividend distribution proposal is considered at the shareholders’ general meeting, different channels should be used to proactively communicate and interact with shareholders, in particular, the minority shareholders, and the Company shall fully listen to the opinions and demands of minority shareholders and timely answer the questions raised by minority shareholders.
At the end of an accounting year, the Board meeting does not propose any plan for profit distribution in cash in spite of making profit in that accounting year, it shall explain matters such as the specific reasons for not proposing any profit distribution in cash and the actual usage of the profit retained by it. The independent directors may issue their opinions on such issues, and then submit the same at the general meeting for approval in accordance with the relevant laws, regulations and regulatory policies.

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(II) Information disclosures regarding profit distribution proposal of the Company:

The Company shall disclose in details in its periodic report the formulation and implementation of the profit distribution policy, especially cash dividend policy, and state whether the policy is in compliance with the requirements of the Articles of Association or the resolutions passed at the general meeting; whether the basis and ratio of the distribution of dividends are specific and clear; whether the relevant decision-making procedures and systems are sound; whether the independent directors have duly performed their duties; whether there are enough channels for minority shareholders to express their views and concerns, and whether their legal rights and interests are sufficiently protected, etc.
In the event of any adjustment or alteration to the cash dividend policy, the Company shall fully describe whether the conditions and procedures for such adjustment or alteration are compliant and transparent.
Where no cash dividends distribution plan are proposed by the Board of the Company for the year when profits are recorded, the Board shall explain in details the reasons for not distributing cash dividends, the exact usage of and application plan for the retained profits in the periodic report, and the independent directors shall express their opinions thereon.
Where there is a change in the control of the Company resulting from securities to be issued, material asset restructuring, merger and division or acquisition, the Company shall disclose in details the cash dividend policy and relevant arrangements after the offering or issuance, restructuring or change in control, as well as the Board’s explanation of the aforesaid in the prospectus, offering proposal, report of material asset restructuring, report of changes in equity or report of acquisition.

Article 16.17 Any alteration of the Company’s profit distribution policy: In case of war, natural disasters and other force majeure, or changes in the Company’s external operational environment resulting in material impact on its production and operations, or relatively significant changes in the Company’s operational position, the Company may adjust its profit distribution policy.

The Board shall conduct specific discussion over adjustment to its profit distribution policy, provide detailed reasons for such adjustment, form a written report to be considered by independent Directors, and then submit the same at the general meeting for approval by way of a special resolution. In considering alterations to its profit distribution policy, the Company shall make internet voting accessible to its shareholders.

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II. Specific Implementation of Cash Dividend and Profit Distribution by the Company for the Last Three Years
(I) Cash dividend for the last three years of the Company

Unit: RMB10,000

				Unit: RMB10,000
			Net profit
			attributable to	Proportion in net
			shareholders of the	profit attributable to
			listed company in	shareholders of the
	Amount of cash		annual consolidated	listed company in
		dividends	statements of	consolidated
Year	(tax	inclusive)	dividends	statements
				(%)
2013		–	-294,911.40	–
2014		–	106,128.20	–
2015		–	-264,614.92	–

As the undistributed profit at the end of each of the last three years was negative, failing to meet the conditions on cash dividends distribution, the profit distribution of the Company for the last three years complied with the provisions on profit distribution under the then effective Articles of Association.

III. Shareholders’ Return Plan for the Next Three Years (2016-2018)

To further increase the transparency of the profit distribution policy of CSCL, perfect and improve the decision-making and supervision system of profit distribution of the Company, ensure the continuity and stability of profit distribution, generate reasonable returns on investment for investors, practically safeguard the legitimate interests of minority shareholders and steer investors towards long-term and reasonable investment, the shareholders’ return plan for the coming three years (2016-2018) of China Shipping Container Lines Co., Ltd. is formulated by the Company pursuant to the Notice Regarding Further Implementation of Cash Dividends Distribution by Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) (Zheng Jian Fa [2012] No. 37), the Guideline on the Distribution of Cash Dividends by Listed Companies of the Shanghai Stock Exchange (《上海證券交易所上市公司現金分紅指引》) and the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies (《上市公司監管指引第3號–上市公司現金分紅》) (CSRC Announcement [2013] No. 43), and the Articles of Association, taking into account the Company’s profitability, operating growth plan, return to shareholders, social capital costs and external financing environment. The plan is subject to consideration and approval at the general meeting of the Company. Particulars are as follows:

(I) Factors considered by the Company in formulating the plan

With the focus placed on the long-term and sustainable development and on the basis of comprehensive analysis on actual situation of its business development, development strategy, profitability, social capital costs and external financing

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environment, the Company, on the premises of guaranteeing its reasonable share capital size and equity structure, has taken into full account both short-term and long-term interests in systematical arrangement for profit distribution and formulated the sustainable, stable and scientific dividend return plan and mechanism for investors after taking full account of the characteristics of the Company’s industry and the Company’s current development stage, business model, profitability, cash flow, fund demands for project investment, bank credit and debt financing environment, so as to ensure the continuity and stability of profit distribution policy of the Company and give comprehensive consideration to the overall interests of all shareholders and the long-term interests and sustainable development of the Company.

(II) Principles for formulation of the plan

The Company shall implement a continuous and stable profit distribution policy and give comprehensive consideration to the reasonable return on investment for investors and long-term development of the Company. The Company will mainly distribute dividends in cash in the coming three years (2016-2018). The plan was formulated in accordance with provisions on profit distribution under the relevant laws, regulations and the Articles of Association on the basis of maintaining the continuity and stability of profit distribution policy.

(III) Specific plan on shareholders’ return plan of the Company for the coming three years (2016-2018)

1. Profit shall be distributed in the following manner:

2. Specific conditions and minimum proportions of cash dividend of the Company are as follows:

The following conditions shall be met at the same time when the Company distributes cash dividends:

(1) If the Company makes profit and the distributable profit realized in the year concerned (i.e. after-tax profits after the Company covers losses and withholds reserves) are positive (according to the financial statements of the parent company) with adequate liquidity, the Company may distribute dividend in cash provided that it shall not undermine the subsequent ongoing operation of the Company.
(2) External auditors had issued a standard unqualified audit report for the financial statements of the Company for that year.

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(3) The capital needs for the Company’s normal operation are satisfied and there are no such event as significant cash expenditure, excluding projects funded by raised proceeds.

The Company shall comply with the proportions set out as follows when distributing cash dividends:

Pursuant to the provisions of the Company Law of the People’s Republic of China and relevant laws and regulations, as well as the Articles of Association, provided that the conditions for cash dividend distribution are satisfied and are in consistent with the normal operation and sustainable development of the Company, dividends distributed in the form of cash to be made for each of the coming three years shall not be less than 10% of the distributable profit realized for year concerned, on condition that no imminent cash outlays are expected. In addition, the accumulated profit to be distributed in cash for the three consecutive years concerned shall not be less than 30% of the average annual distributable profit of the Company for the same period. The specific distribution proportion for each year shall be determined by the Board of the Company based on the Company’s operating conditions and relevant rules of the CSRC and submitted to the general meeting for consideration and approval.

The Board of the Company shall take various factors into consideration, including the Company’s industry features, development stages, business model and profitability as well as whether the Company has any substantial capital expenditure arrangements, and differentiating the following circumstances and propose a differentiated policy for cash dividend distribution pursuant to the procedures stipulated in the Articles of Association:

(1) Where the Company is in a developed stage with no substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 80% of the total profit distribution;
(2) Where the Company is in a developed stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 40% of the total profit distribution;
(3) Where the Company is in a developing stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 20% of the total profit distribution.

In the case that it is difficult to distinguish the Company’s stage of development but the Company has significant capital expenditure arrangements, the profit distribution may be dealt with pursuant to the preceding provisions.

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3. Specific conditions for distributing dividends in shares by the Company are as follows

(IV) Decision-making procedures and mechanism of profit distribution

The Company’s profit distribution plan shall be drafted by the management of the Company with reference to investors’ opinions, and shall then be submitted to the Board and the supervisory committee of the Company for consideration. Independent directors shall state explicit opinions. The Board shall thoroughly discuss the profit distribution plan, record in detail the contents of the recommendations of the management, key points of the speeches of the Directors present at the meeting, voting results of the Board, etc. and form written minutes to be properly kept as the Company’s archives. The Board shall thoroughly discuss the rationality of the profit distribution proposal and form a specific resolution and submit it to the general meeting for consideration.
If the Board receives a distribution plan from other shareholders that satisfies relevant conditions, the Board shall ask the relevant shareholders for the specific reasons and background of such plan, and publish an announcement setting out the contents and reasons of the plan in accordance with the “Rules of Procedures for General Meeting” of the Company and submit it to the general meeting for consideration.
Independent directors may solicit opinions from minority shareholders,propose a cash dividend distribution plan and directly submitted their proposals to the Board of Directors for discussion.
Before the cash dividend distribution proposal is considered at the shareholders’ general meeting, different channels should be used to proactively communicate and interact with shareholders, in particular, the minority shareholders, and the Company shall fully hear the opinions and demands of minority shareholders and timely answer to the questions raised by them.
At the end of an accounting year, when the Board meeting does not propose any plan for dividend distribution in cash in spite of making profit in that accounting year, it shall explain matters such as the specific reasons for not proposing any dividend distribution in cash and the actual usage of the profit

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retained by it. The independent directors shall express their opinions on such issues independently, and then submit the same at the general meeting for approval in accordance with the relevant laws, regulations and regulatory policies.

(V) Formulation cycle and adjustment mechanism in respect of the plan

The Company shall review the Resolution Regarding the Nest Three Years for Shareholders’ Return of the Company for the Nest Three Years at least every three years and make appropriate amendment, if necessary, based on the opinions of shareholders (particularly the minority shareholders), independent directors and supervisors, so as to define the plan for shareholders’ return during the period. The Company will formulate the Resolution Regarding the Shareholders’ Return of the Company for the Nest Three Years, which will be submitted by the Board to the shareholders’ general meeting for approval. Independent directors shall give their independent views therefore and report at the shareholders’ general meeting for consideration and approval by two thirds or more of the voting rights held by the Shareholders present at such Shareholders’ general meeting.

(VI) Information disclosure of profit distribution of the company

The Company will disclose the formulation and execution of the profit distribution policy, especially, cash dividend policy, in the periodic report and explain: If the provisions of the Articles of Association or the requirements under the resolutions made by the general meeting are met; If the dividend distribution standards and proportion are clear and definite; If the relevant decision-making procedures and mechanism are complete; Have the independent directors fulfilled obligations in due diligence and given play to the due role; And if minority shareholders have an opportunity to fully express opinions and demands and if the legitimate rights and interests of minority shareholders have been fully protected.
Where there’s adjustment to or change in cash dividend policy, it is also required to give detailed statement of compliance and transparency of conditions and procedures of such adjustment or change.
Where the Company records annual profit, but the Board of Directors has not submitted the cash dividend plan, the Board shall explain the specific reasons for not proposing any cash dividend and the utilization plan and actual usage of the profit retained by it in the periodic report, and the independent directors shall express independent opinions on this case.
Where there is a change in the Company’s control resulting from securities to be issued, material asset restructuring, merger and division or acquisition, the Company shall disclose in details the cash dividend policy and relevant arrangements after the offering or issuance, restructuring or change in the control, as well as the Board’s explanation of the aforesaid in the prospectus, offering proposal, report of material asset restructuring, report of change in equity or report of acquisition.

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(VII) Supplementary provisions

The matters not covered by the resolution shall be implemented in accordance with the relevant laws, regulations, regulatory documents and the Articles of Association. The resolution shall be implemented upon the approval of the general meeting and the power of interpretation of, and amendments to, the resolution shall be vested in the Board of Directors of the Company.

SECTION VI ANALYSIS ON DILUTION OF CURRENT RETURNS ARISING FROM THE NON-PUBLIC ISSUANCE AND REMEDIAL MEASURES

Pursuant to the relevant requirements of the Opinions of the General Office of the State Council on Further Strengthening the Protection of Small and Medium Investors’ Legitimate Interests in Capital Market (Guo Ban Fa [2013] No. 110) (《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》), the Several Opinions of the State Council on Further Promoting the Healthy Development of Capital Market (Guo Fa [2014] No. 17) (《國務院關於進一步促進資本市場健康發展的若干意見》) and Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring (CSRC Announcement [2015] No. 31) (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》), in order to protect the minority interests, the Company has carefully analyzed the influence of the Non-Public Issuance on dilution of current returns and introduced detailed remedial measures, and relevant entities have also made commitments to fulfill the remedial measures of the Company. The particulars are as follows:

I. Effects of Dilution of Current Returns Arising from the Non-public Issuance on the Main Financial Indicators of the Company

The total funding to be raised from the Non-Public Issuance of the Company will not exceed RMB12 billion and the number of shares to be issued in the Non-Public Issuance will not exceed 3,278,688,524 Shares. The Company has estimated the influence of the Non-Public Issuance on the main financial indicators of the Company at the year of such issuance, and the details of estimation are as follows:

(I) Assumption for estimation

The relevant assumptions are as follows:

Assume that the Non-Public Issuance will be completed by the end of November 2016 and the number of shares to be issued will be 3,278,688,524 Shares. This assumption is only for the estimate of influence of the Non-Public Issuance on the Company’s earnings per share, not the representation of the Company’s opinion about the actual completion date of the Non-Public Issuance and the number of shares to be issued thereunder, and shall be subject to the number of shares and the actual completion date of Non-Public Issuance as endorsed by the CSRC;

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Assume that there will be no material adverse change in the macroeconomic environment, conditions of securities industry and the circumstances where the Company operates;
The restated net profit attributable to shareholders of listed companies (after deduction of non-recurring profit and loss) of the Company in 2015 was RMB-1,550.59 million. The net profit of the Company in 2016 is estimated based on the following three assumptions, which do not constitute the Company’s opinion about the operational results and trend of 2016, nor a profit forecast of the Company:

Scenario 1: We assume that the net profit attributable to shareholders of listed companies (after deduction of non-recurring profit and loss) of the Company of 2016 will decrease by 50% as compared with the restated net profit attributable to shareholders of listed companies (after deduction of non-recurring profit and loss) of 2015;

Scenario 2: We assume that the net profit attributable to shareholders of listed companies (after deduction of non-recurring profit and loss) of the Company of 2016 is nil;

Scenario 3: We assume that the net profit attributable to shareholders of listed companies (after deduction of non-recurring profit and loss) of the Company of 2016 is RMB100 million;

The influence of the receipt of funds raised from the Non-Public Issuance on the production, operation, financial position (such as operating revenue, financial costs and return on investment) and other aspects of the Company is not taken into consideration; and
Assuming that there is no conversion of capital reserve into share capital, dividend distribution and other matters which have influence on number of shares in 2016.

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(II) Influence on earnings per share of the Company

Based on the above assumptions, the influence of the Non-Public Issuance on the main financial indicators of the Company is estimated as follows:

		2016	2016
		Before	After
Item	2015	issuance	issuance
	(Restated)
Share capital in total
(0,000 shares)	1,168,312.50	1,168,312.50	1,496,181.35

The net profit attributable to
shareholders of listed companies
(after deduction of non-recurring
profit and loss) (RMB10,000)	-155,058.94	-77,529.47	-77,529.47
Basic EPS (after deduction of
non-recurring profit and loss)
(RMB/Share)	-0.133	-0.066	-0.065
Diluted EPS (after deduction of
non-recurring profit and loss)
(RMB/share)	-0.133	-0.066	-0.065
Scenario 2: We assume that the net	profit attributable to shareholders of listed
companies (after deduction of non-recurring profit		and loss) of the	Company of
2016 is nil
The net profit attributable to
shareholders of listed companies
(after deduction of non-recurring
profit and loss) (RMB10,000)	-155,058.94	0.00	0.00
Basic EPS (after deduction of
non-recurring profit and loss)
(RMB/Share)	-0.133	0.000	0.000
Diluted EPS (after deduction of
non-recurring profit and loss)
(RMB/share)	-0.133	0.000	0.000

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2016 Before After Item 2015 issuance issuance (Restated)

Scenario 3: We assume that the net profit attributable to shareholders of listed companies (after deduction of non-recurring profit and loss) of the Company of 2016 is RMB100 million

The net profit attributable to
shareholders of listed companies
(after deduction of non-recurring
profit and loss) (RMB10,000)	-155,058.94	10,000.00	10,000.00
Basic EPS (after deduction of
non-recurring profit and loss)
(RMB/Share)	-0.133	0.009	0.008
Diluted EPS (after deduction of
non-recurring profit and loss)
(RMB/share)	-0.133	0.009	0.008

Notes:

Basic EPS and diluted EPS are calculated according to the requirements of Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring published by the CSRC (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) and Regulations on the Preparation of Information Disclosure for Companies Offering Securities to the Public No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (《公開發行證券的公司信息披露編報規則第9號–淨資產收益率和每股收益的計算及披露》) promulgated by the CSRC;
Basic EPS = net profit attributable to shareholders of ordinary shares of the company for the current period ÷ weighted average number of ordinary shares outstanding; the weighted average number of ordinary shares outstanding = the number of ordinary shares outstanding at the beginning of the period + the number of newly issued ordinary shares in the current period × the lapsed time after issuance ÷ the time within the reporting period – the number of ordinary shares repurchased in the current period × the lapsed time after repurchase ÷ the time within the reporting period.

Based on the estimation from the above table, earnings per share of the Company in 2016 is subject to the risk of dilution upon the completion of the Non-Public Issuance.

II. Risk Warning for Dilution of Current Returns Arising from the Non-Public Issuance of Shares

After the proceeds collected from the Non-Public Issuance are in place, the Company’s total share capital will increase. Based on the above estimation, the Non-Public Issuance may result in a decline of EPS at the year of issuance compared with that before Non-Public Issuance, and the Company’s current return during the year (2016) when the proceeds raised from Non-Public Issuance are in place may be subject to the risk of dilution in a short term. Investors are advised to make rational investment and to be aware of the investment risks involved.

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Meanwhile, the Company’s assumptions of relevant financial data for 2016 are for facilitating the calculation of relevant financial indicators only, and do not represent the Company’s judgment on the operation and trend in 2016 or constitute the Company’s profit forecasts or profit undertakings; in addition, the Non-Public Issuance is subject to approval by the CSRC. There are still uncertainties as to whether and when the approval will be obtained and with the time of Issuance. Investors are not advised to make investment decisions based on the above assumptions and the Company does not undertake any liability for damage arising from such investment decisions.

III. Explanations of the Board on the Necessity and Reasonableness of the Non-public Issuance

(I) Necessity for satisfying business development needs and promoting strategic implementation

Upon the strategic transformation, with shipping finance as the foundation, the Company will take the advantages in shipping and logistics industries to integrate resources of the industrial chain; to develop industrial cluster with leasing, investment, insurance and banking as the core; to develop into a “one-stop” financial services group by integrating industry and finance, combining finance with finance, and synergy of various businesses, with market mechanism, differentiated advantages and international vision. The Non-Public Issuance is for capital increase in COSCO Shipping Leasing and Florens in 2017-2019 and will help the aforementioned companies grasp market opportunities, develop high quality businesses and facilitate the achievement of strategic goals of the Company.

(II) Replenish daily working capital, reduce financial costs, satisfy the Company’s daily operation needs and optimize capital structure

In recent years, the Company’s liabilities increased with the rapid increase in the size of the Company and the implementation of material assets restructuring. As of 30 June 2016, the consolidated liabilities of the Company amounted to RMB87.147 billion and the debt-to-asset ratio reached 86.03%. As the Company develops various lease and financial businesses, the Company’s debt size may further increase. The Company will utilize part of the proceeds from the Non-Public Issuance to repay maturing corporate bonds and replenish working capital, which will optimize the capital structure, reduce financial expenses and increase the Company’s overall competitiveness.

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IV. Relationship between the Projects to be Invested with Proceeds and the Company’s Existing Businesses, and the Company’s Reserves of Personnel, Technology, Market, etc for such Projects
(I) Relationship between the invested projects with proceeds and the Company’s existing businesses

1. Project of capital increase in COSCO Shipping Leasing

The Company intends to use the proceeds for capital increase in COSCO Shipping Leasing, allowing the company to develop financing lease business. The specific way of implementation is to increase investment in financing lease assets. The development will focus on medical treatment, energy, education and other innovative fields. The project of capital increase in COSCO Shipping Leasing will facilitate the improvement of professional operation capacity of COSCO Shipping Leasing, further enlarge the service scope of lease business and boost CSCL to effectively implement financial industrial strategies.

2. Project of capital increase in Florens

The Company intends to use the proceeds for capital increase in Florens for its purchase of containers for 2017-2019. According to the plan of Florens, 0.9836 million TEU will be purchased in 2017-2019 to replenish the retired containers that have been sold and containers subject to financing lease which have become mature. Through this project, the container fleet of Florens will be maintained and expanded and the competitive position in the industry will be consolidated. In the meantime, the container lease industry is gradually “warming up”. Against the gradual increase in the return on investment, the purchase of containers when the container lease industry market is at a low level is beneficial to the increase in capital return.

3. Repayment of maturing corporate bonds and replenishment of working capital

The Company intends to use the proceeds to repay maturing corporate bonds and replenish working capital, aiming at improving the Company’s capital structure and liquidity indicators, reducing balance of liabilities and financial risks, and improving the Company’s capital strength and anti-risk capacity, which will reduce the financial expenses of the Company and lay a foundation for the future rapid development of the Company.

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(II) The Company’s reserves of personnel, technology, market, etc. for the projects to be invested with the proceeds

1. Project of capital increase in COSCO Shipping Leasing

(1) Personnel reserves

As of 30 August 2016, COSCO Shipping Leasing has a total of 112 staff, of which the intermediate and senior management and front-office business personnel with experience in the lease industry as recruited in the market represent 21% and 60%, respectively. The members of the core team generally have over 8 to 10 years of experience in the lease industry. A reasonable personnel reserve structure will effectively support COSCO Shipping Leasing to proactively grasp business opportunities and execute efficient management.

(2) Technical reserves

With the increase in operation size and enhancement of management requirements, in July 2015, COSCO Shipping Leasing officially launched the project of lease business management system (phase I), which passed official acceptance in April 2016. The construction contents are eight functions, i.e. pre-lease management, contract management, creditor’s rights and debts, capital management, assets management, working platform and statement center. At present, the lease business management system is in stable and normal operation and maintenance, and plays an important role in promoting the establishment and improvement of market-adaptable management procedures, communication mechanism and risk control system by COSCO Shipping Leasing, collection of comprehensive business operation data and improvement of the operational efficiency of business process.

In addition, the project of lease business management system (phase II) was launched in May 2016. The construction period is estimated to be 10 months. The project of lease business management system (phase II) will further deepen the upgrade of the core business operation platform of COSCO Shipping Leasing. The specific contents include building an automatic interface with financial system and capital system to improve the operation efficiency; supporting the restructuring of Business Department, assets securitization and lease item management and continuous optimization and improvement of system process, financing management and lease item management functions; exploration and development of marketing management, major customer service, expenses management, and other mobile application functions.

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In particular, in the project of lease business management system (phase II), rapid application, approval, lean release and other functions which support small lease projects will be developed for customers of the “Huiyizu” project composed of medium, small and micro-sized medical treatment institutions, and a customer service platform will be built. Upon registration through the internet client, customers can conduct calculation of project quotation and application of lease business on their own. After that, relevant business personnel will conduct data input and make submission for approval. Standard contracts will be generated automatically and project progress enquiry and feedback will be supported.

In respect of construction of basic software and hardware facilities, COSCO Shipping Leasing has completed the construction of its basic office systems including company website, email system, document system, remote video/teleconference system, network monitoring, attendance, etc. and formed an information security management mechanism integrating network firewall, tamper-proofing, virus checking and killing, data backup, etc.

(3) Market reserves

The financing amount accumulatively granted by COSCO Shipping Leasing to the lease business in January-August 2016 amounted to approximately RMB6.779 billion, of which medical treatment, energy, education, innovation and other fields represents 20%, 38%, 24% and 18%, respectively; there are 57 contracts on medical treatment projects, 15 contracts on energy projects, 21 contracts on education projects and 18 contracts on innovative projects and others. Besides, the project capital demand that has passed internal approval of COSCO Shipping Leasing and yet to be released as at the end of August 2016, amounted to approximately RMB3.5 billion, of which medical treatment, energy, education, innovation and other fields represent 5%, 34%, 40% and 21%, respectively.

2. Project of capital increase in Florens

(1) Personnel reserves

Florens has developed the container lease industry for years. It values talent reserves and absorbed and cultivated a large batch of comprehensive talents with rich experience in management, forming a professional highquality management team. The present staff team of the Company is composed of elites in different fields including professional accountants, professional management personnel, professional lawyers, legs professionals, etc.

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PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

(2) Technical reserves

Florens proactively participates in, promotes and optimizes inter-industry inspection and maintenance standards and has formulated CIC inspection standard with several famous container lease companies in the industry including Triton, Seaco, etc. to ensure good container conditions while effectively reduce maintenance costs. Most operations have achieved fully automatic to greatly improve work efficiency and service quality. The full automatic storage yard bill management system and online inventory data management system have efficiently and further improved the management cost efficiency.

(3) Market reserves

Florens has always thoroughly implemented major customer policy. In addition to establishing business relationship with global top 20 great liner companies, it also continuously develops regional high quality customers. As at the end of June 2016, the number of lease customer of the Company was close to 300.

3. Repayment of maturing corporate bonds and replenishment of working capital

One of the purposes of the proceeds from the Non-public Issuance by the Company is to repay maturing corporate bonds and replenish working capital. No reserves in terms of personnel, technology, market, etc. are involved.

V. Remedial Measures Regarding Dilution On Current Returns And The Impact On The Company’s Major Financial Indicators By The Proposed Non-Public Issuance Of A Shares

(I) Special risk warning on the dilution of current returns resulting from the Issuance

After the funds raised from the Issuance are in place, the share capital and the net assets of the Company will increase. Since the implementation of investment projects financed by the proceeds will take some time, return to shareholders during the construction period can still be achieved mainly through our existing businesses. As a result, the enlarged share capital and net assets may lead to a dilution in earnings per share and return on equity of the Company in the short term, therefore the abovementioned indicators are exposed to risk of decrease in the short term. The Company reminds investors to make rational investment and pay attention to the risk of dilution of current returns after the Issuance.

– I-71 –

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APPENDIX I

(II) Specific remedial measures for dilution of current returns arising from the Issuance

To reduce the risk of dilution of the current returns as a result of the Issuance and strengthen the returns on the interests of shareholders of the Company, the Company intends to compensate the dilution through the following measures:

1. Strengthen the regulation over the projects to be invested with the proceeds to ensure efficient use of the proceeds

In order to regulate the management and use of proceeds and ensure that the proceeds will be used exclusively for the projects to be invested with the proceeds, the Company has formulated and improved the Proceeds Administration Measures in accordance with the requirements under the Company Law, Securities Law and Listing Rules as well as other laws, regulations and normative documents and based on the actual conditions of the Company. In accordance with the Proceeds Administration Measures, the Company will strictly administrate the use of proceeds, the proceeds will be placed in a special account and the amount will be only used for the specific designated purpose, so as to ensure that the proceeds will be used for the established purposes in a sufficient and effective manner. The Company will endeavor to improve capital efficiency, perfect and strengthen the investment decision making process, formulate more reasonable fund using proposals, use various financing instruments and channels in a reasonable manner, control the cost of capital, enhance capital utilization efficiency, reduce various fees and expenses of the Company, and control the operating and management risks of the Company in a comprehensive and effective manner, so as to improve operating efficiency and profitability.

2. Speed up the construction progress of projects to be invested with proceeds to achieve prospective earnings as soon as possible

The proceeds from the Issuance will be mainly used for the capital increase in COSCO Shipping Leasing and Florens, repayment of maturing corporate bonds and replenishment of working capital. After the funds raised from the Issuance are in place, the Company will quicken the construction and operation of the projects to be invested with proceeds, proactively allocate resources and arrange the project progress in a reasonable way, striving to achieve the anticipated benefits of project, increase the shareholders’ returns in subsequent years and reduce the risk of dilution of current returns arising from the Issuance.

– I-72 –

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APPENDIX I

3. Promote the development strategy of the Company and comprehensively enhance the overall competitiveness of the Company

Upon the strategic transformation, with shipping finance as the foundation, the Company will take the advantages in shipping and logistics industries to integrate resources of the industrial chain; to develop industrial cluster with leasing, investment, insurance and banking as the core; to develop into a “one-stop” financial services group by integrating industry and finance, combining finance with finance, and synergy of various businesses, with market mechanism, differentiated advantages and international vision. As the shipping finance platform, the Company will be committed to integrate premium resources of its own and give full play to the Group’s advantages in the shipping industry, in an attempt to become China’s leading and the world’s first-class business group boasting integrated financial services based on supply chain with distinct shipping logistic features and to comprehensively enhance the Company’s overall competitiveness so to enhance profitability.

4. Strict implementation of cash dividends distribution and strengthen the investor returns mechanism

In accordance with the Notice Regarding Further Implementation of Cash Dividends Distribution by Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) and the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies (《上市公司監管指引第3號–上市公司現金分紅》) of CSRC, the Company further improved and refined the profit distribution policy. Based on the full consideration of director’s investment return and the growth and development of the Company, we formulated the Shareholders’ Return Plan for the Coming Three Years (2016-2018) of China Shipping Container Lines Company Limited (《中海集裝箱運輸股份有限公司未來三年(2016-2018年) 股東回報規劃》) and made the corresponding amendments to the profit distribution policy in the Articles of Association. With the establishment and improvement of the above system, we further clarified the dividends distribution process, mechanism and specific proportion of dividends distribution and stock dividends distribution, which will effectively ensure the reasonable investment returns of all shareholders. The Company will continue to strictly enforce its dividend policy and to strengthen investor returns mechanism in the future, so to ensure that the interests of shareholders, especially minority shareholders are well protected.

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APPENDIX I

VI. Undertakings with regards to the Remedial Measures for Dilution on Current Returns by the Proposed Non-public Issuance of the Company

In order to ensure the effective implementation of remedial measures for the dilution on current returns resulting from the Non-Public Issuance of A Shares, protect the legitimate interests of the Company and all shareholders, and according to the requirements of relevant laws, regulations and regulatory documents such as the Several Opinions of the State Council on Further Promoting the Healthy Development of Capital Market (《國務院關於進一步促進資本市場健康發展的若干意見》) (Guo Fa [2014] No. 17), the Opinions of the General Office of the State Council on Further Strengthening the Protection of Small and Medium Investors’ Legitimate Interests in Capital Market (《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》) (Guo Ban Fa [2013] No. 110) and the Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) (CSRC Announcement [2015] No. 31) published by the CSRC, our Directors, Senior Management, China Shipping, China COSCO issued Undertaking Letter Relating to Effective Implementation of Remedial Measures of the Diluted Current Returns Resulting from the Non-Public Issuance of Shares of China Shipping Container Lines Company Limited, respectively. Details of which are as follows:

(I) Undertakings from Directors and Senior Management

According to Undertaking Letter from Directors and Senior Management Relating to Effective Implementation of Remedial Measures of the Diluted Current Returns Resulting from the Non-Public Issuance of Shares of China Shipping Container Lines Company Limited, undertakings from our Directors and Senior Management are as follows:

I hereby undertake not to transfer benefits to other entities or individuals with no consideration or under unfair terms, and shall not damage the Company’s interests in any other ways.
I hereby undertake to constrain the consumption behaviour in relation to my work duty.
I hereby undertake not to use the Company’s assets for investments or consumption activities that are unrelated to the engagement and performance of my work duties.
I hereby undertake that the remuneration system formulated by the board of directors or the remuneration committee will be linked with the implementation of the Company’s remedial measures in relation to the returns of the Company.
I hereby undertake that the vesting conditions for the proposed share incentive scheme (if any) of the Company will be linked with the implementation of the Company’s remedial measures in relation to returns of the Company.

– I-74 –

PROPOSAL IN RESPECT OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX I

From the date of making these undertakings until completion of the Proposed Non-public Issuance of A Shares, I undertake to make supplemental undertakings in accordance with the latest regulations imposed by the China Securities Regulatory Commission, which renders the aforementioned undertakings inadequate to satisfy such regulatory requirements.
I hereby undertake to perform these undertakings. If I violate these undertakings and cause losses to the Company or the investors, I shall be liable to indemnify the Company or the investors for their losses in accordance with the law.”

(II) Undertakings from China Shipping

As the controlling shareholder of CSCL, China Shipping issued Undertaking Letter from China Shipping (Group) Company Relating to Effective Implementation of Remedial Measures of the Diluted Current Returns Resulting from the Non-Public Issuance of Shares of China Shipping Container Lines Company Limited, details of which are as follows:

“The Company shall continue to ensure the independence of the Listed Company, and shall not go beyond its power to interfere with the operation management activities of the Listed Company and shall not encroach upon the interests of the Listed Company.”

The Company hereby undertakes to perform these undertakings. If the Company violates such undertakings and causes losses to the Listed Company or to the investors, the Company shall be liable to indemnify the Listed Company or the investors for their losses in accordance with the law.”

(III) Undertakings from China COSCO

As the controlling shareholder of CSCL and the sole shareholder of China Shipping, China COSCO issued Undertaking Letter from China COSCO Shipping Corporation Limited Relating to Effective Implementation of Recovery Measures of the Diluted Current Returns Resulting from the Non-Public Issuance of Shares of China Shipping Container Lines Company Limited, details of which are as follows:

China Shipping Container Lines Company Limited

Board of Directors

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APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

This English translation is for reference only. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

Definitions

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

CSCL/Issuer/Company	China Shipping Container Lines Company Limited1
Proposed Non-public Issuance	the non-public issuance and listing of A Shares of China
of A Shares/Non-public	Shipping Container Lines Company Limited
Issuance/Issuance
Report	the Feasibility Report on the Use of Proceeds from the
	Proposed Non-Public Issuance of A Shares of China
	Shipping Container Lines Company Limited
COSCO Shipping Leasing	COSCO Shipping Leasing Co., Ltd. (中遠海運租賃有限
	公司)
CSCL HK	China Shipping Container Lines (Hong Kong) Co., Ltd.
Florens	Florens International Limited (佛羅倫國際有限公司)
Dong Fang International	Dong Fang International Investment Limited (東方國際
	投資有限公司)
Drewry	Drewry Shipping Consultants Ltd.
Triton	Triton International Limited (全球著名租箱公司)
Seaco	Seaco SRL (全球著名租箱公司)
RMB, RMB10,000 and	Renminbi 1 Yuan, Renminbi 10,000 Yuan, Renminbi
RMB100 million	100 million Yuan, respectively

Note: In the Report, any discrepancies in any tables between totals and sums of amounts listed are due to rounding.

As considered and approved at the 2016 third extraordinary general meeting of CSCL, CSCL proposed to change its Chinese name from “中海集裝箱運輸股份有限公司” into “中遠海運發展股份有限公司”. The new name of the Company has been pre-approved by the State Administration for Industry and Commerce. The Company is currently proceeding with the registration procedures of the new name of the Company with the relevant industry and commerce authorities.
In addition, as considered and approved at the eighth meeting of the fifth session of the Board of CSCL, CSCL proposed to change its abbreviated Chinese stock name for A Shares and H shares from “中海集運” into “中遠海發” and the abbreviated English stock name from “CSCL” into “COSCO SHIP DEVP”, with the A Share Stock Code “601866” and H Share Stock Code “02866” unchanged. Upon registration of the new name of the Company with the relevant industry and commerce authorities, CSCL will apply to the Shanghai Stock Exchange and the Hong Kong Stock Exchange for change of abbreviated stock names, and adjust the said abbreviated stock names according to the opinions of regulators.

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APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

I. PLAN ON USE OF PROCEEDS

The total proceeds to be raised from the Non-public Issuance shall be no more than RMB12.00 billion and will be used for the following purposes after deducting the cost of Issuance:

No. Project name 1 Capital Increase in COSCO Shipping Leasing 2 Capital Increase in Florens 3 Repayment of maturing corporate bonds 4 Replenishment of working capital Total	Unit: RMB10,000 Total investment in the project The amount of proceeds to be used in the project 600,000 600,000 240,000 240,000 180,000 180,000 180,000 180,000 1,200,000 1,200,000	Unit: RMB10,000 Total investment in the project The amount of proceeds to be used in the project 600,000 600,000 240,000 240,000 180,000 180,000 180,000 180,000 1,200,000 1,200,000
		1,200,000

Before receiving the proceeds, the Company will, depending on the actual situations of the progress of the projects, finance these projects by its self-raised fund which shall be replaced once the proceeds have been received according to procedures required by relevant regulations. If the net amount of the proceeds is less than the aggregate amount of the proceeds proposed to be invested in the aforementioned projects, the Company will make up for the shortfall through its self-raised fund. Based on the actual net proceeds raised, the Board may adjust and eventually decide the projects to be invested in, the priorities of and the investment amount of each project, in compliance with relevant laws and regulations.

II. ANALYSIS OF THE FEASIBILITY OF THE PROCEEDS

(I) Capital Increase in COSCO Shipping Leasing

1. Basic information of the project

In order to proactively grasp the development opportunities in the financing lease industry, increase the business scale of the diversified financing lease of CSCL and improve the core competitiveness and brand influence of COSCO Shipping Leasing, the Company proposes to invest RMB6 billion in COSCO Shipping Leasing for its further expansion of the layout of financing lease, additional investment in financial leasing assets and key development of medical treatment, energy, education and innovative fields.

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APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

In accordance with the 2017-2019 plan on capital investment in leasing assets of COSCO Shipping Leasing, COSCO Shipping Leasing will use its own funds of RMB13.8 billion to invest in financing leasing assets in 2017-2019, of which RMB6 billion of proceeds will be used for capital increase in COSCO Shipping Leasing and the shortfall shall be made up through its self-raised fund.

2017-2019 Plan on Capital Investment in Leasing Assets of COSCO Shipping Leasing

Industry Medical treatment Energy Education Innovative field Total	2017 Increase in leasing assets Amount of own funds used 400,000 80,000 400,000 80,000 400,000 80,000 300,000 60,000 1,500,000 300,000	2018 Increase in leasing assets Amount of own funds used 600,000 120,000 700,000 140,000 600,000 120,000 500,000 100,000 2,400,000 480,000	2019 Increase in leasing assets Amount of own funds used 750,000 150,000 900,000 180,000 750,000 150,000 600,000 120,000 3,000,000 600,000	2019 Increase in leasing assets Amount of own funds used 750,000 150,000 900,000 180,000 750,000 150,000 600,000 120,000 3,000,000 600,000
				600,000

2. Basic information of COSCO Shipping Leasing

(1) Overview of COSCO Shipping Leasing

Company name: COSCO Shipping Leasing Co., Ltd.

Registration No./Unified social credit code: 91310000076478553L

Legal representative: Liu Chong

Domicile: Room 3E, No. 450 Fushan Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC

Registered capital: RMB1.5 billion

Date of establishment: 29 August 2013

Type of company: one-person limited liability company (wholly owned by a foreign invested enterprise)

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APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

Scope of business: financial leasing, leasing business, purchase of leased properties from domestic entities and abroad, disposal and maintenance for residual value of leased properties, consultation for financial leasing and guarantee business, business consultation (except brokerage), investment management, financial management consultation (except bookkeeping agency). [For items subject to approval by law, operational activities shall be subject to approval of the relevant authorities]

(2) Shareholding structure of COSCO Shipping Leasing

As at the date of announcement on the plan, CSCL held 100% equity interest of COSCO Shipping Leasing.

(3) Business development of COSCO Shipping Leasing

As one of the important platforms of CSCL for implementation of financial industrial strategies, COSCO Shipping Leasing is mainly engaged in diversified financial leasing and has five business segments, i.e. medical treatment, energy, education, shipping and innovative field. As at 30 June 2016, the total financial leasing assets of COSCO Shipping Leasing amounted to RMB8.292 billion, of which medical treatment, energy, education and shipping represent 27%, 35%, 27% and 11%, respectively. In January – June 2016, the investment in leasing assets increased by RMB4.374 billion.

(4) Financial position of COSCO Shipping Leasing

The audited financial data for the last three years of COSCO Shipping Leasing is as follows:

			Unit: RMB10,000
	As at	As at	As at
	31 December	31 December	31 December
Items	2015	2014	2013
Total assets	517,999.78	51,699.13	50,400.11
Total liabilities	358,943.98	588.33	140.58
Total owners’ equity	159,055.80	51,110.80	50,259.53
Items	2015	2014	2013
Total revenue	22,396.93	0.00	0.00
Operating profit	10,314.29	1,137.24	346.06
Total profit	10,714.35	1,137.24	346.06
Net profit	7,945.00	851.27	259.53

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

3. Necessity of the Project

(1) As the rapid development of financing lease industry under the great support of national policy presents a tremendous market space, COSCO Shipping Leasing is confronted with strategic opportunities of business development

As an industry that is closely combined with the real economy, financing lease, against the backdrop of deepening financial reform by the state, is playing an increasing important role in propelling the industrial innovation and upgrade of national economy, broadening the financing channels for medium, small and micro-sized enterprises, driving development emerging industries and promoting the adjustment of economic structure.

(2) As the competition in the financing lease market is becoming fierce, the Company is in urgent need of capital to reinforce its comprehensive competitiveness

As at the end of 2015, there were 4,508 domestic financing lease enterprises, including 47 financial lease enterprises, 190 domestic lease enterprises and 4,271 foreign-invested enterprises. The total number of lease enterprises doubled as compared to the number of 2,202 enterprises as at the end of 2014. Various financial capitals and industrial capitals have joined the market competition. Ever since 2014, city commercial banks, insurance companies, brokers and large enterprise groups (including state-owned and private enterprises) have newly established financing lease companies with the registered capital of over RMB1 billion.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

Financing lease industry is capital intensive. The business size and comprehensive competitiveness of financing lease companies are closely related to their capital strength. As at the end of 2015, the total amount of register capital of domestic financing lease enterprises reached RMB1.52 trillion, representing a year-on-year increase of over 100 percent. The registered capital of each of the top ten financing lease companies as shown by the statistics of China Leasing Alliance is over RMB6 billion.

(3) The business structure of financing lease industry continuously upgrades, imposing higher requirements on the business layout of COSCO Shipping Leasing

Due to the influence of structural adjustment of macro economy of our country and the guidance of policy planning, the business structure of financing lease presents the trend of diversified balanced development. On the basis of continuously maintaining business development of large fixed assets including traditional airplane, ship, machinery and equipment, etc., a larger layout is being accelerated for high-grade, precision and advanced industries including life and health, energy saving and environmental protection, new energy, electronic information, etc. to promote the development and upgrade of relevant strategic industries. Business is developed in a number of fields including education, culture, science and technology, venture capital investment, agricultural machinery, health, infrastructure, etc. Therefore, the situation of the reliance of the construction of domestic public fields on government investment has been gradually changed. The continuous upgrade of business structure promotes the accelerated expansion of the business scope of financing lease industry and further expedites industrial connection.

COSCO Shipping Leasing aims at providing flexible and innovative comprehensive solutions for financing lease to customers in a market-oriented way and in a mode integrating industry and finance. Facing the trend of demand upgrade of the financing lease industry, COSCO Shipping Leasing, relying on its accumulated customer resources of principal businesses, in-depth understanding of industry and standard service capacity, aims at ranking the top in the domestic financing lease industry and gives priority to and serves the customers of medical treatment, energy, education and innovative field. It proactively grasps the business opportunity of the emerging field of financing lease, striving to further consolidate and increase its market share.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

4. Project feasibility analysis

(1) The development of diversified financing lease businesses is subject to powerful support in terms of construction and innovation of industrial systems and encouragement of national policies

In recent years, the financing lease industry of our country has achieved great progress in respect of construction of external environment, e.g. regulation, law, tax, accounting, etc. Four pillars that support the development of the industry, i.e. industrial regulatory policies, transaction rules, tax system and accounting standards, etc., have been gradually consolidated in order. The business practices of financing lease enterprises in respect of pilot free trade zone and assets securitization have also been continuously developed. The steady progress of the construction and innovation of industrial systems has laid a solid foundation for the future continued growth of financing lease market.

In September 2015, the General Office of the State Council successively issued the Guiding Opinions on Accelerating the Development of Financing Lease Industry (Guo Ban Fa [2015] No. 68) (《關於加快融資租賃業發展的指導意見》(國辦發 [2015]68號)) and the Guiding Opinions on Promoting the Sound Development of Financing Lease Industry (Guo Ban Fa [2015] No. 69) (《關於促進金融租賃業健康發展的指導意見》(國辦發[2015]69號)), which determined to support the development of lease industry at the national level for the first time and clearly proposed that “financing lease companies are encouraged to become larger and stronger in traditional fields including airplane, ship, engineering machinery, etc. and proactive efforts will be made for the exploration of strategic emerging industries and markets including new generation of information technology, high-end equipment manufacturing, new energy, energy saving and environmental protection and biology, and broadening the investment and financing channels of cultural industries; financing lease companies are encouraged to give play to the advantages of financing convenience, flexible terms, financial optimization, etc. to provide products and services meeting the characteristics of medium, small and micro-sized enterprises”.

The purpose for the Company to inject the proceeds raised into COSCO Shipping Leasing as capital increase is mainly to expand its businesses into new areas like medical treatment, energy, education and innovation. The customers served mainly include medium, small and micro-sized enterprises, which are in line with the direction of national supporting policies. In the meantime, COSCO Shipping Leasing, Far Eastern Leasing, AVC International Leasing and other large financing lease companies are based in China (Shanghai) Pilot Free Trade Zone and benefit from the cluster advantage brought about by the development of leading enterprises in the industry.

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APPENDIX II

(2) COSCO Shipping Leasing has competitive strengths and infrastructure required for the expansion into the financing lease businesses in areas like medical treatment, energy, education and innovation

(i) Medical treatment field

The Medical Treatment Business Department of COSCO Shipping Leasing provides liquidity solutions on the procurement of equipment, consumables and medicines and relevant sections for hospitals, pharmaceutical enterprises, health care institutions and medical equipment suppliers. The target customers are mainly public hospitals of level 2 and above and share reform hospitals, and some of them are health centers, hospitals of armed police, private hospitals, pharmaceutical enterprises, elderly care and health institutions at rural and urban level, etc.

COSCO Shipping Leasing provides standardized “Huiyizu (惠醫租)” medical equipment financing lease solutions for medium and small clinic customers. The main business advantages include: (a) relatively high return on investment is guaranteed through careful selection of customers and projects; (b) the highly standard service model shortens business cycle and saves marketing costs for customers; (c) the setting of reasonable access thresholds effectively control the non-performing loan rate. With the help of “Huiyizu” innovative business, COSCO Shipping Leasing is able to compete distinctively with commercial banks and operating lease companies, which enables it to obtain first-mover advantages in the blue ocean market composed of medium, small and micro-sized medical treatment customers. In addition, it will accumulate experience in standardized services to ultimately achieve the high reproducibility of this type of business model and the gradual application in other diversified industrial fields.

In addition, with the accelerated ageing of people in our country, COSCO Shipping Leasing pays close attention to the difficulties in the society and people’s livelihood brought about by the domestic “ageing” trend, and proactively responds to the national policies to develop financing lease business for elderly care industry and explore the innovation in elderly care model.

– II-8 –

FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

(ii) Energy field

The Energy Business Department of COSCO Shipping Leasing focuses on new and clean energy fields such as PV and hydropower, etc. The target customers served include leading high quality enterprises and project companies in the professional energy field and local state-owned energy enterprises. The cooperation targets at the current stage are mainly medium and small-sized PV and hydropower enterprises and small project investment and development enterprises in the energy industry which have good brand reputation and business capacity. COSCO Shipping Leasing has a professional mature team composed of those who are experienced and familiar with the development trend of energy demand and policy guidance, as well as long term marketing channels established with relevant energy associations, suppliers, EPC and key customers. At present, it ranks among the top financing lease companies in the domestic clean power energy field. In the future, it will further grasp market opportunities to further consolidate and improve its competitive advantages and market position.

(iii) Education field

For institutions in the local basic cultural education system and vocational colleges and other institutions of higher education which are subject to shortage of funds in construction and development, the Education Business Department of COSCO Shipping Leasing mainly designs customized financing lease plan and provides funds required for equipment purchase, construction and development to ensure cash flow optimization of customers and relieve the phased and temporary financial pressure. At present, COSCO Shipping Leasing has established good cooperative relationship with a number of domestic colleges and government organizations including provincial, municipal, district and county level education institutions to provide nationwide customers with teaching equipment financing plan, infrastructure financing plan, short-term capital demand solution and equipment purchase financing plan for government construction projects. In the future, COSCO Shipping Leasing will continue to develop education and culture financing lease businesses and further enlarge the coverage of customer base.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

(iv) Innovative field

As at the date of announcement of the plan, COSCO Shipping Leasing has established the Innovative Business Department, which mainly carry out financing lease business in the fields of automobile, power, electronic information, heavy industrial machinery and other high-end equipment manufacturing fields. Automobile, smartphone and rail transit customers will be taken as the starting point to gradually building a leading comprehensive service operator with the focus placed on vertical integration in the financing lease field of high-end manufacturing industry. Relying on the service idea of industrial ecological system, it will help high-end equipment manufacturing customers to transform and upgrade from “Made in China” to “Intelligent Manufacturing in China”.

5. Total investment and financing arrangement for the project

Total investment into the CSCL Leasing project as capital injection amounted to RMB6 billion. It is intended that funds required by the project will be totally financed by proceeds from the Non-public Issuance of RMB6 billion.

6. Economic output of the project

Upon implementation of capital injection into the CSCL Leasing project, it is expected that the operating scale of financial leasing business of CSCL Leasing will be expanded, thus promoting the development of its non-shipping leasing business.

7. Matters with respect to project registration and environmental evaluation

Capital injection in the CSCL Leasing project does not involve such matters as registration with relevant NDRC authorities or obtaining environmental evaluation approval from environmental protection authority.

(II) Capital injection in Florens project

1. Basic information of the project

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APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

expand diversified businesses as well as external markets and continue to increase market share and scale benefits through acquisition of suitable companies in the industry at a proper time with a view to becoming a top-ranking container leasing company with 5,000,000 containers in terms of container scale and RMB50 billion in terms of assets scale.

Against the background of gradual market rebound, competition returning back to normal and increase of return on investment, Florens plans to purchase an aggregate of approximately 0.9836 million TEUs so as to maintain and expand container scale, secure competitive position in the market and increase shareholder returns from 2017 to 2019. A total of approximately RMB2,991,770,000 self-owned funds was used to purchase containers, of which the capital injection of RMB2,400,000,000 in the Florens project was planned to be financed from the proceeds, and the rest was settled through its self-raised fund.

Capital investment plan of Florens during 2017 to 2019

							Unit: RMB10,000	Unit: RMB10,000
			2017		2018		2019
				Self-owned		Self-owned		Self-owned
			Proposed	funds	Proposed	funds	Proposed	funds
Item			investment	utilized	investment	utilized	investment	utilized
Purchase	of	containers	407,763	101,941	364,030	91,008	424,911	106,228

2. Basic information of Florens

(1) Description of Florens

Chinese name: 佛羅倫國際有限公司

English name: Florens International Limited

Date of establishment: 16 July 1998

Registered address: Pasea Estate, Road Town, Tortola, British Virgin Islands

Type of company: a company with limited liability under the BVI law

Issued share capital: USD22,014

Scope of business: container leasing, container management, container trade and other leasing, etc.
(2) Equity structure of Florens

As at the date of the announcement of this proposal, CSCL holds 100% equity interest in Florens through CSCL HK.

– II-11 –

FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

(3) Business development of Florens

As a platform for container leasing business under CSCL, Florens is mainly responsible for the operation of container leasing, management and sale of second-hand containers. After thirty years of development and expansion, Florens has established an industry leading brand. Upon its merger with Dong Fang International Investment Limited (東方國際投資有限公司) at the beginning of 2016, its number of containers reached approximately 2.90 million TEUs, becoming the world second container leasing company. The principal business of Florens is container-related operating leasing, financing leasing, management, trade, rental and management fee collection.

(4) Financial condition of Florens

The audited financial data of Florens for the recent three years are set out as below:

			Unit: USD10’000
	31 December	31 December	31 December
Item	2015	2014	2013
Total assets	214,724.70	218,613.50	211,355.90
Total liabilities	96,659.60	108,284.80	110,837.00
Total owner’s Equity	118,065.10	110,328.70	100,518.90
Item	2015	2014	2013
Total operating income	31,567.50	35,707.50	34,774.70
Operating profit	10,733.50	12,209.60	15,231.70
Total profit	8,764.40	10,018.80	13,061.90
Net profit	8,487.30	9,744.90	12,749.10

3. Necessity of the Project

(1) To gain capital increment through grasping the unsatisfactory market status

With the world economy entering into the cycle of “recession-recovery” since global financial crisis, returns in the container leasing industry has been on continual decline. Despite the overall gloomy condition in the container industry and continuous low profitability in the next one to two years, from the perspective of periodical investment, if we acquire assets at this point, assets prices will be more likely to rise than fall in the future. From the perspective of the macroeconomic environment, although the economies of China and Europe still risk declining, global economy has shown positive signs of recovering led by the US and the future

– II-12 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

economic condition is turning to the bright. Therefore, proper container purchase project enjoys greater opportunity to achieve capital increment both in second-hand container disposal and capital market.

(2) To secure competitive position in the industry through filling in retired and expired containers

According to the Drewry Report published in the middle of 2015, global container scale will grow at a rate of approximately 4.6% from 2016 to 2018. It is expected to increase from 38.52 million TEUs at the end of 2015 to approximately 44.10 million TEUs in 2018, of which, the container scale of container leasing companies is expected to increase by 5% on a yearly basis, increasing from 18.35 million TEUs in 2015 to approximately 21.00 million TEUs by the end of 2018. Top container leasing companies around the world are actively expanding container scale. It is calculated that Florens will dispose and lease an annual average of 250,000 expired containers in 2017 and thereafter. To fill in retired and expired containers, secure the competitive position in the industry and reduce impact on the Company’s operating results, the Company needs to keep up purchasing containers.

4. Feasibility analysis of the project

(1) Global container leasing industry gradually “warming up” driven by the slow recovery of global economy

Container leasing business is highly correlated to the trade transportation volume of containers, both subject to the impact of the periodical fluctuation of macroeconomic situation. As forecast by the International Monetary Fund (IMF), inspired by the more than expected recovery of the US economy and continual growth of new economies, global GDP started to pick up against declining trend, which will help the global container leasing industry to bottom out and contribute to its “warming up”.

At present, three major factors are behind the steady growth of demand for containers. First, as a result of development in international trade and increase in residential income as well as frequent international commercial intercourse, container transportation companies and end users maintain constant demand for newly added containers; second, taking into consideration the specific requirements, safety and operating cost of transportation, advanced containers which can provide proper transportation environment for special goods are used for different goods; third, currently, shipping companies generally adopt the slow-moving strategy, which reduces the turnover rate of container and thus increases demand for containers; fourth, the substitution of new and second-hand containers as well as increased trade in second-hand containers give rise to enormous new container demand.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

(2) Limited room for benefit decline and industry boom hopeful to rebound

Container rental is directly determined by supply-demand relationship with demand playing a more significant role. In their expansion efforts during 2010 and 2011, container leasing companies provided large number of supply to the container leasing industry. Meanwhile, various companies staged fierce competition to fight for high-quality fright customers and lower cost financing. Due to change in market supply and demand resulted from such expansion, container rentals fell quickly after 2012, thus putting large pressure on the rental and investment return of container leasing companies.

Currently, cost of building new containers has fallen near to the record low. Before the economy turns bright, mid to long term market supply and demand reasons will restrict price to the present range. Therefore, there is little room for cost of building new containers and leasing price. Various companies in the industry has restrained development and regained balance from large-scale structural overcapacity. At the same time, the industry has witnessed several mergers and acquisitions, turning the fragmented competitive market into one dominated by four generally large companies. Besides, although global economic prospects still remain uncertain, the US has started to increase interest. There is little room for return from container leasing companies to drop in the future. With recovery of macroeconomic situation and global trade, the industry boom is hopeful to rebound.

5. Total investment and financing arrangement for the project

Total investment in Florens project as capital injection amounted to RMB2.4 billion. It is intended that funds required by the project will be totally financed from the proceeds from the Non-Public Issuance of RMB2.4 billion.

6. Economic benefits analysis of the project

As the useful life for containers is long (10-15 years), during which time investment returns may fluctuate due to certain uncertainties. Therefore, the industry generally adopts Cash-On-Cash return as the significant reference index when assessing return on investment for new containers. After calculation, it is expected that the cash-on-cash return of purchase of containers during 2017 to 2019 will be 10.7%, 11.0% and 11.0% respectively.

7. Project registration and environmental evaluation

Capital injection in the Florens project does not involve such matters as registration with relevant NDRC authorities or obtaining environmental evaluation approval from environmental protection authority. However, it is required to start the overseas investment registration procedure with NDRC and Ministry of Commerce, as well as complete the capital exit approval/registration with foreign exchange administration departments.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

(III) Repayment of maturing corporate bonds and supplement of working capital

In addition to the above projects, not more than RMB3.6 billion of the proceeds from the Proposed Non-Public Issuance of A Shares (deducting the issue fee) will be used to repay the maturing corporate bonds (07 CSCL bonds) and supplement working capital, of which RMB1.8 billion will be used to repay the due debts and RMB1.8 billion to supplement working capital.

1. Necessity analysis on repayment of maturing corporate bonds and supplement of working capital

(1) Satisfying the follow-up requirements of all businesses of the Company

Upon the completion of the major assets restructuring of the Company in 2015, the Company will transfer its priority from container shipping operation to comprehensive financial services mainly including such diversified leasing businesses as ship leasing, container leasing and non-shipping financing leasing. The Company will make full use of its experience in the shipping industry and existing resources in the financial industry to facilitate the development of new industries and achieve optimization of business model and diversification of financial businesses. The Company will establish a comprehensive financial service platform with leasing business at the core supported by shipping industry experience. The rapid development of follow-up businesses requires the Company to be equipped with corresponding capital strength.

(2) Improving capital structure to reduce debt-to-asset ratio and ease short-term repayment pressure

The Company has not conducted equity financing since its listing in 2007. Upon the completion of the major assets restructuring in 2015, Long Honour, Florens and Dong Fang International which were newly included into consolidated statements have relatively large amount of long-term liability and meanwhile, the amount of newly added bank current borrowings is enormous, resulting the increase in total liabilities of the Company after the major assets restructuring, significant rise of debt-to-asset ratio and decrease in finance safety. The interest-bearing liability scale and debt-to-asset ratio in the consolidated statements of the Company for the recent three years and one period is set out as below:

			_Unit: _	RMB1,000,000	RMB1,000,000
	30 June	31 December	31 December	31 December
Item	2016	2015	2014		2013
		(restated)	(restated)		(restated)
Short-term borrowings	23,830.53	12,217.56	4,785.21		4,387.68
Borrowings and bonds
payable due within
one year	7,556.90	14,479.69	6,947.81		5,314.37

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

			_Unit: _	RMB1,000,000
	30 June	31 December	31 December	31 December
Item	2016	2015	2014	2013
		(restated)	(restated)	(restated)
Long-term borrowings	41,447.97	25,025.09	18,583.10	16,260.21
Bonds payable	1,506.23	3,449.49	3,583.46	28,814.76
Total interest-bearing
liabilities	74,341.63	55,171.83	33,899.58	28,822.27
Debt-to-asset
ratio (%)	86.03%	64.36%	59.87%	58.63%

Note: Since the consolidation scope of the Company differs after the major assets restructuring due to merger of enterprises under the same control, the scope of consolidated statements of the Company are changed to a large extent. Therefore, the above financial data and subsequent financial analysis involving data of 2013-2015 are retrospected and restated according to relevant accounting principles.

As of 30 June 2016, short-term borrowing in the consolidated statements of the Company amounts to RMB23.831 billion, long-term borrowing amounts to RMB41.448 billion, bonds payable amount to RMB1.506 billion, borrowings and bonds payable due within one year amount to RMB7.557 billion, total interestbearing liabilities amount to RMB74.342 billion. Therefore, the Company is under great pressure of short-term repayment.

Debt-to-asset ratio of the Company and its comparable companies in the industry is set out as below:

		30 June	31 December	31 December	31 December
Comparable companies		2016	2015	2014	2013
000415.SZ	Bohai Financial	81.59%	75.33%	81.40%	85.32%
600705.SH	AVIC Capital	80.78%	83.85%	81.68%	87.49%
1606.HK	China Development
	Bank Leasing	89.60%	90.37%	90.02%	91.48%
3360.HK	Far East Horizon	84.50%	83.52%	84.24%	83.63%
Average of Comparable
Companies		84.11%	83.27%	84.33%	86.98%
Median of Comparable
Companies		83.04%	83.68%	82.96%	86.41%
CSCL		86.03%	64.36%	59.87%	58.64%

Note: The above data are derived from Wind. The financial data of CSCL for 2013 to 2015 were restated.

As of 30 June 2016, the debt-to-asset ratio of the Company was 86.03%, higher than the average of the industry listed comparable companies. High debt-to-asset ratio increases the finance risks of the Company, restricts its financing capability and curbs its development and expansion to some extent.

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APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

The comparison of liquid ratio of the Issuer with the industry comparable companies is set out below:

		30 June	31 December	31 December	31 December
Comparable companies		2016	2015	2014	2013
000415.SZ	Bohai Financial	0.86	1.27	0.59	0.44
600705.SH	AVIC Capital	0.87	0.92	0.92	0.89
1606.HK	China Development
	Bank Leasing	1.14	0.95	0.99	1.00
3360.HK	Far East Horizon	0.93	0.97	1.18	1.05
Average of Comparable
Companies		0.95	1.03	0.92	0.84
Median of Comparable
Companies		0.90	0.96	0.95	0.94
CSCL		0.50	0.65	0.93	1.07

Note: The above data are derived from Wind. The financial data of CSCL for 2013 to 2015 were restated.

Since 2013, liquid ratio of the Issuer has been declining year by year to 0.50 as of 30 June 2016, far below the average of industry comparable companies. The short-term repayment capability of the Company is significantly weaker than listed comparable companies in the industry, which shows that the Company is under greater pressure of working capital than its industry peers. Therefore, to repay due liabilities and supplement working capital with proceeds will raise the Company’s liquid ratio, and increase its working capital, which will help improve the capital structure of the Company and reduce its liabilities.

(3) Reducing interest cost

Although debt financing provide capital support and guarantee for the Company’s expansion, it also brings about increasing interest cost. Before completion of the reorganization, as affected by the global recession and overall environment in the shipping industry, profitability of the container and shipping business of the Company was low with interest cost accounting for a large portion. Interest expense of the Company during the Reporting Period is set out as below:

				Unit: RMB10,000
	January-June
Item	2016	2015	2014	2013
		(restated)	(restated)	(restated)
Interest cost	68,691.92	89,675.38	73,289.24	70,274.01
Operating profit	-79,874.91	-152,246.27	288,603.88	-119,376.61
Interest cost as a
percentage of
operating profit (%)	-86.00%	-58.90%	25.39%	-58.87%

Note: Financial data for 2013 to 2015 were restated.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

The interest cost of the Company for 2013-2015 (restated) and January-June 2016 accounted for -58.87%, 25.39%, -58.90% and -86.00% of the corresponding operating profit, respectively. The Company cannot make use of the financial leverage to promote business performance. After proceeds from the Non-public Issuance are in place, the Company will repay RMB1.8 billion of corporate bonds. Calculated on Renminbi loan benchmark interest rate (one-year) of financial institutions, the Company will save approximately RMB78.3 million of finance cost each year, reducing the Company’s interest cost to some extent. Therefore, it is necessary for the Company to repay maturing corporate bonds with proceeds from the non-public issue and reduce total liabilities so as to decrease interest cost.

2. Feasibility analysis on repayment of due liabilities and supplement of working capital

To repay debts and supplement working capital with proceeds from the Proposed Non-Public Issuance of A Shares will to some extent improve the liquid ratio of the Company, enhance its debt repayment capability, reduce finance risk and consolidate the financial structure of the Company. If calculated based on the Company’s financial data as of 30 June 2016 and not taking into account the issuance costs, after taking into account RMB1.8 billion from the proceeds from the Non-public Issuance of A Shares will be used to repay maturing corporate bonds and RMB1.8 billion of supplemented liquidity is credited to current assets, the debt-to-asset ratio of the Company will decrease from 86.03% to 76.55% and liquid ratio will increase from 0.50 to 0.77.

After the Non-public Issuance, debt-to-asset ratio will be significantly reduced, which will help to improve capital structure and lower financial risk. In future, the Company may comprehensively use various financing instruments to provide reasonable and proper financing arrangement for the sustainable development of the Company under the precondition of controlling financial risk and maintaining healthy financial structure.

Therefore, upon completion of the Non-public Issuance, the Company intends to use the above-mentioned proceeds to repay due liabilities and supplement working capital, which is in line with relevant laws and regulations, the actual situation of the Company and strategy requirements and shareholders interest as a whole, thus beneficial to the long-term and healthy development of the Company. The successful use of the proceeds will further improve the financial condition of the Company and enhance its core competitive and anti-risk capabilities.

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FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX II

III. IMPACT OF NON-PUBLIC ISSUANCE ON BUSINESS OPERATION AND FINANCIAL POSITION OF THE COMPANY

(I) Impact of the non-public issuance on the Company’s business operation

Proceeds from the Non-public Issuance will be mainly used to invest in CSCL Leasing and Florens and repay due liabilities and supplement working capital, which is in line with the Company’s business transformation plan (enhance shipping leasing business, container leasing business and non-ship leasing business) after reorganization, national industrial policy and industry development trend. It is expected that when the proceeds are in place, the core competitive strength will be further enhanced and its anti-risk capability will be effectively strengthened, which is of significant strategic meaning to the long-term sustainable development of the Company and provide strong capital secure.

(II) Impact of the non-public issuance on the Company’s financial condition

As of 30 June 2016, the debt-to-asset ratio of the Company was 86.03%. Higher debt-to-asset ratio means greater vulnerability to financial risks, such weakness restricts our financing capability and curbs our development and expansion to some extent. Upon completion of the Non-public Issuance, the Company’s equity capital will be increased, and capital strength will be quickly improved. Based on the financial data of the Company as at 30 June 2016, and assuming that the proceeds from the Non-public Issuance will amount to RMB12 billion, after receiving all the proceeds (regardless of the issuance expenses), the debt-to-asset ratio of the Company on consolidated basis will decrease from 86.03% to 76.92%, and the debt-to-asset ratio of the Company will be further reduced to 76.55% after the raised fund of RMB1.8 billion was used to repay the maturing corporate bonds.

The implementation of the Non-public Issuance and the capital injection with proceeds will help to improve capital structure and lower financial risk. Meanwhile, the Company may comprehensively use various financing instruments in future to make reasonable and proper financing arrangement under the precondition of controlling financial risk and maintaining healthy financial structure.

IV. CONCLUSION

In view of the above, investment with proceeds from the Non-public Issuance is in line with relevant national industrial policy, industry development trend and the strategic targets of the Company, which will help to promote the sustainable development and core competitiveness of the Company. Therefore, utilization of proceeds from the Non-public Issuance is feasible and in line with the interests of shareholders as a whole.

China Shipping Container Lines Company Limited

Board of Directors

– II-19 –

STATEMENT ON THE EXEMPTION FROM THE PREPARATION OF A REPORT ON THE UTILISATION OF PROCEEDS FROM PREVIOUS FUND RAISING

APPENDIX III

This English translation is for reference only. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

China Shipping Container Lines Company Limited Statement on Exemption from the Preparation of a Report on the Utilisation of Proceeds from Previous Fund Raising

On 12 December 2007, as approved by China Securities Regulatory Committee (hereinafter referred to as “ CSRC ”) under the Notice on the Authorization of the Initial Public Offering of China Shipping Container Lines Company Limited (《關於核准中海集裝箱運輸股份有限公司首次公開發行股票的通知》) (“Zheng Jian Fa Xing Zi [2007] No. 447”) issued by the and also approved by the Shanghai Stock Exchange, China Shipping Container Lines Company Limited (hereinafter referred to as the “ Company ”) publicly issued 233,662,500 ordinary shares (A Shares) in RMB to public investors, and all proceeds therefrom were received on 10 December 2007. There has been more than five accounting years from such date of receipt.

According to relevant requirements set out by the CSRC in the Regulation of Reports on the Utilisation of Proceeds from Previous Fund Raising (《關於前次募集資金使用情況報告的規定》) (Zheng Jian Fa Xing Zi [2007] No. 500): “For companies which have applied to issue securities and if the period between the date of receipt of proceeds from the previous fund raising exercise is less than five accounting years, the board of directors shall prepare relevant report on the utilisation of proceeds from previous fund raising in accordance with these requirements, and provide details on the last utilisation of proceeds (whether onshore or offshore) from closing date of the last audited financial statements on the issuer’s application documents, then the board of directors shall resolve on the report on the utilisation of proceeds from previous fund raising and shall be submitted to the shareholders’ meetings for the approval of such report”.

Since its initial public offering and listing in 2007, the Company has not launched any fund-raising exercise by way of placement of shares or issuance of new shares or convertible corporate bonds for the last five accounting years.

In view of the above, the Company is not required to prepare a report on the utilisation of proceeds from previous fund raising for its non-public issuance of A Shares, nor is required to engage a certified public accountant to issue an assurance report on the utilisation of proceeds from the previous fund raising exercise.

China Shipping Container Lines Company Limited

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REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX IV

This English translation is for reference only. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

China Shipping Container Lines Company Limited REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

The board of directors of the China Shipping Container Lines Company Limited hereby confirms that the information in this announcement does not contain any false representations, misleading statements or material omissions, and the directors jointly and severally accept full responsibilities for the truthfulness, accuracy and completeness of the information contained herein.

The Non-public Issuance of A Shares (the “Non-public Issuance”) by China Shipping Container Lines Company Limited (the “Company” or “CSCL”) has been considered and approved by the directors at the ninth meeting of the fifth board of directors of the Company. In order to further implement the requirements of the Several Opinions of the State Council on Further Promotion of the Healthy Development of the Capital Markets (《國務院關於進一步促進資本市場健康發展的若干意見》) (Guo Fa [2014] No. 17) and the Opinions of the General Office of the State Council on Further Strengthening the Protection of Small and Medium Investors’ Legitimate Interests in the Capital Markets (《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》) (Guo Ban Fa [2013] No. 110), and in accordance to the Guiding Opinions on Matters Relating to the Dilution of Current Returns As a Result of the Initial Public Offering, Refinancing and Major Asset Restructuring (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) (CSRC Announcement [2015] No. 31), the Company has conducted a thorough analysis on the impact of the Non-public Issuance on the dilution of current returns, after which an announcement regarding the impact of dilution of current returns on the main financial indicators of the Company and the remedial measures taken by the Company was published, with details set forth as follows:

I. REGARDING THE IMPACT OF DILUTION OF CURRENT RETURNS ON THE MAIN FINANCIAL INDICATORS OF THE COMPANY AS A RESULT OF THE NON-PUBLIC ISSUANCE

The Company intends to raise up to RMB12 billion through the Non-public Issuance of up to 3,278,688,524 shares. The Company has conducted a thorough analysis of the impact of the Non-public Issuance on the main financial indicators of the Company for the corresponding year, with details set forth as follows:

(I) Assumptions for the analysis

The analysis is based on the following assumptions:

That the Non-public Issuance shall not be completed by the end of November 2016 and 3,278,688,524 shares shall be issued under the Non-public Issuance. Such assumption is used to calculate the impact of the Non-public Issuance on the

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APPENDIX IV

earnings per share of the Company, and is not indicative of the judgment of the Company on the actual time of completion of the Non-public Issuance and the number of shares to be issued, which are subject to the final certification of China Securities Regulatory Commission (“ CSRC ”);

That there is no material adverse changes in the macro-economic environment and conditions of the stock market as well as the operating environment of the Company;
That the restated net profit attributable to the shareholders of the listed company net of non-recurring gains or losses for 2015, is RMB1,550.59 million. The net profit of the Company for 2016 will be calculated based on the following assumptions, which are not indicative of the judgment of the Company on its operating results and development for 2016 and does not constitute a profit forecast of the Company:

Scenario 1: assuming that the net profit attributable to the shareholders of the listed company net of non-recurring gains or losses for 2016, is 50% more than the restated net profit attributable to the shareholders of the listed company for 2015, net of non-recurring gains or losses;

Scenario 2: assuming that the net profit attributable to the shareholders of the listed company net of non-recurring gains or losses for 2016, is nil;

Scenario 3: assuming that the net profit attributable to the shareholders of the listed company net of non-recurring gains or losses for 2016, is RMB100 million;

Without taking into account the impact of the proceeds from the Non-public Issuance on the production and operation as well as the financial conditions, such as operating income, financial costs and investment profits, of the Company;
That there has been no provident fund converted to share capital or stock distribution of dividends, which have an impact on the number of shares, in 2016.

(II) Impact on the main financial indicators of the Company

Based on the above assumptions, the impact of the Non-public Issuance on the main financial indicators of the Company is calculated as follows:

						2016	2016
						Prior to the	After the
Item					2015	issuance	issuance
					(restated)
Total	number	of	shares	(10,000)	1,168,312.50	1,168,312.50	1,496,181.35

– IV-2 –

REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX IV

		2016
		Prior to the	After the
Item	2015	issuance	issuance
	(restated)

Net profit attributable to the
shareholders of the listed company,
net of non-recurring gains or losses
(RMB10,000)	-155,058.94	-77,529.47	-77,529.47
Basic earnings per share, net of
non-recurring gains or losses
(RMB per share)	-0.133	-0.066	-0.065
Diluted earnings per share, net of
non-recurring gains or losses
(RMB per share)	-0.133	-0.066	-0.065

Scenario 2: assuming that the net profit attributable to the shareholders	Scenario 2: assuming that the net profit attributable to the shareholders	Scenario 2: assuming that the net profit attributable to the shareholders	Scenario 2: assuming that the net profit attributable to the shareholders	of the	listed
company for 2016, net of non-recurring	gains or losses,	is nil;
Net profit attributable to the
shareholders of the listed company,
net of non-recurring gains or losses
(RMB10,000)	-155,058.94		0.00		0.00
Basic earnings per share, net of
non-recurring gains or losses
(RMB per share)	-0.133		0.000		0.000
Diluted earnings per share, net of
non-recurring gains or losses
(RMB per share)	-0.133		0.000		0.000
Scenario 3: assuming that the net profit attributable to the shareholders				of the	listed
company for 2016, net of non-recurring	gains or losses,	is RMB100 million;
Net profit attributable to the
shareholders of the listed company,
net of non-recurring gains or losses
(RMB10,000)	-155,058.94	10,000.00		10,000.00
Basic earnings per share, net of
non-recurring gains or losses
(RMB per share)	-0.133		0.009		0.008
Diluted earnings per share, net of
non-recurring gains or losses
(RMB per share)	-0.133		0.009		0.008

– IV-3 –

APPENDIX IV

REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

Notes:

For the calculation of basic and diluted earnings per share, the Company has complied with the requirements on the Guiding Opinions on Matters Relating to the Dilution of Current Returns As a Result of Initial Public Offering, Refinancing and Major Asset Restructuring issued by CSRC, as well as the Regulations on the Preparation of Information Disclosure for Companies Offering Securities to the Public No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share.
Basic earnings per share = current net profit attributable to the holders of the ordinary shares of the Company/weighted average of the number of ordinary shares in issue; weighted average of the number of ordinary shares in issue = number of ordinary shares in issue at beginning of the period + number of new ordinary shares in issue in the period * period of issuance/reporting period – number of ordinary shares repurchased * period of repurchase/reporting period.

From the above table, we can conclude that there is a risk of dilution for the earnings per share of the Company for 2016 upon completion of the Non-public Issuance.

II. RISKS ASSOCIATED WITH THE DILUTION OF CURRENT RETURNS AS A RESULT OF THE NON-PUBLIC ISSUANCE

Upon completion of the Non-public Issuance, after the proceeds have been received, the Company’s total share capital will increase. Based on the above calculation, the Non-public Issuance may lead to a decrease in earnings per share for the corresponding year compared with that prior to the Issuance. In 2016, with the proceeds in place, there is a risk of short-term dilution of the current returns of the Company. Investors are hereby advised to make sensible decisions and be aware of the risks.

Meanwhile, the Company’s assumptions on the relevant financial data for 2016 are only for the purpose of calculating the relevant financial indicators, which are not indicative of the Company’s forecast on the operating results and development of the Company in 2016, nor does it constitute a profit forecast or commitment of the Company. Furthermore, the Issuance is subject to the approval of CSRC, and whether the approval will be granted as the time of issuance is still uncertain. Investors should not make investment decisions based on the above assumptions, and the Company shall not be held liable for any losses resulting from the investment decisions based on such assumptions.

III. EXPLANATION FOR THE NECESSITY AND RATIONALITY OF THE NONPUBLIC ISSUANCE BY THE BOARD OF DIRECTORS

(1) To meet the needs of business development, promote and implement the business strategy

The Company plans to rely on the shipping finance to exploit its advantages in the shipping logistics industry and integrate industrial chain resources, so as to build an industrial cluster with leasing, investment, insurance and banking at the core of the business and grow into a “one-stop” financial services group with market mechanism, differentiated advantages and international vision as well as industry with finance integration, financing with finance

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APPENDIX IV

integration and collaborative development of its various business areas. The proceeds from the Non-public Issuance will be used in the capital investment of COSCO Shipping Leasing Company Limited (“COSCO Shipping Leasing”) and Florens Assets Management Company Limited (“Florens”) for 2017-2019, which will help them capture the market opportunities, develop premium business and expedite the accomplishment of the Company’s strategic objectives.

(2) To supplement working capital, reduce financial costs, satisfy the Company’s day-to-day operational needs and optimize its capital structure

In recent years, with the rapid growth of the business scale and the major asset restructuring, the liabilities of the Company expanded accordingly. As of June 30, 2016, the Company’s consolidated liabilities amounted to RMB87.147 billion, representing a debt-toasset ratio of 86.03%. With the Company rolling out various types of leasing and financing business, its liabilities may continue to grow. Use of part of the proceeds from the Non-public Issuance to repay mature corporate bonds and supplement working capital will optimize the capital structure, reduce financial costs and improve the Company’s overall competitiveness.

IV. RELATIONSHIP BETWEEN THE INVESTMENT PROJECTS AND THE COMPANY’S EXISTING BUSINESS AND RESERVES ON THE COMPANY’S TALENT, TECHNOLOGY AND MARKET RESOURCES FOR THE INVESTMENT PROJECTS
(1) Relationship between the investment projects and the Company’s existing business

1. Replenishment of COSCO Shipping Leasing Projects

The Company intends to use the proceeds to increase the share capital of COSCO Shipping Leasing for developing its financial leasing business, especially by means of acquiring new leasing assets for investment and finance, and targeting the key areas including medical care, energy, education and innovation. The investment in COSCO Shipping Leasing’s projects will help to enhance the operating proficiency of COSCO Shipping Leasing, expand the scope of its leasing business and facilitate the effective implementation of the financial industry strategy of CSCL.

2. Replenishment of Florens Projects

The Company intends to use the proceeds to increase the share capital of Florens, for purchase of containers in 2017-2019. According to Florens’ plan, a total of 0.9836 million TEUs of containers will be purchased in 2017-2019 to replace the retired containers that are sold and those with finance leases expired. Through the investment projects, the number of Florens’ containers will be maintained and expanded and its competitive position will be further consolidated. At the same time, with the gradual

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APPENDIX IV

rebound of the container leasing industry and proceeds recovered from the returns on investment, the Company’s purchase of containers during the market downturn of the container leasing industry will help to enhance the Company’s return on capital.

3. Repayment of mature corporate bonds and supplement of working capital

The Company intends to use the proceeds to repay mature corporate bonds and replenish working capital, so as to improve the Company’s capital structure and liquidity indicators, reduce its liabilities and financial risks and enhance its capital strength and anti-risk capability, which will help the Company to reduce its financial expenses and lay a solid foundation for its future development.

(2) Fund raising investment projects in relation to the reserves on the human resources, technologies and market

1. Capital Increases in COSCO Shipping Leasing

(1) Human resources reserve

As of 30 August 2016, the total number of existing employees of COSCO Shipping Leasing was 112, of which the recruited middle to senior management and frontline staff with rich experience in the leasing industry accounted for 21% and 60% of the total recruitment respectively, and its core backbone team usually has 8 to 10 years of experience in the leasing industry. The reasonable structure of human resources reserve will provide effective support to COSCO Shipping Leasing’s exploration of business opportunities and performance of efficient management.

(2) Technical Reserve

With the expansion of operating scale and the improvement of management requirements, COSCO SHIPPING LEASING formally launched the leasing business management system (Phase I) in July 2015, which duly passed the formal inspection in April 2016. The construction mainly consisted of eight functions, including pre-leasing management, contract management, creditor’s rights and debts, fund management, asset management, working platform and statement centre. Currently, the steady maintenance and the normal operation of leasing business management system plays an important role in promoting the establishment and improvement of management process, communication mechanism and risk control system applicable to the market, collection of comprehensive business operational data and improvement of operational efficiency of the business process in COSCO Shipping Leasing.

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APPENDIX IV

Meanwhile, the leasing business management system (Phase II) was launched in May 2016 and the construction cycle was expected to be 10 months. The construction of the leasing business management system (Phase II) will continue to upgrade the operational platform of COSCO Shipping Leasing’s core business, including setting up the automation connectivity between financial system and fund system with the aim to improve operational efficiency; supporting the restructuring of business division, assets securitization and leasing target management to continue optimizing and completing the system process, financing management and leasing target management functions; and developing the mobile application functions of market management, major customer services and expense management.

In particularly, “Hui Yi Zu” (惠醫租), which is specifically provided to small and medium medical institutions in the construction of the leasing business management system (Phase II), will be explored and developed for the usages of customers in order to facilitate the quick application, approval or lending on small leasing projects, and build the service platform for customers, who may estimate the quoted prices of projects and submit the leasing application by themselves, once completed the registration in the system through internet application for customers. Relevant business personnel subsequently will complete data importing and submit them for approval and generation of standard contracts automatically. The progress of projects can be inquired and available through the system.

As to the construction of hardware and software infrastructure, COSCO shipping leasing has finished the construction of basic office system, including its website, email system, file system, remote video/telephone conference system, network monitoring and checking work attendance, and has formed an integrated information security management mechanism consisting of network firewall, tamper-proofing, virus killing, data backup and others.

(3) Market reserve

COSCO Shipping Leasing invested approximately RMB6.779 billion in financing lease between January to August 2016, with healthcare, energy, education, innovation and others sections accounting for 20%, 38%, 24% and 18% of the total investments respectively; and it has also invested 57 contracted healthcare projects, 15 contracted energy projects, 21 contracted education projects and 18 contracted projects relating to innovation and other sectors. Furthermore, as at the end of August 2016, the amount of capital required by the projects which have been approved internally by COSCO SHIPPING LEASING and have not been invested was approximately RMB3.5 billion, of which healthcare, energy, education, innovation and other sectors accounting for 5%, 34%, 40% and 21% of the total investments respectively.

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APPENDIX IV

2. Capital Increases in Florens

(1) Human resources reserve

As a company dedicated to the container leasing industry for years, Florens attached high importance to human resources reserve by recruiting and training a large number of comprehensive talents with rich management experience, and built a professional management team with high quality. The staff team of the company consisted of professional talents in various professional fields, such as professional accountants, professional management staff, professional lawyers and professional legal advisors.

(2) Technical reserve

Florens has been actively participating in promoting and optimizing the inspection and maintenance standards in the industry. It established the CIC inspection standards together with certain famous container leasing companies in the industry, such as Triton and Seaco, with an aim to effectively decrease the maintenance costs while keeping the of containers in good condition. Most of the operations have achieved the comprehensive automation and thus significantly improved the working efficiency and service quality. For example, the fully automatic billing management system of depots and the online inventory data management system further improved the management cost efficiency.

(3) Market reserve

Florens has thoroughly implemented a major client policy by establishing business relationship with the top 20 liner operators of the world and continued to develop relationship with regional high-quality customers. As at the end of June 2016, the number of leasing customers of the company has reached nearly 300.

3. Repayment of Maturing Corporate Bonds and Supplement of Liquidity

One of the above-mentioned raised fund investment projects through Non-public Issuance is for the purposes of repayment of maturing corporate bonds and supplement of liquidity without involving reserves relating to human resources, technologies and market.

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APPENDIX IV

V. REMEDIAL MEASURES TAKEN BY THE COMPANY ON THE IMPACT OF DILUTION OF CURRENT RETURNS AS A RESULT OF THE ISSUANCE
(I) Special Risk associated with the Dilution of Current Returns as a Result of the Issuance

Upon the funds raised from the Issuance are in place, the share capital and net assets of the Company will increase. Since the construction of investment projects financed by the proceeds raised will take some time, return to shareholders during the construction period can still be achieved mainly through our existing businesses. As a result, the enlarged share capital and net assets may lead to dilution in earnings per share and return on net assets of the Company in the short term, therefore the abovementioned indicators are exposed to risk of decrease in the short term. The Company reminds investors to make rational investment and pay attention to the risk of dilution of the current returns after the Issuance.

(II) Specific Measures to Compensate the Dilution on Current Returns as a Result of the Issuance

To reduce the impact of dilution of current returns as a result of the Non-public Issuance and increase returns earned for the benefits of the shareholders of the Company, the Company intends to compensate the dilution on current returns through the following measures:

Strengthen the supervision of investment projects financed by the proceeds raised to ensure the efficient use of funds raised from the Issuance.

In order to regulate the management and use of proceeds raised by the Company to ensure that the proceeds are used for investment projects financed by such proceeds only, the Company has complied with the requirements of the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China and the Listing Rules of the Shanghai Stock Exchange (2014 revision) and other laws and regulations and regulatory documents, and taken into account the actual situation of the Company to formulate and improve the Administrative Measures for Proceeds Raised, pursuant to which the Company will take strict administrative measures for the use of proceeds and place the proceeds in a special account for specific designated purpose only, so as to ensure that the proceeds are used sufficiently and efficiently for intended use. The Company will strive to improve the utilization efficiency of the proceeds, perfect and enhance the investment decision process, formulate more reasonable plan for the use of proceeds, make reasonable use of various financing tools and channels, control finance cost, enhance the utilization rate of proceeds, reduce various expenses and costs of the Company and comprehensively and effectively manage the operation and control relevant risks, so as to improve operational efficiency.

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APPENDIX IV

REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

Accelerate the construction progress of investment projects financed by the proceeds raised to realise the expected return as soon as possible.

The proceeds raised from the Non-Public Issuance will mainly be used to increase investment in COSCO Shipping Leasing project and Florens project, repay corporate bonds falling due and replenish working capital. After receiving the proceeds, the Company will speed up the construction and operation of investment projects financed by the proceeds raised, actively allocate resources, arrange the progress of the projects in a reasonable and comprehensive manner, strive to realise the expected benefits from the projects as soon as possible, expand the returns of the shareholders in subsequent years, and mitigate the risk of dilution of current returns as a result of the Issuance.

Promote the implementation of the development strategies to comprehensively enhance the overall competitiveness of the Company.

After strategic transformation, the Company will rely on the shipping financing to take advantage on the strengths in the shipping and logistics industry and to integrate the industrial chain resources. The Company will build an industrial cluster with leasing, investment, insurance and banking as the core, and will establish a “one-stop” financial services group that combines shipping with finance and combines financing with finance which can coordinate the development among various operations based on marketisation mechanism, differentiated competitive advantages and international perspective. The Company will strive to integrate its quality resources for being a shipping financial platform, give full effect to the industrial advantages of the Group, collaboratively develop a variety of financial operations to become China’s leading and the world’s first-class integrated financial services group with a distinct shipping logistic features, so as to comprehensively enhance the overall competitiveness of the Company.

Stringently implement cash dividend distribution policy and optimise investment return mechanism.

According to the requirements of the Notice Regarding Further Implementation of Cash Dividends Distribution by Listed Companies and the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies issued by the CSRC, the Company further improved and refined the profit distribution policy. By fully taking into account of the investment on the return for the shareholders and for the growth and development of the Company, the Company formulated the Plan for Shareholders’ Return Plan for the Next Three Years (2016-2018) of China Shipping Container Lines Co., Ltd., and revised the profit distribution policy set out in the Articles of Association accordingly. The formulation and perfection of the aforesaid system further clarifies the decisionmaking procedures and mechanism of dividend distribution and the specific proportion of bonus shares to be issued of the Company, which will effectively guarantee the reasonable investment return of all shareholders. In the future, the Company will continue to strictly implement its dividend policy and optimise the investment return mechanism to ensure that the interests of its shareholders, especially the minority shareholders, can be protected.

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REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

APPENDIX IV

VI. COMMITMENT TO ENSURE THE IMPLEMENTATION OF THIS NON-PUBLIC ISSUANCE OF SHARES OF THE COMPANY TO COVER THE DILUTION ON CURRENT RETURNS

To ensure the implementation of this Non-public Issuance of A Shares of the Company and to cover the dilution of current returns and protect the legitimate interests of the Company and all its shareholders, each of the directors, senior management of the Company, China Shipping and COSCO shipping Group have issued their respective Letters of Undertaking Regarding Effective Implementation of Measures aiming at Remedying Diluted Current returns Through the Non-public Issuance of Shares of China Shipping Container Lines Company Limited in accordance with the requirements of the applicable laws, regulations and regulatory documents including the Several Opinions of the State Council on Further Promoting the Healthy Development of the Capital Markets (Guo Fa [2014] No. 17) and the Opinions of the General Office of the State Council on Further Strengthening the Protection of Small and Medium Investors’ Legitimate Interests in the Capital Markets (Guo Ban Fa [2013] No. 110) and the Guiding Opinions on Matters Relating to the Dilution of Current Returns As a Result of Initial Public Offering, Refinancing and Major Asset Restructuring CSRC Announcement [2015] No. 31). Details of such undertakings are set out as follows:

(I) Undertakings by the Directors and senior management of the Company

According to the Letter of Undertakings Regarding Directors and Senior Management’s Commitment to Ensure the Implementation of the Non-public Issuance of Shares by China Shipping Container Lines Company Limited to Cover the Dilution of Current Returns issued by the Directors and senior management of the Company, the Directors and senior management of the Company have made the following undertakings:

I hereby undertake not to transfer benefits to other entities or individuals with no consideration or under unfair terms, and shall not damage the Company’s interests in any other ways.
I hereby undertake to constrain the consumption behaviour in relation to my work duty.
I hereby undertake not to use the Company’s assets for investments or consumption activities that are unrelated to the engagement and performance of my work duties.
I hereby undertake that the remuneration system formulated by the board of directors or the remuneration committee will be linked with the implementation of the Company’s remedial measures in relation to the returns of the Company.
I hereby undertake that the vesting conditions for the proposed share incentive scheme (if any) of the Company will be linked with the implementation of the Company’s remedial measures in relation to returns of the Company.

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APPENDIX IV

REMEDIAL MEASURES REGARDING DILUTION ON CURRENT RETURNS AND THE IMPACT ON THE COMPANY’S MAJOR FINANCIAL INDICATORS BY THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

From the date of making these undertakings until completion of the Proposed Non-public Issuance of A Shares, I undertake to make supplemental undertakings in accordance with the latest regulations imposed by the China Securities Regulatory Commission, which renders the aforementioned undertakings inadequate to satisfy such regulatory requirements.
I hereby undertake to perform these undertakings. If I violate these undertakings and cause losses to the Company or the investors, I shall be liable to indemnify the Company or the investors for their losses in accordance with the law.

(II) Undertakings by China Shipping

As the controlling shareholder of CSCL, China Shipping has issued the Letter of Undertakings Regarding China Shipping Container Lines Company Limited’s Commitment to Ensure the Implementation of the Non-public Issuance of Shares by China Shipping Container Lines Company Limited to Cover the Dilution of Current Returns and has made the following undertakings:

(III) Undertakings by COSCO SHIPPING Group

As the sole shareholder of China Shipping (Group) Company, being the controlling shareholder of CSCL, China Shipping has issued the Letter of Undertakings Regarding China COSCO Shipping Corporation Limited’s Commitment to Ensure the Implementation of the Non-public Issuance of Shares by China Shipping Container Lines Company Limited to Cover the Dilution of Current Returns and has made the following undertakings:

China Shipping Container Lines Company Limited

– IV-12 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

The full text of the English translation of the Proposed Amendments to the Articles of Association is set out below.

Existing Articles Chapter VIII General meeting

To be amended as Chapter VIII General meeting

Article 8.23 Resolutions made at general meetings are divided into ordinary resolutions and special resolutions.

An ordinary resolution of a general meeting shall be passed by more than half of the shareholders (including proxy(ies)) with voting rights attending the general meeting.

A special resolution of a general meeting shall be passed by more than two thirds of the shareholders (including proxy(ies)) with voting rights attending the general meeting.

An ordinary resolution of a general meeting shall be passed by more than half of the shareholders (including proxy(ies)) with voting rights attending the general meeting. A special resolution of a general meeting shall be passed by more than two thirds of the shareholders (including proxy(ies)) with voting rights attending the general meeting.

The attending shareholders (including proxies) shall vote for or against every matter to be voted on. Abstentions will not be counted when the Company calculates the poll results concerning the particular matter.

The attending shareholders (including proxies) shall vote for or against every matter to be voted on, unless securities registration and settlement institutions, as the proxies of Shares traded through Shanghai-Hong Kong Stock Connect, make declarations according to the intention of actual holders. Abstentions will not be counted when the Company calculates the poll results concerning the particular matter.

Existing Articles Chapter XVI Accounting regulation and profit distribution

To be amended as Chapter XVI Accounting regulation and profit distribution

– V-1 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

Article 16.15 The profit distribution policy of the Company is specified as follows:

(I) Profit shall be distributed in the following manner: the Company may distribute dividends in cash, in shares or in a combination of both. The Company may distribute an interim profit if practicable.
(II) Specific circumstances and proportions of cash dividend of the Company are as follows:
If the Company makes profit and its total accumulated undistributed profit are positive with adequate liquidity in the current year, the Company may distribute dividend in cash provided that it shall not undermine the subsequent ongoing operation of the Company. In addition, the profit to be distributed in cash each year shall not be less than 10% of the distributable profit realized in that year.
(III) Conditions for distributing dividends in shares by the Company are as follows:

To be amended as

Article 16.15 The profit distribution policy of the Company is specified as follows:

(I) Profit shall be distributed in the following manner:

(II) Specific circumstances and proportions of cash dividend of the Company are as follows:

The following conditions shall be met in distributing cash dividends by the Company:

If the Company makes profit and the distributable profit realized in the year concerned (i.e. after-tax profits of the Company net of loss recovery and allocation of its profits to the statutory reserve) are positive (according to the financial statements of the parent company) with adequate liquidity, the Company may distribute dividend in cash provided that it shall not undermine the subsequent ongoing operation of the Company.
External auditors had issued a standard unqualified audit report for the financial statements of the Company for that year.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

To be amended as

The capital needs for the Company’s normal operation are satisfied and there is no such event as significant cash expenditure, excluding projects funded by raised proceeds. Such significant cash expenditure refers to the proposed external investment, asset acquisition, repayment of debts or acquisition of equipment by the Company with accumulated expenditure within the following 12 months amounting to or exceeding 30% of the latest audited net assets of the Company.

The Company shall comply with the proportions set out as follows when proceeding with distributing cash dividends:

Pursuant to the provisions of the Company Law of the People’s Republic of China and relevant laws and regulations, as well as the Articles of Association, provided that the conditions for cash dividend distribution are satisfied and are in consistent with the normal operation and sustainable development of the Company, dividends distributed in the form of cash to be made for each of the coming three years shall not be less than 10% of the distributable profit realized for that year, on condition that no imminent cash outlays are expected.Also, the accumulated cash distribution of profit for the three years shall not be less than 30% of the average annual distributable profit of the Company for the same period. The specific distribution proportion for each year shall be determined by the Board of the Company based on the Company’s operating conditions and relevant rules of the CSRC and submitted to the general meeting for consideration and approval.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

To be amended as

Where the Company is in a developed stage with no substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 80% of the total profit distribution;
Where the Company is in a developed stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 40% of the total profit distribution;
Where the Company is in a developing stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 20% of the total profit distribution;

– V-4 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

To be amended as

(III) Conditions for distributing dividends in shares by the Company are as follows:

Where the Company’s business is in a sound condition, and the Board considers that the share price of the Company does not reflect its share capital size and distributing dividend in the form of shares is in the entire interest of all the shareholders of the Company, the Company may adopt dividend distribution in the form of shares provided that the above conditions for cash dividend are fully satisfied. Should the Company distribute dividends in shares, it should be made on the premise of maintaining reasonable cash dividend returns and appropriate capital size and take into account the growth of the Company and dilution in net assets per share.

– V-5 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

Article 16.16 Procedures for reviewing the profit distribution plan of the Company are as follows:

(I) The Company shall have various channels to consult its minority shareholders and independent directors for their expectation of distribution. The Company’s profit distribution plan shall be drafted by the management of the Company with reference to investors’ opinions, and shall then be submitted to the Board and the supervisory committee of the Company for consideration. The Board shall thoroughly discuss the profit distribution plan, record in detail the contents of the recommendations of the management, key points of the speeches of the Directors present at the meeting, opinions of independent directors, voting results of the Board, etc. and form written minutes to be properly kept as the Company’s records. The Board shall thoroughly discuss the rationality of the profit distribution plan and form a specific resolution and submit it to the general meeting for consideration.
(II) If the Board receives a distribution plan from other shareholders that satisfies relevant conditions, the Board shall ask the relevant shareholders for the specific reasons and background of such plan, and publish an announcement setting out the contents and reasons of the plan in accordance with the “Rules of Procedures for General Meeting” of the Company and submit it to the general meeting for consideration.

To be amended as

Article 16.16 Procedures for reviewing the profit distribution plan of the Company and related information disclosure are as follows:

(I) Procedures for consideration of the profit distribution plan of the Company:
The Company’s profit distribution plan shall be drafted by the management of the Company with reference to investors’ opinions, and shall then be submitted to the Board and the supervisory committee of the Company for consideration and independent directors shall express their opinions. The Board shall thoroughly discuss the profit distribution plan, keep detailed records of the contents of the recommendations of the management, key points of the speeches of the Directors present at the meeting, voting results of the Board, etc. and prepare written minutes to be properly kept as the Company’s records. The Board shall thoroughly discuss the rationality of the profit distribution plan and prepare a specific resolution and submit it to the general meeting for consideration.
If the Board receives a distribution plan from other shareholders that satisfies relevant conditions, the Board shall ask the relevant shareholders for the specific reasons and background of such plan, and publish an announcement setting out the contents and reasons of the plan in accordance with the “Rules of Procedures for General Meeting” of the Company and submit it to the general meeting for consideration.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

(III) After the end of an accounting year, when the Board meeting does not propose any plan for profit distribution in cash in spite of making profit in that accounting year, it shall explain matters such as the specific reasons for not proposing any profit distribution in cash and the actual usage of the profit retained by it for the independent directors to issue their opinions on such issues, and then submit the same at the general meeting for approval in accordance with the relevant laws, regulations and regulatory policies.

To be amended as

Independent directors may solicit opinions from minority shareholders, put forth profit distribution plan and submit it directly to the Board for consideration and approval.
Before the cash dividend distribution plan is considered at the shareholders’ general meeting, different channels should be used to proactively communicate and interact with shareholders, in particular, the medium and small shareholders, and the Company shall fully listen to the opinions and demands of minority shareholders and timely answer the questions raised by minority shareholders.
After the end of an accounting year, when the Board meeting does not propose any plan for profit distribution in cash in spite of making profit in that accounting year, it shall explain matters such as the specific reasons for not proposing any profit distribution in cash and the actual usage of the profit retained by it for the independent directors to issue their opinions on such issues, and then submit the same at the general meeting for approval in accordance with the relevant laws, regulations and regulatory policies.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

To be amended as

(II) Information disclosures regarding profit distribution plan of the Company:
The Company shall disclose in details in its periodic report the formulation and implementation of the profit distribution policy, especially cash dividend policy, and state whether the policy is in compliance with the requirements of the Articles of Association or the resolutions passed at the general meeting; whether the basis and ratio of the distribution of dividends are clear; whether the relevant decision-making procedures and systems are sound; whether the independent directors have duly performed their duties; whether there are enough channels for medium and small shareholders to express their views and concerns, and whether their legal interests are sufficiently protected, etc.
In the event of any adjustment or alteration to the cash dividend policy, the Company shall fully describe whether the conditions and procedures for such adjustment or alteration are compliant and transparent.
Where no cash dividends distribution plan are proposed by the Board of the Company for the year when profits are recorded, the Board shall explain in details the reasons for not distributing cash dividends, the exact usage of and application plan for the retained profits in the periodic report, and the independent directors shall express their opinions thereon.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX V

Existing Articles

To be amended as

Where there is a change in the control of the Company resulting from securities issuance, material asset restructuring, merger and division or acquisition, the Company shall disclose in details the cash dividend policy and relevant arrangements after the offering or issuance, restructuring or change in control, as well as the Board’s explanation of the aforesaid in the prospectus, offering proposal, report of material asset restructuring, report of changes in equity or report of acquisition.

– V-9 –

SHAREHOLDERS’ RETURN PLAN

APPENDIX VI

This English translation is for reference only. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

CHINA SHIPPING CONTAINER LINES COMPANY LIMITED SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (2016-2018)

To further enhance the transparency of the profit distribution policy of China Shipping Container Lines Company Limited (hereinafter referred to as the “ Company ”), improve the decision-making and supervision mechanism for profit distribution of the Company, ensure the continuity and stability of profit distribution, provide investors with reasonable return on investment, effectively protect the legal rights and interests of minority shareholders and guide investors to establish long-term and rational investment philosophy, the Shareholders’ Return Plan for the Coming Three Years (2016-2018) of China Shipping Container Lines Company Limited (hereinafter referred to as the “ Plan ”) has been formulated by the Company pursuant to the Notice Regarding Further Implementation of Cash Dividends Distribution by Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) (Zheng Jian Fa [2012] No. 37), the Guidelines on Cash Dividends Distribution by Listed Companies of the Shanghai Stock Exchange (《上海證券交易所上市公司現金分紅指引》), the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution by Listed Companies (《上市公司監管指引第3 號- 上市公司現金分紅》) (CSRC Announcement [2013] No. 43) issued by China Securities Regulatory Commission (“ CSRC ”) and other regulations, as well as the provisions of the articles of association of China Shipping Container Lines Company Limited (hereinafter referred to as the “Articles of Association”), taking into account the Company’s profitability, business development plan, return to shareholders, social capital costs and external financing environment. The details of the Plan are as follows:

I. CONSIDERATIONS IN THE FORMULATION OF THE PLAN

The Company is focusing on the long-term and sustainable corporate development. When formulating the Plan, the Company comprehensively analyzed the factors such as actual operation and development conditions, development strategy, profitability, social capital cost and external financing environment, and fully considered the industry features, current development stage, business model, profitability, cash flow, project investment funding needs, bank credit and debt financing environment and other conditions. Under the premise of guaranteeing the reasonable share capital size and shareholding structure, after taking into consideration of the short-term and long-term interests of the shareholders, the Company has made the systematic arrangements for profit distribution, and has established a sustainable, stable and scientific return plan and mechanism for the investors, in order to ensure the continuity and stability of the Company’s profit distribution policy while taking into account the interests of the shareholders as a whole and the long-term interests of the Company as well as the sustainable development of the Company.

– VI-1 –

SHAREHOLDERS’ RETURN PLAN

APPENDIX VI

II. PRINCIPLES FOR THE FORMULATION OF THE PLAN

The Company shall actively implement continuous and stable profit distribution policy by taking into account the reasonable return on investment to investors and the long-term development of the Company. In the coming three years (2016-2018), the Company will adhere to the principle of cash based dividend distribution. The Plan has been formulated in line with the provisions on profit distribution under the relevant laws and regulations and in the Articles of Association while maintaining the continuity and stability of the profit distribution policy.

III. DETAILED PLAN FOR SHAREHOLDERS’ RETURN FOR THE COMING THREE YEARS (2016-2018) OF THE COMPANY

(I) Methods of profit distribution

The Company may distribute profits in cash, in shares or in a combination of both cash and shares or as otherwise permitted by the laws and regulations. The Company shall give priority to the profit distribution method of cash dividends. In line with the principle and conditions of profit distribution, the Company shall in principle make profit distribution once a year. The board of directors of the Company may propose the Company to make interim profits distribution based on the Company’s profitability and capital demand.

(II) Specific conditions and proportion of cash dividend distribution

When implementing cash dividend distribution, the Company shall, at the same time, meet the following conditions:

The Company records positive gain and realizes positive distributable profit (i.e. the remaining sum of after-tax profit after taking into account the net operating loss and deducting proceeds on provident funds) (on parent company statements basis) in the year, has abundant cash flow, and the implementation of cash dividend will not affect the Company’s continuing operations.
The auditor issued the standard unqualified audit report on the Company’s financial report of the year.
The cash dividend shall not affect the Company’s capital needs for normal operation, and there are no significant cash expenditures and other similar matters (other than fund raising pursuant to the fund raising projects).

Significant cash expenditures refers to the Company’s total accumulated expenditures used for proposed external investment, assets acquisition, debts repayment or equipment purchase in the within the next twelve months amounts to or exceeds 30% of latest audited net assets of the Company.

– VI-2 –

SHAREHOLDERS’ RETURN PLAN

APPENDIX VI

The proportions of the Company’s implementation of cash dividend are as follows:

Pursuant to the relevant laws and regulations such as the Company Law of the People’s Republic of China (《中華人民共和國公司法》) and the Articles of Association, where the conditions for cash dividend distribution are met, coupled with the normal operations and sustainable development of the Company, and there is no significant cash expenditure, the Company’s profit for distribution in cash in each of the next three years shall not be less than 10% of the distributable profit realized in the year, and the accumulated profit distribution in cash shall not be less than 30% of the annual distributable profits realized in such three years. The actual proportion of distribution for each year shall be proposed by the board of directors based on the operating conditions of the Company and the relevant provisions of the CSRC, and shall be submitted to the shareholders’ general meeting for approval.

The board of directors shall take various factors into consideration, including the Company’s industry features, development stages, business model and profitability as well as whether the Company has any substantial capital expenditure arrangements, in differentiating the following circumstances and propose a differentiated policy for cash dividend distribution pursuant to the procedures stipulated in the Articles of Association:

Where the Company is in a developed stage with no substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 80% of the total profit distribution;
Where the Company is in a developed stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 40% of the total profit distribution;
Where the Company is in a developing stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 20% of the total profit distribution.

(III) Specific conditions for distributing share dividends

If the Company is operating in good conditions, and the board of directors considers that the share price of the Company does not match with the capital size of the Company and issuing stock dividends is in the interest of the shareholders as a whole, the Company may distribute profit by stock dividends if the above conditions for cash dividends are satisfied. When the Company distributes profits by means of stock dividends, the Company should provide shareholders with reasonable cash dividend and maintain proper scale of capital stock, while comprehensively consider the factors such as growth of the Company and dilution of net assets per share.

– VI-3 –

SHAREHOLDERS’ RETURN PLAN

APPENDIX VI

IV. PROCEDURES AND MECHANISM FOR DECISION MAKING ON PROFIT DISTRIBUTION

(I) The Company’s profit distribution proposal shall be formulated by the management of the Company with reference to views of investors, after the plan has been formulated, it shall then be submitted to the board of directors and the supervisory committee of the Company for consideration, in respect of which the independent directors shall give their clear opinions. The board of directors shall thoroughly discuss the profit distribution proposal, record in detail the contents of the recommendations of the management, key points of the speeches of the directors present at the meeting, results of votes and keep written minutes to be properly recorded as the Company’s records. The board of directors shall thoroughly discuss the rationality of the profit distribution proposal and form a specific resolution and submit it to the general meeting for consideration.
(II) If the board of directors receives a distribution proposal from other shareholders that satisfies relevant conditions, the board of directors shall ask the relevant shareholders for the specific reasons and background of such proposal, and publish an announcement setting out the contents and reasons of the proposal in accordance with the “Rules on the Procedures for General Meeting” of the Company and submit it to the general meeting for consideration.
(III) Independent directors may solicit opinion of minority shareholders, put forward profit distribution proposal and submit it directly to the board of directors for consideration.
(IV) Before the specific cash dividend distribution proposal is considered at the general meeting, the Company shall actively communicate and exchange ideas through multiple channels with shareholders, and minority shareholders in particular, fully listen to the opinions and demands of minority shareholders and timely reply to issues that concern minority shareholders.
(V) After the end of an accounting year, if the board of directors does not propose any plan for profit distribution in cash in spite of making profit in that accounting year, it shall explain matters such as the specific reasons for not proposing any profit distribution in cash and the actual usage of the profit retained by the Company, in respect of which the independent directors shall give their opinions, and then submit the same at the general meeting for approval in accordance with the relevant laws, regulations and regulatory policies.

– VI-4 –

SHAREHOLDERS’ RETURN PLAN

APPENDIX VI

V. PERIOD FOR FORMULATING THE PLAN AND RELEVANT ADJUSTMENT MECHANISM

The Company shall review the Shareholders’ Return Plan for the coming three years of the Company at least every three years. The Company shall evaluate and make necessary amendments to the prevailing profit distribution policy and determine the shareholders’ return plan of the Company for such period, after considering opinions of the shareholders (minority shareholders in particular), independent directors and supervisors. The board of directors shall submit a proposal for approval at the general meeting on the Shareholders’ Return Plan for the coming three years of the Company, in respect of which the independent directors shall give their independent opinions for consideration at the general meeting. The proposal shall be approved by more than two-thirds of the voting rights held by the shareholders present at such general meeting.

VI. INFORMATION DISCLOSURE ON THE PROFIT DISTRIBUTION OF THE COMPANY

(I) The Company shall disclose in detail in its regular reports the formulation and implementation of the profit distribution policy (especially cash dividend distribution policy), the compliance with relevant provisions of the Articles of Association or resolutions at the general meeting(s), the accuracy and clarity of the standard and proportion of profit distribution, the completeness of relevant decision-making procedures and mechanisms, the fulfillment of obligations and contributions of the independent directors, whether or not the medium and small shareholders have the chance to voice their opinions and demands and whether or not the legal rights of the medium and small shareholders have been fully protected.
(II) For any adjustment or change to cash dividend distribution policy, it is also required to explain in detail whether the conditions and procedures for such adjustment or change are compliant and transparent.
(III) If the board of directors of the Company does not propose any plan for profit distribution in cash in spite of a profit-making year, it shall explain in detail in its regular reports matters such as the reasons for not proposing any profit distribution in cash and the purpose and the plan for usage of the profit retained by the Company, in respect of which the independent directors shall give their independent opinions.
(IV) Where there is a change in the Company’s control, resulting from securities issuance, material asset restructuring, merger, division or acquisition, the Company shall disclose in details the cash dividend policy and relevant arrangements after such offering, issuance, restructuring or change in the control, as well as the board of directors’ explanation on the aforesaid in the prospectus, offering proposal, material asset restructuring report, report of change in equity or acquisition report.

– VI-5 –

SHAREHOLDERS’ RETURN PLAN

APPENDIX VI

VII. SUPPLEMENTARY PROVISIONS

Any matters not covered herein shall be handled in accordance with the requirements of relevant laws and regulations as well as normative documents and the Articles of Association. The board of directors is responsible for the interpretation of the Plan which will be effective from the date of approval at the shareholders’ general meeting of the Company. The same shall apply for amendments of the Plan.

China Shipping Container Lines Company Limited Board of Directors

– VI-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

1. SUMMARY OF THE FINANCIAL INFORMATION

The following is a summary of:

(i) the audited financial results and assets and liabilities of the Group for each of the three financial years ended 31 December 2013, 2014 and 2015 prepared in accordance with the HKFRS, extracted from the annual reports of the Company for the relevant financial years;
(ii) the unaudited financial results and assets and liabilities of the Group for the six months ended 30 June 2016 prepared in accordance with the HKFRS, extracted from the interim report of the Company for the six months ended 30 June 2016; and
(iii) the unaudited financial results and assets and liabilities of the Group for the nine months ended 30 September 2016 prepared in accordance with the PRC GAAP, extracted from the third quarterly report of the Company for the nine months ended 30 September 2016.

As a result of the different accounting policy adopted for the unaudited financial results and assets and liabilities of the Group for the nine months ended 30 September 2016, the summary of which is presented separately below.

Ernst & Young, the auditors of the Company, did not issue any qualified opinion on the financial statements of the Group for each of the three financial years ended 31 December 2013, 2014 and 2015.

Save for the following, the Group had no items which are exceptional or extraordinary because of size, nature or incidence for each of the three financial years ended 31 December 2013, 2014 and 2015 and the six months ended 30 June 2016:

On 11 December 2015, the Company announced that a notification was received from China Shipping, the former ultimate holding company and current immediate holding company of the Company, that the SASAC has granted its approval in principle of the restructuring of China Shipping and its subsidiaries (the “ CS Group ”) and China Ocean Shipping (Group) Company and its subsidiaries (the “ COSCO Group ”) in relation to their businesses in container shipping, vessel leasing, oil shipping, bulk shipping and the financial sectors (the “ Restructuring ”). As part of the Restructuring, the Company and its relevant subsidiaries entered into a series of agreements with China Shipping, China Ocean Shipping (Group) Company and their relevant subsidiaries (the “ Counterparties ”) on 11 December 2015, whereby the Company and its relevant subsidiaries have agreed to acquire equity interests in certain companies’ operating container leasing businesses, shipping-related financial service business and other financial business from the Counterparties; and to sell equity interests in certain of its subsidiaries and associates operating port business and container shipping agency business to the Counterparties;
On 3 January 2014, the Company and China Shipping Logistics Co., Ltd. (“ CS Logistics ”) entered into an equity transfer agreement, pursuant to which, the Company agreed to dispose the entire 100% equity interests in Shanghai China Shipping International Container Storage and Transportation Co., Ltd. to CS Logistics;

– VII-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

On 3 January 2014, the Company and China Shipping Investment Co., Ltd. (“ CS Investment ”) entered into an equity transfer agreement, pursuant to which, the Company agreed to dispose the entire 100% equity interests in Shanghai Zhengjin Industrials Co., Ltd. to CS Investment; and
On 11 October 2013, the Company, China Shipping Terminal Development (H.K.) Co., Ltd. (“ CSTD HK ”) and China Shipping (HK) Holdings Co., Ltd. entered into a share purchase agreement, pursuant to which the Company agreed to sell its 100% equity interest in China Shipping Terminal Development Co., Ltd. to CSTD HK.

The amounts absorbed by dividends and dividends per Share for the three financial years ended 31 December 2015 and for the nine months ended 30 September 2016 are nil.

Consolidated Statement of Profit or Loss

For the year ended 31 December 2013, 2014 and 2015 and for the six months ended 30 June 2016.

CONTINUING OPERATIONS Revenue Costs of services/sales Gross (loss)/profit Selling, administrative and general expenses Other income Other (loss)/gains, net Operating (loss)/profit Finance costs Share of profits of: Associates Joint ventures (Loss)/profit before income tax from continuing operations Income tax expense (Loss)/profit for the year from continuing operations	For the six months ended 30 June 2016 RMB’000 8,375,935 (7,866,912) 509,743 (631,923) 73,225 130,251 81,306 (686,916) (135,784) 5,488 (735,906) (80,806) (816,712)	Year ended 31 December 2015 2014 2013 RMB’000 RMB’000 RMB’000 31,834,165 36,077,425 33,917,357 (32,788,268) (34,839,333) (36,004,215) (954,103) 1,238,092 (2,086,858) (1,951,930) (963,275) (916,383) 715,009 788,350 451,194 (297,378) 898,527 133,977 (2,488,402) 1,961,694 (2,418,070) (605,787) (468,294) (457,618) 193,185 77,915 41,760 3,841 6,209 5,541 (2,897,163) 1,577,524 (2,828,387) (41,972) (547,530) (36,290) (2,939,135) 1,029,994 (2,864,677)

– VII-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

DISCONTINUED OPERATION Profit for the year from a discontinued operation (LOSS)/PROFIT FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests (LOSS)/EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT (Expressed in RMB per share) Basic and diluted – For (loss)/profit for the year – For (loss)/profit from continuing operations	For the six months ended 30 June 2016 RMB’000 9,772 (806,940) (834,572) 27,632 (806,940) RMB(0.07) RMB(0.07)	Year 2015 RMB’000 – (2,939,135) (2,950,234) 11,099 (2,939,135) RMB(0.253) RMB(0.253)	ended 31 December 2014 2013 RMB’000 RMB’000 38,756 280,632 1,068,750 (2,584,045) 1,044,036 (2,610,098) 24,714 26,053 1,068,750 (2,584,045) RMB0.089 RMB(0.223) RMB0.086 RMB(0.245)

– VII-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2013, 2014, 2015 and for the six months ended 30 June 2016.

(Loss)/profit for the year Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods Change in fair value of available-for- sale investments, net of tax Cash flow hedges: Effective portion of changes in fair value of hedging instruments arising during the year Share of other comprehensive income/(loss) of associates and joint venture Exchange differences on translation of foreign operations Share of other comprehensive income of associates Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods Total comprehensive (loss)/ income for the year Attributable to: Owners of the parent Non-controlling interests	For the six months ended 30 June 2016 RMB’000 (806,940) (95,567) (32,196) – (239,616) 34,242 (333,137) (1,140,077) (1,158,892) 18,815 (1,140,077)	Year ended 31 December 2015 2014 2013 RMB’000 RMB’000 RMB’000 (2,939,135) 1,068,750 (2,584,045) – – – (5,682) 4,715 – 39,841 (32,334) – 299,935 10,724 (147,475) – – – 334,094 (16,895) (147,475) (2,605,041) 1,051,855 (2,731,520) (2,618,519) 1,027,451 (2,757,302) 13,478 24,404 25,782 (2,605,041) 1,051,855 (2,731,520)

– VII-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Financial Position

For the year ended 31 December 2013, 2014 and 2015 and for the six months ended 30 June 2016.

ASSETS Non-current assets Property, plant and equipment Investment properties Prepaid land lease payments Leasehold land and land use rights Intangible assets Investments in associates Investments in joint ventures Available-for-sale investments Finance lease receivables Loans and receivables Derivative financial instruments Deferred tax assets Other long term prepayments Total non-current assets Current assets Inventories Trade and notes receivables Prepayments and other receivables Prepaid land lease payments Finance lease receivables Loans and receivables Hold-for-trading investments Derivative financial instruments Restricted cash Cash and cash equivalents Assets of a disposal group classified as held for sale Total current assets Total assets	As at 30 June 2016 RMB’000 58,116,231 8,005 214,412 – 23,440 8,710,052 134,305 1,557,118 9,023,724 207,413 – 85,631 28,050 78,108,381 590,211 1,720,328 2,034,622 3,904 2,142,961 1,830,739 21,668 – 864,547 13,965,281 23,174,261 11,036 23,185,297 101,293,678	As at 31 December 2015 2014 2013 RMB’000 RMB’000 RMB’000 38,336,163 36,369,808 32,290,294 2,037 2,093 2,148 – – – – – 75,991 15,572 18,916 20,406 3,954,706 3,754,380 297,303 56,243 52,402 51,067 – – – – – – – – – – 4,026 – 4,358 10,479 496,534 – – – 42,369,079 40,212,104 33,233,743 898,955 1,185,498 1,545,370 1,930,882 2,384,511 2,476,402 675,706 401,953 375,245 – – – – – – – – – – – – – 697 – 1,410 500 2,100 11,001,051 9,355,888 9,014,462 14,508,004 13,329,047 13,413,579 – – 4,169,566 14,508,004 13,329,047 17,583,145 56,877,083 53,541,151 50,816,888	As at 31 December 2015 2014 2013 RMB’000 RMB’000 RMB’000 38,336,163 36,369,808 32,290,294 2,037 2,093 2,148 – – – – – 75,991 15,572 18,916 20,406 3,954,706 3,754,380 297,303 56,243 52,402 51,067 – – – – – – – – – – 4,026 – 4,358 10,479 496,534 – – – 42,369,079 40,212,104 33,233,743 898,955 1,185,498 1,545,370 1,930,882 2,384,511 2,476,402 675,706 401,953 375,245 – – – – – – – – – – – – – 697 – 1,410 500 2,100 11,001,051 9,355,888 9,014,462 14,508,004 13,329,047 13,413,579 – – 4,169,566 14,508,004 13,329,047 17,583,145 56,877,083 53,541,151 50,816,888
			33,233,743
			1,545,370 2,476,402 375,245 – – – – – 2,100 9,014,462
			13,413,579 4,169,566 17,583,145
			50,816,888

– VII-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

EQUITY Equity attributable to owners of the parent Share capital Special reserves General reserves Other reserves Retained Profit/(Accumulated losses) Non-controlling interests Total equity LIABILITIES Non-current liabilities Bank and other borrowings Corporate bonds Deposits from customers Finance lease obligations Derivative financial instruments Deferred tax liabilities Other long term payables Total non-current liabilities	As at 30 June 2016 RMB’000 11,683,125 4,817 93,356 (97,032) 2,133,734 13,818,000 328,925 14,146,925 41,779,529 1,506,225 8,951 – 27,044 248,178 701,370 44,271,297	As 2015 RMB’000 11,683,125 19,030 – 17,206,241 (6,734,162) 22,174,234 63,096 22,237,330 17,807,972 1,796,432 – 7,276 691 94 – 19,612,465	at 31 December 2014 2013 RMB’000 RMB’000 11,683,125 11,683,125 20,150 38,278 – – 16,873,604 16,895,315 (3,784,442) (4,845,260) 24,792,437 23,771,459 85,046 446,595 24,877,483 24,218,054 13,463,254 10,917,131 1,793,981 1,791,530 – – 150,281 186,597 – – 75 27 – – 15,407,591 12,895,285

– VII-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Current liabilities Trade payables Other payables and accruals Interest-bearing bank and other borrowings Bank and other borrowings Corporate bonds Derivative financial instruments Finance lease obligations – current portion Deposits from customers Tax payable Provisions Liabilities directly associated with assets classified as held for sale Total current liabilities Total liabilities Total equity and liabilities Net current (liabilities)/assets Total assets less current liabilities	As at 30 June 2016 RMB’000 2,291,539 1,176,093 – 29,344,629 2,042,810 6,345 – 7,821,837 100,268 25,000 42,808,521 66,935 42,875,456 87,146,753 101,293,678 (19,690,159) 58,418,222	As 2015 RMB’000 3,532,484 889,433 10,557,263 – – 147 8,550 – 14,411 25,000 15,027,288 – 15,027,288 34,639,753 56,877,083 (519,284) 41,849,795	at 31 December 2014 2013 RMB’000 RMB’000 3,825,897 3,890,379 658,358 757,256 8,690,651 8,020,195 – – – – – – 36,978 34,773 – – 19,193 14,060 25,000 25,000 13,256,077 12,741,663 – 961,886 13,256,077 13,703,549 28,663,668 26,598,834 53,541,151 50,816,888 72,970 3,879,596 40,285,074 37,113,339	at 31 December 2014 2013 RMB’000 RMB’000 3,825,897 3,890,379 658,358 757,256 8,690,651 8,020,195 – – – – – – 36,978 34,773 – – 19,193 14,060 25,000 25,000 13,256,077 12,741,663 – 961,886 13,256,077 13,703,549 28,663,668 26,598,834 53,541,151 50,816,888 72,970 3,879,596 40,285,074 37,113,339
				12,741,663 961,886
				13,703,549
				26,598,834
				50,816,888

				3,879,596

				37,113,339

– VII-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Financial Results

For the nine months ended 30 September 2016

Total operating revenue (Loss)/profit before taxation Income tax expenses (Loss)/profit attributable to owners of the parent (Loss)/profit attributable to non-controlling interests (Loss)/earnings per share (expressed in RMB per share) – basic and diluted	For the nine months ended 30 September 2016 RMB 12,297,782,363.64 (462,382,907.64) (135,982,261.89) (634,917,959.88) 36,552,790.35
	(0.0543)

Consolidated Assets and Liabilities

As at 30 September 2016

Total non-current assets Total current assets Total assets Total non-current liabilities Total current liabilities Total liabilities Equity attributable to owners of the parent Non-controlling interests Total equity	As at 30 September 2016 RMB 84,460,242,145.26 26,887,017,795.92
	111,347,259,941.18

	58,954,062,580.78 38,133,533,541.71
	97,087,596,122.49

	13,924,538,667.71 335,125,150.98
	14,259,663,818.69

– VII-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is an extract of the audited consolidated financial statements of the Group for the year ended 31 December 2013 prepared in accordance with the HKFRS:

Consolidated Statement of Profit or Loss

For the year ended 31 December 2013

Notes
CONTINUING OPERATIONS
Revenue
5
Costs of services
6
Gross loss
Selling, administrative and general expenses
6
Other income
7
Other gains, net
8
Operating (loss)/profit
Finance costs
11
Share of profits and losses of:
Associates
22
Joint ventures
23
Loss before income tax from continuing operations
Income tax expense
12
(Loss)/profit for the year from continuing operations
DISCONTINUED OPERATION
Profit for the year from a discontinued operation
14
(LOSS)/PROFIT FOR THE YEAR
Attributable to:
Owners of parent
13
Non-controlling interests
(LOSS)/EARNINGS PER SHARE
ATTRIBUTABLE TO ORDINARY EQUITY
HOLDERS OF THE PARENT
(Expressed in RMB per share)
16
– Basic and diluted
For (loss)/profit for the year
For (loss)/profit from continuing operations

Year ended 31 December
2013
2012
RMB’000
RMB’000
33,917,357
32,997,924
(36,004,215)
(33,460,782)
(2,086,858)
(462,858)
(916,383)
(893,400)
451,194
580,539
133,977
1,211,815
(2,418,070)
436,096
(457,618)
(506,357)
41,760
38,520
5,541
5,294
(2,828,387)
(26,447)
(36,290)
460,547
(2,864,677)
434,100
280,632
139,510
(2,584,045)
573,610
(2,610,098)
524,921
26,053
48,689
(2,584,045)
573,610
(RMB0.223)
RMB0.045
(RMB0.245)
RMB0.037

Details of the dividends payable and proposed for the year are disclosed in note 15 to the financial statements.

The notes are an integral part of these consolidated financial statements.

– VII-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2013

Note (Loss)/profit for the year Other comprehensive loss to be reclassified to profit or loss in subsequent periods Exchange differences on translation of foreign operations Net other comprehensive loss to be reclassified to profit or loss in subsequent periods Total comprehensive (loss)/income for the year Attributable to: Owners of parent Non-controlling interests	Year ended 31 December 2013 2012 RMB’000 RMB’000 (2,584,045) 573,610 (147,475) (19,451) (147,475) (19,451) (2,731,520) 554,159 (2,757,302) 505,495 25,782 48,664 (2,731,520) 554,159

The notes are an integral part of these consolidated financial statements.

– VII-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Financial Position

As at 31 December 2013

Notes
ASSETS
Non-current assets
Property, plant and equipment
17
Investment properties
Leasehold land and land use rights
18
Intangible assets
19
Deferred tax assets
35
Available-for-sale financial assets
20
Interests in associates
22
Interests in joint ventures
23
Total non-current assets
Current assets
Inventories
27
Trade and notes receivables
28
Prepayments and other receivables
Restricted cash
29
Cash and cash equivalents
29
Assets of a disposal group classified as
held for sale
14
Total current assets
Total assets
EQUITY
Equity attributable to owners of the parent
Issued capital
30
Special reserves
31(a)
Other reserves
31(b)
Accumulated losses
31(c)
Non-controlling interests
Total equity

As at 31 December
2013
2012
RMB’000
RMB’000
32,290,294
35,676,940
2,148
–
75,991
92,981
20,406
28,730
496,534
496,859
–
362,140
297,303
293,965
51,067
1,329,542
33,233,743
38,281,157
1,545,370
1,238,030
2,476,402
2,263,700
375,245
590,406
2,100
1,000
9,014,462
8,830,970
13,413,579
12,924,106
4,169,566
–
17,583,145
12,924,106
50,816,888
51,205,263
11,683,125
11,683,125
38,278
2,229
16,895,316
17,041,861
(4,845,260)
(2,198,638)
23,771,459
26,528,577
446,595
945,084
24,218,054
27,473,661

– VII-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes LIABILITIES Non-current liabilities Interest-bearing bank and other borrowings 32 Domestic corporate bonds 33 Finance lease obligations 34 Deferred tax liabilities 35 Total non-current liabilities Current liabilities Trade payables 36 Other payables and accruals Interest-bearing bank and other borrowings 32 Finance lease obligations – current portion 34 Tax payable Provisions 37 Liabilities directly associated with the assets classified as held for sale 14 Total current liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at 31 December 2013 2012 RMB’000 RMB’000 10,917,131 15,363,812 1,791,530 1,789,078 186,597 228,384 27 11 12,895,285 17,381,285 3,890,379 3,883,845 757,256 778,327 8,020,195 1,528,272 34,773 119,634 14,060 15,239 25,000 25,000 12,741,663 6,350,317 961,886 – 13,703,549 6,350,317 26,598,834 23,731,602 50,816,888 51,205,263 3,879,596 6,573,789 37,113,339 44,854,946	As at 31 December 2013 2012 RMB’000 RMB’000 10,917,131 15,363,812 1,791,530 1,789,078 186,597 228,384 27 11 12,895,285 17,381,285 3,890,379 3,883,845 757,256 778,327 8,020,195 1,528,272 34,773 119,634 14,060 15,239 25,000 25,000 12,741,663 6,350,317 961,886 – 13,703,549 6,350,317 26,598,834 23,731,602 50,816,888 51,205,263 3,879,596 6,573,789 37,113,339 44,854,946
		17,381,285

		3,883,845 778,327 1,528,272 119,634 15,239 25,000
		6,350,317 –
		6,350,317
		23,731,602
		51,205,263

		6,573,789

		44,854,946

The notes are an integral part of these consolidated financial statements.

– VII-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Statement of Financial Position

As at 31 December 2013

Notes
ASSETS
Non-current assets
Property, plant and equipment
17
Leasehold land and land use rights
18
Intangible assets
19
Deferred tax assets
35
Interests in subsidiaries
21
Interests in associates
22
Interests in joint ventures
23
Total non-current assets
Current assets
Inventories
27
Trade and notes receivables
28
Prepayments and other receivables
Cash and cash equivalents
29
Assets of a disposal group classified
as held for sale
14
Total current assets
Total assets
EQUITY
Issued capital
30
Special reserves
31(a)
Other reserves
31(b)
Accumulated losses
31(c)
Total equity

As at 31 December
2013
2012
RMB’000
RMB’000
17,389,782
17,956,752
–
10,877
11,207
11,206
491,889
491,889
13,241,339
14,974,207
213,972
213,972
41,500
41,500
31,389,689
33,700,403
912,977
493,746
1,188,531
1,246,185
201,871
688,297
5,445,944
4,225,897
7,749,323
6,654,125
2,133,649
–
9,882,972
6,654,125
41,272,661
40,354,528
11,683,125
11,683,125
34,832
449
19,012,889
19,012,889
(2,134,094)
(1,083,225)
28,596,752
29,613,238

– VII-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes LIABILITIES Non-current liabilities Interest-bearing bank and other borrowings 32 Domestic corporate bonds 33 Total non-current liabilities Current liabilities Trade payables 36 Other payables and accruals Interest-bearing bank and other borrowings 32 Provision 37 Total current liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at 31 December 2013 2012 RMB’000 RMB’000 2,600,000 2,923,969 1,791,530 1,789,078 4,391,530 4,713,047 4,602,319 4,464,521 1,657,277 709,036 1,999,783 829,686 25,000 25,000 8,284,379 6,028,243 12,675,909 10,741,290 41,272,661 40,354,528 1,598,593 625,882 32,988,282 34,326,285	As at 31 December 2013 2012 RMB’000 RMB’000 2,600,000 2,923,969 1,791,530 1,789,078 4,391,530 4,713,047 4,602,319 4,464,521 1,657,277 709,036 1,999,783 829,686 25,000 25,000 8,284,379 6,028,243 12,675,909 10,741,290 41,272,661 40,354,528 1,598,593 625,882 32,988,282 34,326,285
		4,713,047
		4,464,521 709,036 829,686 25,000
		6,028,243
		10,741,290

		40,354,528

		625,882

		34,326,285

The notes are an integral part of these consolidated financial statements.

– VII-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

Attributable to owners of parent

At 1 January 2012 Profit for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive (loss)/income for the year ended 31 December 2012 Transaction with owners Capital injection from non-controlling interests Dividends paid to non-controlling interests Accrued special reserve during the year Used special reserve during the year Others At 31 December 2012	Issued capital RMB’000 11,683,125 – – – – – – – – 11,683,125	Special reserves RMB’000 – – – – – – 164,475 (162,246) – 2,229	Other reserve RMB’000 17,061,062 – (19,426) (19,426) – – – – 225 17,041,861	Accumulated losses RMB’000 (2,720,854) 524,921 – 524,921 – – (164,475) 162,246 (476) (2,198,638)	Total RMB’000 26,023,333 524,921 (19,426) 505,495 – – – – (251) 26,528,577	Non- controlling interests RMB’000 877,356 48,689 (25) 48,664 47,853 (28,635) – – (154) 945,084	Total equity RMB’000 26,900,689
							573,610 (19,451)
							554,159
							47,853 (28,635) – – (405)
							27,473,661

– VII-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Attributable to owners of parent

At 1 January 2013 (Loss)/profit for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive (loss)/income for the year ended 31 December 2013 Transaction with owners Capital injection from non-controlling interests Disposal of subsidiaries Dividends paid to non-controlling interests Accrued special reserve during the year Used special reserve during the year Others At 31 December 2013	Issued capital RMB’000 11,683,125 – – – – – – – – – 11,683,125	Special reserves RMB’000 2,229 – – – – – – 176,601 (140,552) – 38,278	Other reserve RMB’000 17,041,861 – (147,204) (147,204) – – – – – 659 16,895,316	Accumulated losses RMB’000 (2,198,638) (2,610,098) – (2,610,098) – – – (176,601) 140,552 (475) (4,845,260)	Total RMB’000 26,528,577 (2,610,098) (147,204) (2,757,302) – – – – – 184 23,771,459	Non controlling interests RMB’000 945,084 26,053 (271) 25,782 45,428 (422,222) (147,477) – – – 446,595	Total equity RMB’000 27,473,661
							(2,584,045) (147,475)
							(2,731,520)
							45,428 (422,222) (147,477) – – 184
							24,218,054

The notes are an integral part of these consolidated financial statements.

– VII-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Cash Flows

For the year ended 31 December 2013

Notes
Cash flows from operating activities
Cash generated from/(used in) operations
39(a)
Income tax paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Purchase of items of property, plant and equipment and
intangible assets
Purchase of an investment property
Proceeds from disposal of items of property,
plant and equipment
39(b)
Disposal of subsidiaries
38
Disposal of joint ventures
Increase in investments in joint ventures and associates
Increase in investments in available-for-sale
financial assets
Dividends received from associates
Dividends received from joint ventures
Dividends received from available-for-sale
financial assets
Interest received
Net cash generated/(used in) from investing activities
Cash flows from financing activities
Interest paid
Capital injection from non-controlling shareholders
New bank loans
Repayment of bank loans
Capital element of finance lease payments
Interest element of finance lease payments
Dividends paid to non-controlling interests
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
29
Effect of foreign exchange rate changes, net
Cash and cash equivalents at end of year
29
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and cash equivalents as stated in the statement of
financial position
Cash and short term deposits attributable to a
discontinued operation
Cash and cash equivalents as stated in the statement of
cash flows

Year ended 31 December
2013
2012
RMB’000
RMB’000
(1,071,578)
229,588
(72,607)
(93,276)
(1,144,185)
136,312
(2,637,863)
(2,115,107)
(2,227)
–
161,409
3,389,312
696,342
–
28,389
–
(21,020)
(19,800)
(284,057)
–
17,466
12,621
44,621
26,318
12,576
11,497
126,158
86,909
(1,858,206)
1,391,750
(587,056)
(620,547)
45,428
47,853
19,589,402
11,010,034
(14,947,659)
(9,930,172)
(126,648)
(239,788)
(15,956)
(29,350)
(20,286)
(4,593)
3,937,225
233,437
934,834
1,761,499
8,830,970
7,073,273
(163,000)
(3,802)
9,602,804
8,830,970
9,014,462
8,830,970
588,342
–
9,602,804
8,830,970

The notes are an integral part of these consolidated financial statements.

– VII-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

China Shipping Container Lines Company Limited (the “Company”) was established in the People’s Republic of China (the “PRC”) on 28 August 1997 as a company with limited liability under the Company Law of the PRC. On 3 March 2004, the Company was transformed into a joint stock limited company under the Company Law of the PRC. In 2004, the Company issued overseas public shares (“H Shares”), which were listed on the Main Board of The Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”) on 16 June 2004. In 2007, the Company issued PRC domestic public shares (“A Shares”), which were listed on the Shanghai Stock Exchange on 12 December 2007.

The address of the Company’s registered office is Room A-538, Yangshan International Trade Center, No. 188 Ye Sheng Road, Pilot Free Trade Zone, Shanghai, the PRC.

The Company and its subsidiaries (together, the “Group”) are principally engaged in owning, chartering and operating container vessels for the provision of international and domestic container marine transportation services, and the operation of container terminals.

These consolidated financial statements are presented in Renminbi (“RMB”), unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors (the “Board”) on 26 March 2014.

2.1 BASIS OF PREPARATION

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2013. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described in the accounting policy for subsidiaries below. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

– VII-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the following new and revised HKFRSs for the first time for the current year’s financial statements.

HKFRS 1 Amendments

HKFRS 1 Amendments Amendments to HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards – Government Loans HKFRS 7 Amendments Amendments to HKFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities HKFRS 10 Consolidated Financial Statements HKFRS 11 Joint Arrangements HKFRS 12 Disclosure of Interests in Other Entities HKFRS 10, HKFRS 11 and Amendments to HKFRS 10, HKFRS 11 and HKFRS 12 HKFRS 12 Amendments – Transition Guidance HKFRS 13 Fair Value Measurement HKAS 1 Amendments Amendments to HKAS 1 Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income HKAS 19 (2011) Employee Benefits HKAS 27 (2011) Separate Financial Statements HKAS 28 (2011) Investments in Associates and Joint Ventures HKAS 36 Amendments Amendments to HKAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets (early adopted) HK(IFRIC)-Int 20 Stripping Costs in the Production Phase of a Surface Mine Annual Improvements 2009-2011 Amendments to a number of HKFRSs issued in June 2012 Cycle

Other than as further explained below regarding the impact of HKFRS 10, HKFRS 11, HKFRS 12, HKFRS 13, HKAS 19 (2011), amendments to HKFRS 10, HKFRS 11, HKFRS 12, HKAS 1, HKAS 19 and HKAS 36, and certain amendments included in Annual Improvements 2009-2011 Cycle (Include other standards as appropriate) , the adoption of the new and revised HKFRSs has had no significant financial effect on these financial statements.

The principal effects of adopting these new and revised HKFRSs are as follows:

(a) KFRS 10 replaces the portion of HKAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements and addresses the issues in HK(SIC)-Int 12 Consolidation – Special Purpose Entities . It establishes a single control model used for determining which entities are consolidated. To meet the definition of control in HKFRS 10, an investor must have (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. The changes introduced by HKFRS 10 require management of the Group to exercise significant judgement to determine which entities are controlled.

As a result of the application of HKFRS 10, the Group has changed the accounting policy with respect to determining which investees are controlled by the Group.

The application of HKFRS 10 does not change any of the consolidation conclusions of the Group in respect of its involvement with investees as at 1 January 2013.

(b) HKFRS 11 replaces HKAS 31 Interests in Joint Ventures and HK(SIC)-Int 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers . It describes the accounting for joint arrangements with joint control. It addresses only two forms of joint arrangements, i.e., joint operations and joint ventures, and removes the option to account for joint ventures using proportionate consolidation. The classification of joint arrangements under HKFRS 11 depends on the parties’ rights and obligations arising from the arrangements. A joint operation is a joint arrangement whereby the joint operators have rights to the assets and obligations for the liabilities of the arrangement and is accounted for on a line-by-line basis to the extent of the joint operators’ rights and obligations in the joint operation. A joint venture is a joint arrangement whereby the joint venturers have rights to the net assets of the arrangement and is required to be accounted for using the equity method in accordance with HKAS 28 (2011).

The directors of the Company reviewed and assessed the classification of the Group’s investments in joint arrangements in accordance with the requirements of HKFRS 11, and concluded that the application of HKFRS 11 does not change any accounting for investments in joint ventures as at 1 January 2013.

– VII-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(c) HKFRS 12 sets out the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities previously included in HKAS 27 Consolidated and Separate Financial Statements , HKAS 31 Interests in Joint Ventures and HKAS 28 Investments in Associates . It also introduces a number of new disclosure requirements for these entities. Details of the disclosures for subsidiaries, joint ventures and associates are included in notes 21, 23 and 22 to the financial statements.
(d) The HKFRS 10, HKFRS 11 and HKFRS 12 Amendments clarify the transition guidance in HKFRS 10 and provide further relief from full retrospective application of these standards, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. The amendments clarify that retrospective adjustments are only required if the consolidation conclusion as to which entities are controlled by the Group is different between HKFRS 10 and HKAS 27 or HK(SIC)-Int 12 at the beginning of the annual period in which HKFRS 10 is applied for the first time.
(e) HKFRS 13 provides a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across HKFRSs. The standard does not change the circumstances in which the Group is required to use fair value, but rather provides guidance on how fair value should be applied where its use is already required or permitted under other HKFRSs. HKFRS 13 is applied prospectively and the adoption has had no material impact on the Group’s fair value measurements. As a result of the guidance in HKFRS 13, the policies for measuring fair value have been amended. Additional disclosures required by HKFRS 13 for the fair value measurements of financial instruments are included in note 25 to the financial statements.
(f) The HKAS 1 Amendments change the grouping of items presented in other comprehensive income (“OCI”). Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) are presented separately from items which will never be reclassified (for example, the revaluation of land and buildings). The amendments have affected the presentation only and have had no impact on the financial position or performance of the Group. The consolidated statement of comprehensive income has been represented to reflect the changes. In addition, the Group has chosen to use the new title”statement of profit or loss” as introduced by the amendments in these financial statements.
(g) HKAS 19 (2011) includes a number of amendments that range from fundamental changes to simple clarifications and re-wording. The revised standard introduces significant changes in the accounting for defined benefit pension plans including removing the choice to defer the recognition of actuarial gains and losses. Other changes include modifications to the timing of recognition for termination benefits, the classification of short-term employee benefits and disclosures of defined benefit plans. As the Group does not have any defined benefit plan or employee termination plan and the Group does not have any significant employee benefits that are expected to be settled for more than twelve months after the reporting period, the adoption of the revised standard has had no effect on the financial position or performance of the Group.
(h) The HKAS 36 Amendments remove the unintended disclosure requirement made by HKFRS 13 on the recoverable amount of a cash-generating unit which is not impaired. In addition, the amendments require the disclosure of the recoverable amounts for the assets or cash-generating units for which an impairment loss has been recognised or reversed during the reporting period, and expand the disclosure requirements regarding the fair value measurement for these assets or units if their recoverable amounts are based on fair value less costs of disposal. The amendments are effective retrospectively for annual periods beginning on or after 1 January 2014 with earlier application permitted, provided HKFRS 13 is also applied. The Group has early adopted the amendments in these financial statements. The amendments have had no impact on the financial position or performance of the Group.
(i) Annual Improvements 2009-2011 Cycle issued in June 2012 sets out amendments to a number of standards. There are separate transitional provisions for each standard. While the adoption of some of the amendments may result in changes in accounting policies, none of these amendments have had a significant financial impact on the Group. Details of the key amendments most applicable to the Group are as follows:
HKAS 1 Presentation of Financial Statements : Clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative period is the previous period. An entity must

– VII-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the previous period. The additional comparative information does not need to contain a complete set of financial statements.

In addition, the amendment clarifies that the opening statement of financial position as at the beginning of the preceding period must be presented when an entity changes its accounting policies; makes retrospective restatements or makes reclassifications, and that change has a material effect on the statement of financial position. However, the related notes to the opening statement of financial position as at the beginning of the preceding period are not required to be presented.
HKAS 32 Financial Instruments: Presentation : Clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with HKAS 12 Income Taxes . The amendment removes existing income tax requirements from HKAS 32 and requires entities to apply the requirements in HKAS 12 to any income tax arising from distributions to equity holders.

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKFRS 9	_Financial Instruments_4
HKFRS 9, HKFRS 7 and	Hedge Accounting and amendments to HKFRS 9, HKFRS 7
HKAS 39 Amendments	_and HKAS 39_4
HKFRS 10, HKFRS 12 and	Amendments to HKFRS 10, HKFRS 12 and HKAS 27 (2011) –
HKAS 27 (2011)	_Investment Entities_1
HKFRS 14	_Regulatory Deferral Accounts_3
HKAS 19 Amendments	Amendments to HKAS 19 Employee Benefits – Defined
	_Benefit Plans: Employee Contributions_2
HKAS 32 Amendments	Amendments to HKAS 32 Financial Instruments:
	Presentation – Offsetting Financial Assets and
	_Financial Liabilities_1
HKAS 39 Amendments	Amendments to HKAS 39 Financial Instruments:
	Recognition and Measurement – Novation of Derivatives
	_and Continuation of Hedge Accounting_1
HK(IFRIC)-Int 21	_Levies_1
Annual improvements	Amendments to a number of HKFRSs issued in January 20142
2010-2012 Cycle
Annual improvements	Amendments to a number of HKFRSs issued in January 20142
2011-2013 Cycle

1 Effective for annual periods beginning on or after 1 January 2014
2 Effective for annual periods beginning on or after 1 July 2014
3 Effective for annual periods beginning on or after 1 January 2016
4 No mandatory effective date yet determined but is available for adoption

Further information about those new and revised HKFRSs that are expected to be applicable to the Group is as follows:

HKFRS 9 issued in November 2009 is the first part of phase 1 of a comprehensive project to entirely replace HKAS 39 Financial Instruments: Recognition and Measurement . This phase focuses on the classification and measurement of financial assets. Instead of classifying financial assets into four categories, an entity shall classify financial assets as subsequently measured at either amortised cost or fair value, on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. This aims to improve and simplify the approach for the classification and measurement of financial assets compared with the requirements of HKAS 39.

– VII-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

In November 2010, the HKICPA issued additions to HKFRS 9 to address financial liabilities (the “Additions”) and incorporated in HKFRS 9 the current derecognition principles of financial instruments of HKAS 39. Most of the Additions were carried forward unchanged from HKAS 39, while changes were made to the measurement of financial liabilities designated as at fair value through profit or loss using the fair value option (“FVO”). For these FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. However, loan commitments and financial guarantee contracts which have been designated under the FVO are scoped out of these Additions.

In December 2013, the HKICPA added to HKFRS 9 the requirements related to hedge accounting and made some related changes to HKAS 39 and HKFRS 7 which include the corresponding disclosures about risk management activity for applying hedge accounting. The amendments to HKFRS 9 relax the requirements for assessing hedge effectiveness which result in more risk management strategies being eligible for hedge accounting. The amendments also allow greater flexibility on the hedged items and relax the rules on using purchased options and non-derivative financial instruments as hedging instruments. In addition, the amendments to HKFRS 9 allow an entity to apply only the improved accounting for own credit risk-related fair value gains and losses arising on FVO liabilities as introduced in 2010 without applying the other HKFRS 9 requirements at the same time.

HKAS 39 is aimed to be replaced by HKFRS 9 in its entirety. Before this entire replacement, the guidance in HKAS 39 on impairment of financial assets continues to apply. The previous mandatory effective date of HKFRS 9 was removed by the HKICPA in December 2013 and a mandatory effective date will be determined after the entire replacement of HKAS 39 is completed. However, the standard is available for application now. The Group will quantify the effect in conjunction with other phases, when the final standard including all phases is issued.

Amendments to HKFRS 10 include a definition of an investment entity and provide an exception to the consolidation requirement for entities that meet the definition of an investment entity. Investment entities are required to account for subsidiaries at fair value through profit or loss in accordance with HKFRS 9 rather than consolidate them. Consequential amendments were made to HKFRS 12 and HKAS 27 (2011). The amendments to HKFRS 12 also set out the disclosure requirements for investment entities. The Group expects that these amendments will not have any impact on the Group as the Company is not an investment entity as defined in HKFRS 10.

The HKAS 32 Amendments clarify the meaning of “currently has a legally enforceable right to set off” for offsetting financial assets and financial liabilities. The amendments also clarify the application of the offsetting criteria in HKAS 32 to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on 1 January 2014.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The results of subsidiaries are included in the Company’s statement of profit or loss to the extent of dividends received and receivable. The Company’s investments in subsidiaries that are not classified as held for sale in accordance with HKFRS 5 are stated at cost less any impairment losses.

Investments in Associates and Joint Ventures

An associate is an entity in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

– VII-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The Group’s investments in associates and joint ventures are stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

The Group’s share of the post-acquisition results and other comprehensive income of associates and joint ventures is included in the consolidated statement of profit or loss and consolidated other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s investments in the associates or joint ventures, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associates or joint ventures is included as part of the Group’s investments in associates or joint ventures.

If an investment in an associate becomes an investment in a joint venture or vice versa, the retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method. In all other cases, upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

The results of associates and joint ventures are included in the Company’s statement of profit or loss to the extent of dividends received and receivable. The Company’s investments in associates and joint ventures are treated as non-current assets and are stated at cost less any impairment losses.

When an investment in an associate or a joint venture is classified as held for sale, it is accounted for in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations .

Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of HKAS 39 is measured at fair value with changes in fair value either recognised in profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of HKAS 39, it is measured in accordance with the appropriate HKFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group’s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

– VII-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 December. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the disposed operation and the portion of the cash-generating unit retained.

Fair Value Measurement

The Group measures its derivative financial instruments and equity investments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly

Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Impairment of Non-Financial Assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, deferred tax assets, financial assets, goodwill and non-current assets, and a disposal group classified as held for sale), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

– VII-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of profit or loss in the period in which it arises (only if there are revalued assets in the financial statements), unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related Parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group; or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly-controlled by a person identified in (a); and
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Property, Plant and Equipment and Depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal group classified as held for sale, it is not depreciated and is accounted for in accordance with HKFRS 5, as further explained in the accounting policy for “Non-current assets and disposal groups held for sale”. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

– VII-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Costs incurred on the subsequent dry-docking of vessels are capitalised and depreciated over the period to the next estimated dry-docking date. When significant dry-docking costs are incurred prior to the expiry of the depreciation period, the remaining costs of the previous dry-docking are written off immediately.

Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Changes in the values of property, plant and equipment are dealt with as movements in the asset revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on an individual asset basis, the excess of the deficit is charged to the statement of profit or loss. Any subsequent revaluation surplus is credited to the statement of profit or loss to the extent of the deficit previously charged. An annual transfer from the asset revaluation reserve to retained profits is made for the difference between the depreciation based on the revalued carrying amount of an asset and the depreciation based on the asset’s original cost. On disposal of a revalued asset, the relevant portion of the asset revaluation reserve realised in respect of previous valuations is transferred to retained profits as a movement in reserves.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

	Estimated useful lives
Container vessels	25 years from the date of first registration
Improvements on vessels under operating leases	5 years or the period of the lease, whichever
	is the shorter
Building	30 to 40 years
Containers	12 years
Port and depot infrastructure	20 to 50 years
Loading machinery	8 to 20 years
Motor vehicles, computer, office equipment and	3 to 8 years
furniture

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Vessels under construction are stated at cost less accumulated impairment losses. Cost of vessel under construction includes all direct costs relating to the construction and acquisition of vessels incurred by the Group. No depreciation is provided for vessels under construction until such time as the relevant vessels are completed and ready for intended use. Vessels under construction are transferred to container vessels upon the completion of the construction.

Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

– VII-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Investment Properties

Investment properties are interests in land and buildings (including the leasehold interest under an operating lease for a property which would otherwise meet the definition of an investment property) held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at historical cost less accumulated depreciation and provision for any impairment in value. Depreciation is calculated on the straight-line basis over the expected useful life of 20 years.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the statement of profit or loss during the financial period in which they are incurred.

Any gains or losses on the retirement on disposal of an investment property are recognised in the statement of profit or loss in the year of the retirement or disposal.

For a transfer from investment properties to owner-occupied properties or inventories, the deemed cost of a property for subsequent accounting is its fair value at the date of change in use. If a property occupied by the Group as an owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under “Property, plant and equipment and depreciation” up to the date of change in use, and any difference at that date between the carrying amount and the fair value of the property is accounted for as a revaluation in accordance with the policy stated under “Property, plant and equipment and depreciation” above. For a transfer from inventories to investment properties, any difference between the fair value of the property at that date and its previous carrying amount is recognised in the statement of profit or loss.

Non-Current Assets and Disposal Groups Held for Sale

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sales transaction rather than through continuing use. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such assets or disposal groups and its sale must be highly probable. All assets and liabilities of a subsidiary classified as a disposal group are reclassified as held for sale regardless of whether the Group retains a non-controlling interest in its former subsidiary after the sale.

Non-current assets and disposal groups (other than investment properties and financial assets) classified as held for sale are measured at the lower of their carrying amounts and fair values less costs to sell. Property, plant and equipment and intangible assets classified as held for sale are not depreciated or amortised.

Leasehold Land and Land Use Rights

All land in the PRC is state-owned or collectively-owned and no individual land ownership exists. The Group acquires the right to use certain land. The premiums paid for this right are treated as prepayment for operating lease and recorded as leasehold land and land use rights, which are amortised over the lease period using the straight-line method.

Intangible Assets (Other Than Goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value at the date of acquisition. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

– VII-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(a) Port line use rights

Port line use rights are stated at cost less accumulated amortisation and accumulated impairment losses. Cost represents consideration paid for the rights to use the port lines for periods of 50 years. Amortisation of port line use rights are calculated on the straight-line method over the period of the port line use rights.

(b) Computer software

Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed eight years.

Leases

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases, including prepaid land lease payments under finance leases, are included in property, plant and equipment, and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the statement of profit or loss so as to provide a constant periodic rate of charge over the lease terms.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the statement of profit or loss on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under operating leases net of any incentives received from the lessor are charged to the statement of profit or loss on the straight-line basis over the lease terms.

Sale and Leaseback Transactions

A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset. The lease payment and the sale price are usually interdependent because they are negotiated as a package. The accounting treatment of a sale and leaseback transaction depends upon the type of lease involved.

– VII-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

If a sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is deferred and amortised over the lease term.

If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value, any profit or loss is recognised immediately. If the sale price is below fair value, any profit or loss is recognised immediately except that, if the loss is compensated for by future lease payments at below market price, it is deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value is deferred and amortised over the period for which the asset is expected to be used. If the fair value at the time of a sale and leaseback transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and fair value is recognised immediately.

Investments and Other Financial Assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, these assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income and gains in the statement of profit or loss. The loss arising from impairment is recognised in the statement of profit or loss in finance costs for loans and in other expenses for receivables.

Available-for-sale financial assets

Available-for-sale financial investments are non-derivative financial assets in listed and unlisted equity investments and debt securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated as at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in market conditions.

After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in the statement of profit or loss in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the available-for-sale investment revaluation reserve to the statement of profit or loss in other gains or losses. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income and dividend income, respectively and are recognised in the statement of profit or loss as other income in accordance with the policies set out for “Revenue recognition” below.

When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses.

– VII-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term are still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity.

For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the effective interest rate. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the statement of profit or loss.

Derecognition of Financial Assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred assets to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Impairment of Financial Assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition).

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

– VII-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other expenses in the statement of profit or loss.

Assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

Available-for-sale financial investments

For available-for-sale financial investments, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired.

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the statement of profit or loss, is removed from other comprehensive income and recognised in the statement of profit or loss.

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss – is removed from other comprehensive income and recognised in the statement of profit or loss. Impairment losses on equity instruments classified as available for sale are not reversed through the statement of profit or loss. Increases in their fair value after impairment are recognised directly in other comprehensive income.

In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. Impairment losses on debt instruments are reversed through the statement of profit or loss if the subsequent increase in fair value of the instruments can be objectively related to an event occurring after the impairment loss was recognised in the statement of profit or loss.

Financial Liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, an amount due to the ultimate holding company, derivative financial instruments and interest-bearing bank and other borrowings.

– VII-31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

Financial guarantee contracts

Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. A financial guarantee contract is recognised initially as a liability at its fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation.

Derecognition of Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on weighted average basis. Net realisable value is based on estimated selling prices less any cost of estimated costs to be incurred to completion and disposal.

Cost of inventories includes the transfer from equity of gains and losses on qualifying cash flow hedges in respect of the purchases of raw materials.

Cash and Cash Equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

– VII-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Issued Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of profit or loss.

Income Tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except:

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

– VII-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Government Grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed.

Where the grant relates to an asset, the fair value is deducted from the carrying amount of the asset and released to the statement of profit or loss by way of a reduced depreciation charge.

Where the Group receives grants of non-monetary assets, the grants are recorded at the fair value of the non-monetary assets and released to the statement of profit or loss over the expected useful lives of the relevant assets by equal annual instalments.

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board that make strategic decisions.

Revenue Recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) Liner services, freight revenues from the operation of the international and domestic containerised transportation business are recognised on a percentage of completion basis, which is determined on the time proportion method of each individual vessel voyage;
(b) from chartering of vessels under operating leases, over the periods of the respective leases on the straight-line basis;
(c) from container terminal operation, when the services are rendered;
(d) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset; and
(e) dividend income, when the shareholders’ right to receive payment has been established.

Share-Based Payments

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Employees (including directors) of the Group receive remuneration in the form of share-based payments.

The cost of cash-settled transactions is measured initially at fair value at the grant date using a binomial option valuation model, taking into account the terms and conditions upon which the instruments were granted (note 9). The fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is measured at the end of each reporting period up to and including the settlement date, with changes in fair value recognised in the statement of profit or loss.

– VII-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Other Employee Benefits

(a) Pension obligations

The full-time employees of the Group employed in Mainland China are covered by various government-sponsored pension plans under which the employees are entitled to a monthly pension based on certain formulae. The relevant government agencies are responsible for the pension liability to these retired employees. The Group contributes on a monthly basis to these pension plans based on percentages of the total salary of employees, subject to a certain ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in each year.

The Group also operates a defined contribution Mandatory Provident Fund (“MPF”) scheme for its employees employed in Hong Kong. The Group and the employees both contribute 5% of the employees’ relevant income per month as required by the Hong Kong MPF Scheme Ordinance subject to a maximum of HKD1,250 per person.

The Group’s contributions to the above defined contribution schemes are charged to the consolidated statement of profit or loss as incurred.

(b) Housing benefits

All full-time employees of the Group employed in Mainland China are entitled to participate in various government-sponsored housing funds. The Group contributes to these funds based on certain percentages of the salaries of the employees on a monthly basis, subject to a certain ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in each year. Contributions to the funds are expensed as incurred.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Contingent Liabilities and Contingent Assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognised but is disclosed in the notes to the consolidated financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group. Contingent assets are not recognised but are disclosed in the notes to the consolidated financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profits within the equity section of the statement of financial position, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because the Company’s memorandum and articles of association grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

– VII-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Foreign Currencies

Certain subsidiaries incorporated outside Mainland China have Hong Kong dollars (“HKD”), United States dollars (“USD”), South African rand (“ZAR”) and Brazilian real (“BRL”) as their functional currencies. The functional currency of Mainland China subsidiaries is the RMB. As the Group mainly operates in Mainland China, the RMB is used as the presentation currency of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss.

Differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed of, at which time the cumulative amount is reclassified to the statement of profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measure in fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference is on the items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively).

The functional currencies of non-PRC established subsidiaries are currencies other than the RMB. As at the end of the reporting period, the assets and liabilities of these entities are translated into RMB at the exchange rates prevailing at the end of the reporting period and their statement of profit or loss are translated into RMB at the weighted average rates for the year.

The resulting exchange differences are recognised in other comprehensive income and accumulated in the translation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the statement of profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

For the purpose of the consolidated statement of cash flows, the cash flows of non-PRC established subsidiaries are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of non-PRC established companies which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

– VII-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Lease accounting

Judgement is required in the initial classification of leases as either operating leases or finance leases and, in respect of finance leases, determining the appropriate discount rate implicit in the lease to discount minimum lease payments. In respect of certain leases classified as finance leases, it has not been possible to reliably estimate lessors’ residual values and management has been required to independently estimate an appropriate discount rate. Judgement is also required in respect of the treatment of gains and losses arising on the sale and leaseback of assets. The accounting policy for leases is set out in note 2.4.

Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

(i) Impairment of container vessels and containers

The Group assesses whether vessels and containers have any indication of impairment, in accordance with the accounting policy stated in note 2.4 in the annual financial statements for the year ended 31 December 2013. As at 31 December 2013, after reviewing the external and internal evidence, the directors considered the indication of impairment, and an assessment of the recoverable amounts of the assets has been conducted.

(ii) Useful lives and residual values of property, plant and equipment

Management determines the estimated useful lives and residual values for the Group’s property, plant and equipment by reference to the Group’s business model, its assets management policy, the industry practice, expected usage of the asset, and the current scrap values of steel in an active market at each measurement date. The depreciation expense will change where the useful lives or residual values of property, plant and equipment are different from the previous estimate.

Were the useful lives to differ by 10% from management’s estimates as at 31 December 2013 with all other variables held constant, the estimated depreciation expense of property, plant and equipment for the year would be approximately RMB132,576,000 lower or RMB162,038,000 higher for the year ended 31 December 2013.

Were the residual values to differ by 10% from management’s estimates as at 31 December 2013 with all other variables held constant, the estimated depreciation expense of property, plant and equipment for the year would be approximately RMB28,094,000 lower or higher for the year ended 31 December 2013.

(iii) Income taxes and deferred income tax

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, the differences will impact the income tax and deferred income tax provisions in the period in which the determination is made.

Recognition of deferred income tax assets depends on the management’s expectation of future taxable profit that will be available against which the deferred income tax assets can be utilised. The outcome of their actual utilisation may be different.

– VII-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(iv) Provision of cost of services

Cost of services, which comprise container and cargo costs, vessel and voyage costs, and sub-route and other costs, are recognised on a percentage of completion basis as set out in note 2.4. Invoices in relation to these expenses are normally received several months after the expenses have been incurred. Consequently, recognition of costs of services is based on the rendering of services as well as the latest tariff agreed with vendors. If the actual expenses of a voyage differ from the estimated expenses, this will have an impact on costs of services in future periods.

4 FINANCIAL RISK MANAGEMENT

4.1 Financial Risk Factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk and bunker price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to United States dollars (“USD”) and Hong Kong dollars (“HKD”). Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group is considering using forward contracts to cover the foreign currency exposures in the future, where appropriate. As at 31 December 2013, if RMB had strengthened/weakened by 5% against the USD/HKD with all other variables held constant, post-tax profit for the year would have been RMB51,195,000 lower/higher (2012: post-tax profit of RMB74,451,150 lower/higher), mainly as a result of foreign exchange losses/gains on translation of USD/HKD-denominated trade and notes receivables, prepayments and other receivables and cash and cash equivalents, and foreign exchange gains/losses on translation of USD/HKD-denominated bank borrowings, trade payables, finance lease obligations and other payables and accruals.

(ii) Cash flow and fair value interest rate risk

Other than the short-term deposits placed with bank balances, cash at bank and loan to a jointly-controlled entity, the Group has no other significant interest bearing assets. The risk on the Group’s income and operating cash flows from changes in market interest rates is low.

The Group’s interest rate risk arises from borrowings, domestic corporate bonds, and finance lease obligations. Bank borrowings issued at variable rates expose the Group to cash flow interest rate risk; finance lease obligations, domestic corporate bonds and bank borrowings issued at fixed rates expose the Group to fair value interest rate risk. As at 31 December 2013 and 2012, around 37% and 39% of the Group’s borrowings, domestic corporate bonds, and finance lease obligations were at fixed rates, respectively. During 2013 and 2012, the Group’s bank borrowings at variable rates were denominated in USD. The weighted average effective interest rates and terms of repayment of the Group’s borrowings are disclosed in note 32.

As at 31 December 2013, if interest rates had been 100 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been RMB201,143,000 higher/lower (2012: post-tax loss of RMB178,310,882 higher/lower), mainly as a result of higher/lower interest expense on floating rate bank borrowings.

– VII-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(iii) Price risk

The container transport and logistics activities are sensitive to economic fluctuations. The Group is exposed to freight rate risk. The Group’s revenue will increase/decrease by RMB303,609,000 (2012: increase/decrease RMB311,538,000) for a 1% increase/reduction of the average container freight rates with all other variables held constant.

The Group is also exposed to fluctuations in bunker prices. Bunker cost is part of the voyage expenses and is a significant cost item to the Group. Management monitors conditions and bunker price fluctuations and where appropriate, bunker forward contracts are used to lock up the price of part of the Group’s bunker requirements. As at 31 December 2013, the Group did not have bunker forward contracts (2012: Nil).

(b) Credit risk

The Group has no significant concentration of credit risk. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The Group has policies that limit the amount of credit exposure to any financial institutions. The carrying amount of trade and notes receivables, prepayments and other receivables and cash and cash equivalents represent the maximum credit exposure of the Group. The Group has also policies in place to ensure that services are rendered to customers with appropriate credit history and the Group performs periodic credit evaluations of its customers.

Maximum credit risk exposure relating to off-balance sheet financial guarantees is related to the Company which provides to subsidiaries loans and other banking facilities amounting to approximately RMB7,685 million (2012: RMB5,605 million) as at 31 December 2013, being the face value of the borrowings under guarantee and with a maturity term to year 2015 (2012: to year 2015).

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Group aims to maintain flexibility in funding by keeping committed credit lines available.

Management monitors rolling forecasts of the Group’s liquidity reserve (comprises undrawn borrowing facilities (note 32) and cash and cash equivalents (note 29)) on the basis of expected cash flows. This is generally carried out at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location and take into account the liquidity of the market in which the entity operates. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary; monitoring liquidity ratios against internal and external regulatory requirements; and maintaining debt financing plans.

For the year ended 31 December 2013, the Group’s operating loss and loss for the year amounted to RMB2,418,070,000 and RMB2,864,677,000, respectively. The net operating cash outflow amounted to RMB1,144,184,000.

The directors of the Company believe that based on the Group’s available unused banking facilities in excess of RMB2,148 million and its cash and cash equivalents of RMB9,014 million, the Group has sufficient financial resources to satisfy its working capital requirements and payments of liabilities and its forthcoming future capital commitments as and when they fall due.

The table below analyses the Group and the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest calculated based on the interest rate at the statement of financial position date).

– VII-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group

At 31 December 2013 Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Interest payables in relation to the borrowings and domestic corporate bonds Finance lease obligations (note 34) Trade payables (note 36) Other payables and accruals At 31 December 2012 Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Interest payables in relation to the borrowings and domestic corporate bonds Finance lease obligations (note 34) Trade payables (note 36) Other payables and accruals The Company At 31 December 2013 Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Interest payables in relation to the borrowings and domestic corporate bonds Trade payables (note 36) Other payables and accruals At 31 December 2012 Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Interest payables in relation to the borrowings and domestic corporate bonds Trade payables (note 36) Other payables accrual	Less than 1 year RMB’000 8,020,195 – 455,318 46,996 3,890,379 655,273 1,528,272 – 609,445 136,414 3,883,845 656,505 Less than 1 year RMB’000 1,999,783 – 199,745 4,602,319 1,581,488 829,686 – 212,652 4,464,521 528,329	Between 1 and 2 years RMB’000 7,067,374 – 310,720 46,991 – – 4,283,980 – 565,148 48,457 – – Between 1 and 2 years RMB’000 2,600,000 – 176,891 – – 12,571 – 210,501 – –	Between 2 and 5 years RMB’000 2,454,772 1,800,000 280,762 129,835 – – 8,923,135 – 628,579 142,855 – – Between 2 and 5 years RMB’000 – 1,800,000 162,360 – – 2,911,398 – 224,071 – –	Over 5 years RMB’000 1,394,985 – 20,544 38,284 – –
				2,156,697 1,800,000 97,514 78,899 – –
				Over 5 years RMB’000 – – – – –
				– 1,800,000 – – –

– VII-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

4.2 Capital Risk Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including current and non-current borrowings, domestic corporate bonds and finance lease obligations as shown in the consolidated statement of financial position) less cash and cash equivalents.

The gearing ratios of the Group at 31 December 2013 and 2012 were as follows:

Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Finance lease obligations (note 34) Less: Cash and cash equivalents (note 29) Net debt Total equity Gearing ratio (net debt/total equity)	2013 RMB’000 18,937,326 1,791,530 221,370 (9,016,562) 11,933,664 24,218,054 49.3%	2012 RMB’000 16,892,084 1,789,078 348,018 (8,831,970) 10,197,210 27,473,661 37.1%

Note:

The increase of gearing ratio is mainly due to the increase in borrowings and decrease of total equity of the Group as a result of operating loss.

5 REVENUE AND SEGMENT INFORMATION

The chief operating decision-maker has been identified as the Board. The decision-maker reviews the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The chief operating decision-maker assesses the performance of the operating segments based on a measure of operating profit/(loss), which is reconciled to profit/(loss) before income tax.

The container terminal and related business was classified as held for sale and its carrying amount will be recovered principally through a sale transaction approved by the Board rather than through continuing operation. For the year ended 31 December 2013 and 2012, all the losses/profits from continuing operations are generated through container shipping and related business.

– VII-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Revenue from the major trade districts and shipping lanes is set out below:

Pacific Europe/Mediterranean Asia Pacific China Domestic Other Lanes Logistic Services and Others Turnover	Year ended 31 December 2013 2012 RMB’000 RMB’000 9,847,162 10,671,520 7,836,977 8,803,867 5,846,905 6,136,979 6,213,860 6,048,334 727,804 897,868 3,444,649 439,356 33,917,357 32,997,924	Year ended 31 December 2013 2012 RMB’000 RMB’000 9,847,162 10,671,520 7,836,977 8,803,867 5,846,905 6,136,979 6,213,860 6,048,334 727,804 897,868 3,444,649 439,356 33,917,357 32,997,924
		32,997,924

The directors of the Company consider that the nature of the Group’s business precludes a meaningful allocation of the Group’s non-current assets of container shipping business to specific geographical segments as they mainly include container vessels and containers which are utilised across geographical markets for shipment of cargoes throughout the world.

No revenue from a single customer or a group of customers under common control derived 10% or more of the Group’s revenue for the years ended 31 December 2013 and 2012.

6 COSTS AND EXPENSES BY NATURE

Costs of services, selling, administrative and general expenses of continuing operations are analysed as follows:

Costs of services Container repositioning and management Bunkers consumed or sold Operating lease rentals Port charges Depreciation (note 17) Employee benefit expenses (note 9) Sub-route costs and others Selling, administrative and general expenses Employee benefit expenses (note 9) Rental expenses Telecommunication and utilities expenses Depreciation (note 17) Repair and maintenance expenses Auditors’ remuneration Amortisation (note 18 and note 19) Provision for impairment of trade receivables (note 28) Office expenses and others	2013 RMB’000 9,997,141 10,213,356 3,366,099 1,970,053 1,431,610 1,302,847 7,723,109 36,004,215 513,829 48,326 68,920 26,728 3,091 13,800 8,497 4,725 228,467 916,383 36,920,598	2012 RMB’000 9,293,452 10,259,746 3,371,930 1,974,880 1,450,418 1,309,364 5,800,992
		33,460,782
		540,034 58,120 40,652 28,055 2,815 13,800 8,184 15,922 185,818
		893,400
		34,354,182

– VII-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

7 OTHER INCOME

Interest income Government grant related to income Refund of value-added tax (“VAT”) (Note a) Information technology services fees	2013 RMB’000 130,557 135,756 170,787 14,094 451,194	2012 RMB’000 182,397 117,447 267,751 12,944
		580,539

Note:

(a) Starting from 1 January 2012, the Company, Shanghai Puhai Shipping Lines Co., Ltd. and Yangshan International Container Storage & Transportation Co., Ltd., subsidiaries of the Group, are entitled to a refund of VAT, in accordance with “Circular of the Ministry of Finance and the State Administration of Taxation on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries” (“the Circular”).

8 OTHER GAINS, NET

(Loss)/gains on disposal of items of property, plant and equipment (Note a) Gains on physical inventory count (Note b) Compensation Net foreign exchange gains	2013 RMB’000 (19,846) 118,804 5,241 29,778 133,977	2012 RMB’000 1,144,492 – 51,643 15,680
		1,211,815

Notes:

(a) During 2012, China Shipping Container Lines (Hong Kong) Co., Ltd. (“CSCL HK”) and China Shipping Container Lines (Asia) Co., Limited (“CSCL Asia”), subsidiaries of the Group, entered into agreements (the “Sale Agreements”) with certain container leasing companies (“Purchasers”) pursuant to which CSCL HK and CSCL Asia agreed to sell containers of the Group (the “Containers”) of an aggregate net book value of RMB2,152,086,000 as of the dates when the relevant containers were disposed of for a total consideration of RMB3,246,548,000.

The said consideration was agreed after arm’s length negotiations between CSCL (HK), CSCL (Asia) and the Purchasers with reference to the assets valuation report on the Containers dated 20 September 2012 issued by an independent and qualified PRC valuer, China Tong Cheng Assets Appraisal Co., Ltd.

CSCL (HK), CSCL (Asia) (as lessees) and the Purchasers (as lessors) also entered into leaseback agreements (“the Leaseback Agreements”) on the same dates of signing of the Sale Agreements pursuant to which CSCL (HK) and CSCL (Asia) leased the Containers from the Purchasers for a period of two to four years upon the terms and conditions as contained therein (the “Leaseback transactions”). The Leaseback transactions are accounted for as operating leases as the Group does not retain the risks and rewards incident to the ownership of the Containers. A gain of RMB1,094,462,000 is recognised in other gains, net as the terms of the Sale Agreements and Leaseback Agreements are demonstrably at fair value.

(b) During the year ended 31 December 2013, the Company identified an inventory count surplus of the spare parts during the physical inventory count and the surplus of RMB118,804,000 is recognised in other gains, net.

– VII-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

9 EMPLOYEE BENEFIT EXPENSES

An analysis of staff costs, including directors’ and supervisors’ emoluments, is set out below:

Staff salaries and hiring of crews Social welfare benefits Change in fair value of share-based compensation liabilities	2013 RMB’000 1,119,217 714,720 (17,261) 1,816,676	2012 RMB’000 1,123,247 718,087 8,064
		1,849,398

In accordance with the “Resolution Regarding Adoption and Approval of the H Share Share Appreciation Rights Scheme and Implementation Methods” passed at the Company’s second Special General Meeting held on 12 October 2005, the Company implemented an H Share share appreciation rights scheme as an incentive to its directors and employees. Under this scheme, which was adopted by the shareholders of the Company on 12 October 2005, and amended by the shareholders on 20 June 2006, 26 June 2007 and 26 June 2008, the H Share share appreciation rights (the “Rights”) are granted in units with each unit representing one H Share. No shares of the Company will be issued under the share appreciation rights scheme. Upon exercise of the Rights, the grantee will receive a cash payment from the Company in RMB, subject to any applicable withholding tax, translated from the HKD amount equal to the number of units of Rights exercised multiplied by the appreciation, if any, in the market price of the Company’s H Shares, representing the market price in excess of the exercise price of the Rights, based on the applicable exchange rate between RMB and HKD at the date of the exercise.

The stipulated lock-up period for exercising the Rights is two years after the date of grant. Not more than 30%, 60% and 100% of the Rights can be exercised during the third year, fourth year and fifth year, respectively. The Rights can be exercised before the expiration of the term of the scheme (10 years). The Rights which have not been exercised after the expiration of the term of the scheme shall lapse.

Until the liabilities relating to the Rights are settled, the Group re-measures the fair value of the liabilities at each statement of financial position date by using a binomial option valuation model. Changes in fair value of the liabilities are recognised in the consolidated statement of profit or loss.

Movements in the number of share appreciation rights outstanding and their related weighted average exercise prices during the year are as follows:

At 1 January Forfeited At 31 December	2013 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 93,850 2.83 (8,798) 2.83 85,052	2012 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 96,457 2.83 (2,607) 2.83 93,850	2012 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 96,457 2.83 (2,607) 2.83 93,850
			93,850

Up to 31 December 2013, no rights granted have been exercised (2012: Nil). As at 31 December 2013, the expiry dates of the outstanding Rights were between 2013 and 2015.

– VII-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The fair value of the liability relating to the Rights is estimated on each statement of financial position date by using a binomial option valuation model based on an expected volatility from 54.61% to 65.79%, exercise price shown above, no expected dividend yield and risk-free interest rates from 6.24% to 7.08%. The volatility compared with the valuation report measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices of the Company and other comparable companies.

During the year ended 31 December 2013, the Group recognised a gain of approximately RMB17,261,000 (2012: a loss of RMB8,064,000) as a result of the decrease in fair value of the share-based compensation liability related to the Rights from approximately RMB40,749,000 as at 31 December 2012 to approximately RMB23,488,000 as at 31 December 2013. As at 31 December 2013, the unrecognised compensation cost of the outstanding Rights is approximately RMB1,050,000 (2012: RMB2,100,000) which is expected to be recognised in the next year.

10 EMOLUMENTS OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(A) Directors’ and Supervisors’ Emoluments

The remuneration of every director and supervisor is set out below:

			Pension and		Unit of
Name of director and			other social		the Rights
supervisor	Fees	Salary	welfare	Total	granted (note 9)
	RMB’000	RMB’000	RMB’000	RMB’000
For the year ended
31 December 2013
Directors
Mr. Li Shaode (a)	–	–	–	–	3,382,100
Mr. Xu Lirong (a)	–	–	–	–	–
Mr. Zhang Guofa	–	–	–	–	2,218,050
Mr. Huang Xiaowen	–	–	–	–	3,334,050
Mr. Zhao Hongzhou	–	703	322	1,025	2,604,000
Mr. Zhang Jianhua (b)	–	–	–	–	1,240,000
Ms. Su Min	–	–	–	–	–
Mr. Wang Daxiong	–	–	–	–	1,240,000
Mr. Xu Hui (b)	–	–	–	–	1,085,000
Mr. Chen Jihong	–	–	–	–	–
Mr. Ding Nong	–	–	–	–	–
Mr. Lin Jianqing (b)	–	–	–	–	525,450
Mr. Zhang Rongbiao	–	–	–	–	–
Ms. Zhang Nan	100	–	–	100	–
Mr. Wu Daqi (b)	–	–	–	–	–
Mr. Shen Kangchen (b)	50	–	–	50	–
Mr. Jim Poon (b)	150	–	–	150	–
Mr. Shen Zhongying (b)	50	–	–	50	–
Mr. Zhang Songshen (c)	150	–	–	150	–
Mr. Chen Lishen (c)	50	–	–	50	–
Mr. Guan Yimin (c)	50	–	–	50	–
Mr. Shi Xin (c)	50	–	–	50	–

– VII-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The remuneration of every director and supervisor is set out below:

Name of director and supervisor Supervisors Mr. Chen Decheng (b) Mr. Xu Wenrong (c) Mr. Tu Shiming (e) Mr. Kou Laiqi (b) Mr. Ye Hongjun (c) Mr. Wang Xiuping Mr. Hua Min (b) Mr. Shen Kangchen (c) Ms. Pan Yingli (b) Mr. Shen Chongying (c) Senior management Mr. Huang Xinming Mr. Li Zhigang Mr. Feng Xingguo Mr. Sui Jun Mr. Liu Chong (d) Mr. Zhang Mingwen Mr. Ye Yumang	Fees RMB’000 50 – – – – – 50 50 50 50 – – – – – – – 900	Salary RMB’000 – – 589 – – 638 – – – – 703 583 595 596 80 508 363 5,358	Pension and other social welfare RMB’000 – – 309 – – 16 – – – – 358 313 307 307 37 145 65 2,179	Total RMB’000 50 – 898 – – 654 50 50 50 50 1,061 896 902 903 117 653 428 8,437	Unit of the Rights granted (note 9) 948,600 – 246,450 156,550 – 1,395,000 – – – – 2,604,000 1,399,650 1,240,000 – – – 1,240,000
					24,858,900

Notes:

(a) Resigned on 2 December 2013;
(b) Resigned on 28 June 2013;
(c) Appointed on 28 June 2013;
(d) Resigned on 18 April 2013;
(e) Resigned on 27 January 2014.

			Pension and		Unit of
Name of director and			other social		the Rights
supervisor	Fees	Salary	welfare	Total	granted (note 9)
	RMB’000	RMB’000	RMB’000	RMB’000
For the year ended
31 December 2012
Directors
Mr. Li Shaode	–	–	–	–	3,382,100
Mr. Xu Lirong	–	–	–	–	–
Mr. Zhang Guofa	–	–	–	–	2,218,050
Mr. Huang Xiaowen	–	1,495	121	1,616	3,334,050
Mr. Zhao Hongzhou	–	2,373	237	2,610	2,604,000
Mr. Zhang Jianhua	–	–	–	–	1,240,000
Mr. Wang Daxiong	–	–	–	–	1,240,000
Mr. Xu Hui	–	–	–	–	1,085,000

– VII-46 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

Name of director and supervisor Mr. Ding Nong (a) Mr. Lin Jianqing Mr. Zhang Rongbiao Ms. Zhang Nan Mr. Wu Daqi Mr. Shen Kangchen Mr. Jim Poon Mr. Shen Zhongying Supervisors Mr. Chen Decheng Mr. Wang Xiuping Mr. Kou Laiqi Mr. Tu Shiming Mr. Hua Min Ms. Pan Yingli Senior management Mr. Huang Xinming Mr. Li Zhigang Mr. Feng Xingguo Mr. Liu Chong Mr. Zhang Mingwen (b) Mr. Ye Yumang	Fees RMB’000 – – – 100 – 100 300 100 100 – – – 100 100 – – – – – – 900	Salary RMB’000 – – – – – – – – – 660 – 2,208 – – 2,628 2,260 2,181 2,208 8 638 16,659	Pension and other social welfare RMB’000 – – – – – – – – – 165 – 230 – – 165 238 232 236 12 161 1,797	Total RMB’000 – – – 100 – 100 300 100 100 825 – 2,438 100 100 2,793 2,498 2,413 2,444 20 799 19,356	Unit of the Rights granted (note 9) – 525,450 – – – – – – 948,600 1,395,000 156,550 246,450 – – 2,604,000 1,399,650 1,240,000 – – 1,240,000
					24,858,900

Notes:

(a) Appointed on 5 December 2012;
(b) Appointed on 21 November 2012.

No directors or supervisors of the Company waived any emoluments during the year ended 31 December 2013 (2012: Nil). No discretionary bonus was paid to any of the directors or supervisors of the Company during the year ended 31 December 2013 (2012: Nil).

In year 2013, fair value of the Rights granted to the directors and supervisors of the Company decreased by approximately RMB5,045,000 (2012: increased by approximately RMB2,136,000).

(B) Five Highest Paid Individuals

The five highest paid employees during the year included one director, one supervisor and three senior managers (2012: one director, one supervisor and three senior managers), details of whose remuneration are set out in note 10(a) above.

(C) During the year ended 31 December 2013, no emoluments were paid by the Group to any of the directors, supervisors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office (2012: Nil).

– VII-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

11 FINANCE COSTS

Interest expenses: – Borrowings and domestic corporate bonds – Finance lease obligations Total interest expenses Less: amount capitalised in vessels under construction and construction in progress	2013 RMB’000 502,527 15,956 518,483 (60,865) 457,618	2012 RMB’000 580,686 29,350 610,036 (103,679) 506,357

The capitalisation rate applied to funds borrowed and bonds issued generally and utilised for the vessels under construction is 3.56% (2012: 3.75%) per annum for the year ended 31 December 2013.

12 INCOME TAX EXPENSE

Current income tax – Hong Kong profits tax (Note (a)) – PRC corporate income tax (Note (b)) Deferred income tax (note 35)	2013 RMB’000 387 35,562 341 36,290	2012 RMB’000 2,823 20,916 (484,286) (460,547)

Notes:

(a) Hong Kong profits tax

Hong Kong profits tax is provided at the rate of 16.5% (2012: 16.5%) on the estimated assessable profits of the Group’s companies operated in Hong Kong for the year ended 31 December 2013.

(b) PRC corporate income tax (“CIT”)

According to the Corporate Income Tax Law of the People’s Republic of China, which was effective from 1 January 2008, the CIT rate applicable of the Company and its subsidiaries incorporated in PRC is 25% for the year ended 31 December 2013 and 2012.

Pursuant to relevant CIT regulations, the dividends received by the Company from its overseas subsidiaries are subject to CIT at a rate of 25%.

– VII-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(c) The taxation on the Group’s loss before income tax differs from the theoretical amount that would arise using the taxation rate applicable to the Company as follows:

Loss before income tax from continuing operations Less: Share of results of associated companies Share of results of joint ventures Tax calculated at an income tax rate of 25% (2012: 25%) Tax losses for which no deferred income tax asset was recognised Recognition of tax losses previously not recognised Dividend income not subject to tax Loss/(income) not subject to tax Effect of different tax rate or tax base of subsidiaries and others	2013 RMB’000 (2,828,387) (41,760) (5,541) (2,875,688) (718,922) 289,750 – – 425,243 40,219 36,290	2012 RMB’000 (26,447) (38,520) (5,294) (70,261) (17,565) 274,182 (485,639) (2,874) (228,041) (610) (460,547)

13 PROFIT ATTRIBUTABLE TO OWNERS OF PARENT

The profit attributable to owners of parent includes a loss of RMB1,050,869,000 for the year ended 31 December 2013, which has been dealt with in the financial statements of the Company (2012: loss of RMB482,542,000).

14 DISCONTINUED OPERATION

On 11 October 2013, the Company announced the decision of its board of directors to dispose of China Shipping Terminal Company Limited. China Shipping Terminal Company Limited engages in operating container terminals. The disposal of China Shipping Terminal Company Limited is expected to be completed in 2014. As at 31 December 2013, final negotiations for the sale were in progress and China Shipping Terminal Company Limited was classified as a disposal group held for sale.

The results of China Shipping Terminal Company Limited for the year are presented below:

Revenue Costs of services Selling, administrative and general expenses Other income Other gains, net Finance costs Share of profits and losses of: Associates Joint ventures Profit of the discontinued operation Loss recognised on the remeasurement to fair value Profit before tax from the discontinued operation Income tax: Related to pre-tax profit Profit for the year from the discontinued operation	2013 RMB’000 399,386 (223,406) (66,269) 27,192 244,706 (77,030) 1,906 49,634 356,119 – 356,119 (75,487) 280,632	2012 RMB’000 396,721 (174,546) (64,846) 18,996 799 (42,774) 757 45,872 180,979 – 180,979 (41,469) 139,510

– VII-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The major classes of assets and liabilities of China Shipping Terminal Company Limited classified as held for sale as at 31 December are as follows:

Assets Property, plant and equipment Leasehold land and land use rights Intangible assets Available-for-sale financial assets Interests in associates Interests in joint ventures Inventories Trade and notes receivables Prepayments and other receivables Cash and cash equivalents Assets classified as held for sale Interest-bearing bank and other borrowings Trade payables Other payables and accruals Tax payable Liabilities directly associated with the assets classified as held for sale Net assets directly associated with the disposal group Asset revaluation reserve of the disposal group	2013 RMB’000 1,486,113 14,583 3,555 646,197 42,862 1,261,501 11,692 100,693 14,028 588,342
	4,169,566
	742,600 17,595 161,591 40,100
	961,886
	3,207,680
	–

The net cash flows incurred by China Shipping Terminal Company Limited are as follows:

Operating activities Investing activities Financing activities Exchange loss on cash and cash equivalents Net cash inflow Earnings per share: Basic, from the discontinued operation Diluted, from the discontinued operation	2013 RMB’000 (112,733) 464,632 111,566 (4,903) 458,562 2.24 cents 2.24 cents	2012 RMB’000 235,104 3,659 (240,451) 1
		(1,687)

		0.82 cents 0.82 cents

– VII-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The calculations of basic and diluted earnings per share from the discontinued operation are based on:

	2013	2012
	RMB	RMB
Profit attributable to ordinary equity holders of the parent
from the discontinued operation	261,150,000	95,643,000
Weighted average number of ordinary shares in issue during
the year used in the basic and diluted earnings
per share calculation (note 16)	11,683,125,000	11,683,125,000

15 DIVIDENDS

The directors do not recommend a dividend in respect of the year ended 31 December 2013 (2012: Nil).

16 EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of parent by the weighted average number of ordinary shares in issue during the year.

	2013	2012
Earnings
(Loss)/profit attributable to ordinary equity holders of the
parent, used in the basic earnings per share calculation
(RMB’000)
From continuing operations	(2,871,248)	429,278
From a discontinued operation	261,150	95,643
Shares
Weighted average number of ordinary shares in issue
(thousands)	11,683,125	11,683,125

Diluted earnings/(loss) per share is the same as the basic earnings/(loss) per share, as the Company does not have any potential dilutive ordinary shares during the year ended 31 December 2013 (2012: Nil).

– VII-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

17 PROPERTY, PLANT AND EQUIPMENT

Container vessels RMB’000 30,193,554 (5,582,991)	Vessels under construction RMB’000 4,487,456 –	Improvements under operating leases RMB’000 97,213 (85,748)	Buildings RMB’000 305,573 (55,810)	The Construction in progress RMB’000 2,374,042 –	Group Containers RMB’000 5,811,738 (2,267,089)	Port and depot infrastructure RMB’000 1,065,158 (110,712)	Loading machinery RMB’000 894,551 (306,092)	Motor vehicles, computer office equipment and furniture RMB’000 544,925 (316,528)	Total RMB’000 45,774,210 (8,724,970)
24,610,563	4,487,456	11,465	249,763	2,374,042	3,544,649	954,446	588,459	228,397	37,049,240
24,610,563 (24,276) 4,057,997 25,470 (58,294) (1,134,165)	4,487,456 (3,995) (4,057,997) 1,811,731 – –	11,465 (2) – 6,875 – (4,353)	249,763 (1) 25,095 – – (10,405)	2,374,042 (135) (790,296) 155,400 – –	3,544,649 (6,146) 172,890 400,975 (2,194,082) (249,264)	954,446 – – 6,791 – (18,608)	588,459 – 587,858 11,377 (4,493) (53,937)	228,397 (205) 4,453 34,107 (6,281) (56,384)	37,049,240 (34,760) – 2,452,726 (2,263,150) (1,527,116)
27,477,295	2,237,195	13,985	264,452	1,739,011	1,669,022	942,629	1,129,264	204,087	35,676,940
34,166,375 (6,689,080)	2,237,195 –	104,086 (90,101)	330,666 (66,214)	1,739,011 –	2,581,886 (912,864)	1,071,949 (129,320)	1,470,253 (340,989)	553,518 (349,431)	44,254,939 (8,577,999)
27,477,295	2,237,195	13,985	264,452	1,739,011	1,669,022	942,629	1,129,264	204,087	35,676,940
27,477,295 (317,879) 1,488,665 286,914 (163,624) – – (1,283,318)	2,237,195 (50,806) (1,488,665) 1,646,106 – – – –	13,985 (18) – 6,081 (99) – (10,653) (4,175)	264,452 (6) – 13,572 – – (43,330) (11,022)	1,739,011 – – 18,363 – (1,737,080) (1,751) –	1,669,022 (54,196) – 578,068 (10,737) – (133) (116,294)	942,629 – – 2,411 – – (928,543) (16,497)	1,129,264 (1,798) – 5,077 (2,941) (580,067) (491,683) (57,852)	204,087 (696) – 10,529 (2,246) (4,849) (10,020) (51,454)	35,676,940 (425,399) – 2,567,121 (179,647) (2,321,996) (1,486,113) (1,540,612)
27,488,053	2,343,830	5,121	223,666	18,543	2,065,730	–	–	145,351	32,290,294
35,174,284 (7,686,231)	2,343,830 –	95,413 (90,292)	287,309 (63,643)	18,543 –	3,058,922 (993,192)	– –	– –	448,479 (303,128)	41,426,780 (9,136,486)
27,488,053	2,343,830	5,121	223,666	18,543	2,065,730	–	–	145,351	32,290,294

– VII-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

At 1 January 2012 Cost Accumulated depreciation and impairment losses Net book amount Year ended 31 December 2012 Opening net book amount Transfers Additions Disposals Depreciation Closing net book amount At 31 December 2012 Cost Accumulated depreciation and impairment losses Net book amount Year ended 31 December 2013 Opening net book amount Transfers Additions Disposals Depreciation Closing net book amount At 31 December 2013 Cost Accumulated depreciation and impairment losses Net book amount	Container vessels RMB’000 19,888,655 (4,492,274) 15,396,381 15,396,381 1,806,502 9,229 (19,996) (706,479) 16,485,637 21,673,068 (5,187,431) 16,485,637 16,485,637 1,488,665 48,180 (92,102) (839,268) 17,091,112 23,117,812 (6,026,700) 17,091,112	Vessels under construction RMB’000 2,190,563 – 2,190,563 2,190,563 (1,806,502) 883,032 – – 1,267,093 1,267,093 – 1,267,093 1,267,093 (1,488,665) 221,572 – – – – – –	The Company Buildings Construction in progress RMB’000 RMB’000 195,778 8,525 (40,439) – 155,339 8,525 155,339 8,525 – (9,179) – 2,586 – – (6,738) – 148,601 1,932 195,778 1,932 (47,177) – 148,601 1,932 148,601 1,932 – – – 16,612 (143,832) – (3,388) – 1,381 18,544 51,946 18,544 (50,565) – 1,381 18,544	Motor vehicles, computer, office equipment and furniture RMB’000 195,169 (127,949) 67,220 67,220 9,179 2,272 (8,881) (16,301) 53,489 196,115 (142,626) 53,489 53,489 – 238,284 (48) (12,980) 278,745 434,351 (155,606) 278,745	Total RMB’000 22,478,690 (4,660,662)
					17,818,028
					17,818,028 – 897,119 (28,877) (729,518)
					17,956,752
					23,333,986 (5,377,234)
					17,956,752
					17,956,752 – 524,648 (235,982) (855,636)
					17,389,782
					23,622,653 (6,232,871)
					17,389,782

– VII-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(a) As at 31 December 2013, the net book value of container vessels, containers and port and depot infrastructure of the Group pledged as securities for the bank borrowings amounted to approximately RMB5,942,678,000 (2012: RMB6,033,486,000) (note 32).
(b) As at 31 December 2013, the net book value of the assets leased out under operating leases, where the Group and the Company are the lessors, comprised vessels under chartering arrangements amounting to RMB761,099,504 and RMB4,239,201,000, respectively (2012: RMB427,613,000 and RMB6,350,489,000, respectively).
(c) During the year ended 31 December 2013, the capitalised borrowing costs of the Group and the Company included in vessels under construction and construction in progress amounted to approximately RMB60,865,000 and RMB23,246,000 (2012: RMB103,679,000 and RMB72,878,000), respectively.
(d) As at 31 December 2013, the accumulated impairment losses of the container vessels of the Group included under “accumulated depreciation and impairment losses” amounted to RMB26,363,000 (2012: RMB26,363,000).
(e) Depreciation expenses of RMB1,431,610,000 (2012: RMB1,450,418,000) has been charged to consolidated statement of profit or loss within costs of services, RMB26,728,000 (2012: RMB28,055,000) has been charged to consolidated statement of profit or loss within selling, administrative and general expenses (note 6), and RMB82,274,000 (2012: RMB48,643,000) was included in the profit for the year from a discontinued operation.

18 LEASEHOLD LAND AND LAND USE RIGHTS

Year ended 31 December 2012 Opening net book value Amortisation charge for the year (note 6) Closing net book amount At 31 December 2012 Cost Accumulated amortisation Net book amount Year ended 31 December 2013 Opening net book value Assets included in a discontinued operation (note 14) Disposals Amortisation charge for the year (note 6) Closing net book amount At 31 December 2013 Cost Accumulated amortisation Net book amount	The Group RMB’000 95,388 (2,407) 92,981 107,889 (14,908) 92,981 92,981 (14,583) – (2,407) 75,991 90,341 (14,350) 75,991	The Company RMB’000 11,226 (349) 10,877 13,918 (3,041) 10,877 10,877 – (10,528) (349) – – – –

– VII-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group’s and the Company’s leasehold land and land use rights are located in the PRC, and are held on lease periods ranging from 30 to 50 years. The amortisation of leasehold land and land use rights of RMB1,871,000 (2012: RMB1,871,000) has been charged to “selling, administrative and general expenses” and RMB536,000 (2012: RMB536,000) has been included in the profit for the year from a discontinued operation.

19 INTANGIBLE ASSETS

Year ended 31 December 2012 Opening net book value Exchange difference Additions Amortisation charge for the year (note 6) Closing net book amount At 31 December 2012 Cost Accumulated amortisation Net book amount Year ended 31 December 2013 Opening net book value Exchange difference Additions Assets included in a discontinued operation (note 14) Amortisation charge for the year (note 6) Closing net book amount At 31 December 2013 Cost Accumulated amortisation Net book amount	Port line use rights RMB’000 2,731 – – (58) 2,673 2,903 (230) 2,673 2,673 – – (2,615) (58) – – – –	The Group Computer software RMB’000 20,260 (7) 12,478 (6,674) 26,057 45,899 (19,842) 26,057 26,057 (123) 2,506 (940) (7,094) 20,406 43,627 (23,221) 20,406	Total RMB’000 22,991 (7) 12,478 (6,732) 28,730 48,802 (20,072) 28,730 28,730 (123) 2,506 (3,555) (7,152) 20,406 43,627 (23,221) 20,406	The Company Computer software RMB’000 4,104 – 8,796 (1,694) 11,206 16,120 (4,914) 11,206 11,206 – 2,091 – (2,090) 11,207 18,211 (7,004) 11,207

The Group’s port line use rights are located in Jinzhou, the PRC, and can be used for 50 years since the year 2008. The amortisation of intangible assets of RMB6,626,000 (2012: RMB6,313,000) has been charged to “selling, administrative and general expenses” and RMB526,000 (2012: RMB419,000) has been included in the profit for the year from a discontinued operation.

– VII-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

20 AVAILABLE-FOR-SALE FINANCIAL ASSETS – THE GROUP

			2013	2012
			RMB’000	RMB’000
Unlisted	equity	securities	–	362,140

As the investments did not have a quoted market price in an active market, the range of reasonable fair value estimates is so significant and the probabilities of the various estimates cannot be reasonably assessed, the directors of the Company are of the opinion that their fair values cannot be reliably measured and therefore are stated at cost.

The available-for-sale financial assets of China Shipping Terminal Company Limited amounted to RMB646,197,000 was classified as held for sale as at 31 December 2013.

21 INTERESTS IN SUBSIDIARIES – THE COMPANY

								2013	2012
								RMB’000	RMB’000
Investments	in	subsidiaries	–	unlisted	shares,	at	cost	13,241,339	14,974,207

The changes in investments in subsidiaries during the year comprised the following:

(i) The investment in subsidiaries amounted to RMB2,133,649 has been classified as held for sale.
(ii) In May 2013, the Company made capital investment in a newly established subsidiary, China Shipping (South America) Holdings Ltd. by cash injection of BRL5,559,400, representing a 95% equity interest in the subsidiary; and,
(iii) In November 2013, the Company made capital investment in a newly established subsidiary, Shanghai Zhenjing Industrial Co., Ltd., by cash and properties of RMB30,000,000 and RMB342,776,000, respectively, representing a 100% equity interest in the subsidiary; and,
(iv) The fair value of share option benefits amounting to approximately RMB13,330,000 (2012: RMB31,545,000) attributable to directors and employees (note 9) of subsidiaries is recorded as investments in subsidiaries.

The list of the principal subsidiaries of the Company as at 31 December 2013 is set out in note 43(a).

– VII-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

22 INTERESTS IN ASSOCIATES

The Group

Beginning of year Increase in investments (Notes a to b) Share of results of associates Interests in associates included in a discontinued operation (note 14) Dividend received End of year The Company Unlisted investment, at cost Beginning of year Increase in investments End of year	2013 RMB’000 293,965 20,000 43,666 (42,862) (17,466) 297,303 2013 RMB’000 213,972 – 213,972	2012 RMB’000 257,309 10,000 39,277 – (12,621)
		293,965

		2012 RMB’000 213,972 –
		213,972

Notes:

(a) In April 2013, the Group made further capital investment in Ningbo Mei Shan Bonded Port-Area New Bay Terminal Management Co., Ltd. (“Ningbo Mei Shan Port”) by cash injection of RMB20,000,000. After this investment, the Group’s equity interest in Ningbo Mei Shan Port remains 20%.
(b) In April 2012, the Group made further capital investment in Ningbo Mei Shan Bonded Port-Area New Bay Terminal Management Co., Ltd. (“Ningbo Mei Shan Port”) by cash injection of RMB10,000,000. After this investment, the Group’s equity interest in Ningbo Mei Shan Port remains 20%.
(c) The interests in associates as at 31 December 2013 included goodwill of RMB670,000 (2012: RMB670,000). The Group’s share of the result of its associates, all of which are unlisted, and the aggregated assets and liabilities (excluding goodwill), are as follows:

		2013				2012
		*Ningbo				Ningbo
	Angang	Mei Shan	CS		Angang	Mei Shan	CS
	Transportation	Port	Finance	Total	Transportation	Port	Finance	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total assets	97,721	43,089	2,442,152	2,582,962	93,039	21,050	2,504,626	2,618,715
Total liabilities	32,871	227	2,210,369	2,243,467	27,884	94	2,297,442	2,325,420
Net assets	64,850	42,862	231,783	339,495	65,155	20,956	207,184	293,295
Revenue	123,936	3,000	96,040	222,976	90,792	1,500	110,834	203,126
Net profit	360	1,906	41,400	43,666	764	757	37,756	39,277
Percentage of interest held	20.07%	20.00%	25.00%		20.07%	20.00%	25.00%

Interests in Ningbo Mei Shan Port were included in discontinued operation as at 31 December 2013.
(d) The details of the associates of the Group and the Company as at 31 December 2013 are set out in note 43(b).

– VII-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

23 INTERESTS IN JOINT VENTURES

The Group

Beginning of year Increase in investments (Notes a to b) Share of results of joint ventures Others Dividends declared by joint ventures Liquidation of joint ventures Interests in joint ventures included in a discontinued operation (note 14) Exchange differences End of year The Company Unlisted investment, at cost Beginning of year Increase in investments End of year	2013 RMB’000 1,329,542 1,020 55,175 665 (44,679) (28,870) (1,261,501) (285) 51,067 2013 RMB’000 41,500 – 41,500	2012 RMB’000 1,294,881 9,800 51,166 225 (26,272) – – (258) 1,329,542 2012 RMB’000 41,500 – 41,500

Notes:

(a) In July 2013, the Group made capital investments in a newly established company, Lianyungang Gangtie International Container Joint Transport Co., Ltd. by cash injections of RMB1,020,000 representing a 30% equity interest in the investees.
(b) In October 2012, the Group made capital investments in a newly established company, Lianyungang Xindongrun Port Stevedoring Co., Ltd. by cash injections of RMB9,800,000, representing a 49% equity interest in the investees.
(c) There are no significant contingent liabilities relating to the Group and the Company’s interests in the joint ventures, and no significant contingent liabilities of the ventures themselves.

– VII-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(d) The interests in joint ventures as at 31 December 2013 included goodwill of RMB31,959,000 (2012: RMB31,959,000). The Group’s share of the results of its joint ventures, all of which are unlisted, and their aggregated assets and liabilities (excluding goodwill), are as follows:

			2013
	*Guangzhou	*Dalian
	Nansha Port	International	Others
	Stevedoring	Container	included in
	Corporation	Terminal	continuing
	Limited	Co., Ltd.	operations	*Others	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total assets	1,377,335	941,941	131,787	630,679	3,081,742
Total liabilities	718,621	544,544	80,720	393,330	1,737,215
Net assets	658,714	397,397	51,067	237,349	1,344,527
Revenue	297,814	109,372	37,255	212,805	657,246
Net profit	45,876	(4,505)	5,541	8,263	55,175
Percentage of
interest held	40%	30%	40%-50%	30%-49%

		2012
	Guangzhou	Dalian
	Nansha Port	International
	Stevedoring	Container
	Corporation	Terminal Co.,
	Limited	Ltd.	Others	Total
	RMB’000	RMB’000	RMB’000	RMB’000
Total assets	1,257,716	956,528	851,676	3,065,920
Total liabilities	715,133	555,174	498,030	1,768,337
Net assets	542,583	401,354	353,646	1,297,583
Revenue	287,246	87,579	229,758	604,583
Net profit	37,426	1,966	11,774	51,166
Percentage of interest held	40%	30%	30%-50%

Interests in these joint ventures were included in discontinued operation as at 31 December 2013.

(e) The details of the joint ventures of the Group and the Company as at 31 December 2013 are set out in note 43(c).

24 FINANCIAL INSTRUMENTS BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below:

Assets per statement of financial position: Available-for-sale financial assets (note 20) Loans and receivables – Trade and notes receivables (note 28) – Other receivables – Restrict cash (note 29) – Cash and cash equivalents (note 29)	The Group 2013 2012 RMB’000 RMB’000 – 362,140 2,476,402 2,263,700 255,517 244,000 2,100 1,000 9,014,462 8,830,970 11,748,481 11,701,810	The Company 2013 2012 RMB’000 RMB’000 – – 1,188,531 1,246,185 201,872 478,749 – – 5,445,944 4,225,897 6,836,347 5,950,831	The Company 2013 2012 RMB’000 RMB’000 – – 1,188,531 1,246,185 201,872 478,749 – – 5,445,944 4,225,897 6,836,347 5,950,831
			5,950,831

– VII-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Liabilities per statement of financial position: Other financial liabilities at amortised cost – Trade payables (note 36) – Other payables and accruals – Interest-bearing bank and other borrowings (note 32) – Domestic corporate bonds (note 33) – Finance lease obligations (note 34)	The Group 2013 2012 RMB’000 RMB’000 3,890,379 3,883,845 655,273 656,505 18,937,326 16,892,084 1,791,530 1,789,078 221,370 348,018 25,495,878 23,569,530	The Company 2013 2012 RMB’000 RMB’000 4,602,319 4,464,521 1,581,488 528,329 4,599,783 3,753,655 1,791,530 1,789,078 – – 12,575,120 10,535,583	The Company 2013 2012 RMB’000 RMB’000 4,602,319 4,464,521 1,581,488 528,329 4,599,783 3,753,655 1,791,530 1,789,078 – – 12,575,120 10,535,583
			10,535,583

25 FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group’s and the Company’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

Group

Financial liabilities Long term borrowing Domestic corporate bonds Finance lease obligations	Carrying amounts 2013 2012 RMB’000 RMB’000 10,917,131 15,363,812 1,791,530 1,789,078 186,597 228,384 12,895,258 17,381,274	Fair values 2013 2012 RMB’000 RMB’000 10,872,225 15,350,360 1,706,526 1,662,124 186,597 228,384 12,765,348 17,240,868	Fair values 2013 2012 RMB’000 RMB’000 10,872,225 15,350,360 1,706,526 1,662,124 186,597 228,384 12,765,348 17,240,868
			17,240,868

Company

Financial liabilities Long term borrowing Domestic corporate bonds	Carrying amounts 2013 2012 RMB’000 RMB’000 2,600,000 2,923,969 1,791,530 1,789,078 4,391,530 4,713,047	Fair values 2013 2012 RMB’000 RMB’000 2,555,094 2,855,874 1,706,526 1,662,124 4,261,620 4,517,998	Fair values 2013 2012 RMB’000 RMB’000 2,555,094 2,855,874 1,706,526 1,662,124 4,261,620 4,517,998
			4,517,998

Management has assessed that the fair values of cash and cash equivalents, restricted cash, trade and notes receivables, trade payables, financial assets included in other receivables, financial liabilities included in accruals and other payables and, short term borrowing approximate to their carrying amounts largely due to the short term maturities of these instruments.

– VII-60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group’s corporate finance team headed by the finance manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The corporate finance team reports directly to the chief financial officer and the audit committee. At each reporting date, the corporate finance team analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer. The valuation process and results are discussed with the audit committee twice a year for interim and annual financial reporting.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The fair values of the non-current portion of long term borrowing, domestic corporate bonds, and finance lease obligations have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The Group’s own non-performance risk for finance lease obligations, and interest-bearing bank as at 31 December 2013 was assessed to be insignificant.

For the fair value of the unlisted available-for-sale equity investments, as the investments did not have a quoted market price in an active market, the range of reasonable fair value estimates is so significant and the probabilities of the various estimates cannot be reasonably assessed, the directors of the Company are of the opinion that their fair values cannot be reliably measured and therefore are stated at cost.

Fair Value Hierarchy

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level	1	–	Quoted market prices in an active market (that are unadjusted) for identical assets or
			liabilities
Level	2	–	Valuation techniques (for which the lowest level input that is significant to the fair value
			measurement is directly or indirectly observable)
Level	3	–	Valuation techniques (for which the lowest level input that is significant to the fair value
			measurement is unobservable)

The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:

Liabilities for which fair values are disclosed:

Group

As at 31 December 2013

Long term borrowing Domestic corporate bonds Finance lease obligations	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 10,917,131 1,791,530 186,597
	12,895,258

– VII-61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2012

Long term borrowing Domestic corporate bonds Finance lease obligations	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 15,363,812 1,789,078 228,384
	17,381,274

Company

As at 31 December 2013

Long term borrowing Domestic corporate bonds	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 2,600,000 1,791,530
	4,391,530

As at 31 December 2012

Long term borrowing Domestic corporate bonds	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 2,923,969 1,789,078
	4,713,047

– VII-62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

26 CREDIT QUALITY OF FINANCIAL ASSETS

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates.

(A) Trade Receivables

As at 31 December 2013, the Group’s trade receivables of RMB2,064,190,000 (2012: RMB2,240,303,000) and the Company’s trade receivables of RMB1,208,953,000 (2012: RMB1,216,479,000) were due within three months. Trade receivables that were due within three months mainly represent those due from customers with good credit history and a low default rate. Trade receivables that were either past due or impaired are disclosed in note 28.

None of the financial assets that are fully performing has been renegotiated in the last year.

(B) Cash and Cash Equivalents

The Group categorises its cash in banks into the following:

Major international banks (Citibank, ABN AMRO Bank, etc.)
Group 1 – Major international banks (Citibank, ABN AMRO Bank, etc.)
• Group 2 – Top four banks in the PRC (China Construction Bank, Bank of China, Agricultural Bank of China and Industrial and Commercial Bank of China)
• Group 3 – Other reputable PRC banks

The management considered the credit risk in respect of cash and bank deposits with financial institutions is relatively small as each counterparty either bears a high credit rating or is a large PRC bank. The management believes the state is able to support the PRC banks in the event of a crisis.

Group 1 Group 2 Group 3*	The Group 2013 2012 RMB’000 RMB’000 1,002,671 1,726,376 4,246,825 3,841,855 3,764,966 3,262,739 9,014,462 8,830,970	The Company 2013 2012 RMB’000 RMB’000 514,784 132,555 3,248,361 3,481,817 1,682,799 611,525 5,445,944 4,225,897	The Company 2013 2012 RMB’000 RMB’000 514,784 132,555 3,248,361 3,481,817 1,682,799 611,525 5,445,944 4,225,897
			4,225,897

Included cash on hand held by companies of the Group

27 INVENTORIES

Bunkers Others	The Group 2013 2012 RMB’000 RMB’000 1,420,095 1,196,394 125,275 41,636 1,545,370 1,238,030	The Company 2013 2012 RMB’000 RMB’000 789,955 466,356 123,022 27,390 912,977 493,746	The Company 2013 2012 RMB’000 RMB’000 789,955 466,356 123,022 27,390 912,977 493,746
			493,746

– VII-63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

28 TRADE AND NOTES RECEIVABLES

The ageing analysis of the trade and notes receivables based on invoice dates is as follows:

The carrying amounts of trade and notes receivables approximate their fair values as at the statement of financial position dates.

Trade receivables – Subsidiaries – Fellow subsidiaries – Third parties Notes receivable Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months Over 1 year Less: provision for impairment of receivables	The Group 2013 2012 RMB’000 RMB’000 – – 345,561 385,232 1,805,866 1,684,558 2,151,427 2,069,790 324,975 193,910 2,476,402 2,263,700 2,064,190 2,240,303 333,358 82,066 74,461 3,109 70,223 – 2,525 3,623 2,544,757 2,329,101 (68,355) (65,401) 2,476,402 2,263,700	The Company 2013 2012 RMB’000 RMB’000 145,647 289,229 64,813 38,663 726,606 773,614 937,066 1,101,506 251,465 144,679 1,188,531 1,246,185 1,208,953 1,216,479 887 53,958 622 946 2,206 – – – 1,212,668 1,271,383 (24,137) (25,198) 1,188,531 1,246,185	The Company 2013 2012 RMB’000 RMB’000 145,647 289,229 64,813 38,663 726,606 773,614 937,066 1,101,506 251,465 144,679 1,188,531 1,246,185 1,208,953 1,216,479 887 53,958 622 946 2,206 – – – 1,212,668 1,271,383 (24,137) (25,198) 1,188,531 1,246,185
			1,101,506 144,679
			1,246,185

			1,216,479 53,958 946 – –
			1,271,383 (25,198)
			1,246,185

The carrying amounts of the trade and notes receivables are denominated in the following currencies:

RMB HKD USD Other currencies	The Group 2013 2012 RMB’000 RMB’000 1,292,324 1,319,041 95,206 47,351 1,023,454 839,829 65,418 57,479 2,476,402 2,263,700	The Company 2013 2012 RMB’000 RMB’000 1,011,085 901,944 20 26 167,654 329,119 9,772 15,096 1,188,531 1,246,185	The Company 2013 2012 RMB’000 RMB’000 1,011,085 901,944 20 26 167,654 329,119 9,772 15,096 1,188,531 1,246,185
			1,246,185

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Group does not hold any collateral as security.

– VII-64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Credit Policy

Credit terms in a range within three months are granted to those customers with a good payment history. There is no concentration of credit risk with respect to trade receivables, as the Group and the Company have a large number of customers, internationally dispersed.

As at 31 December 2013, based on the invoice date, trade receivables of the Group and the Company that were aged over three months amounted to RMB480,567,000 and RMB3,715,000 (2012: RMB88,798,000 and RMB54,904,000), respectively. They are regarded as over-due and partially impaired, and the related amounts of provisions, estimated by management based on historic experiences of credit losses amounted to RMB68,355,000 and RMB24,137,000 (2012: RMB65,401,000 and RMB25,198,000), respectively.

The movements in the provision for impairment of trade and notes receivables are as follows:

At 1 January Provision for impairment of trade receivables (note 6) Provision for impairment included in a discontinued operation At 31 December	The Group 2013 2012 RMB’000 RMB’000 65,401 48,968 4,435 16,433 (1,481) – 68,355 65,401	The Company 2013 2012 RMB’000 RMB’000 25,198 9,166 (1,061) 16,032 – – 24,137 25,198	The Company 2013 2012 RMB’000 RMB’000 25,198 9,166 (1,061) 16,032 – – 24,137 25,198
			25,198

The creation and release of provision for impaired receivables have been included in “selling, administrative and general expenses from continuing operations” in the consolidated statement of profit or loss (note 6) and a reversal of RMB290,000 (2012: provision RMB511,000) has been included in the profits for the year from a discontinued operation.

29 CASH AND CASH EQUIVALENTS

Cash at banks and in hand Short-term bank deposits Less: Restricted cash	The Group 2013 2012 RMB’000 RMB’000 3,575,544 5,134,814 5,441,018 3,697,156 9,016,562 8,831,970 (2,100) (1,000) 9,014,462 8,830,970	The Company 2013 2012 RMB’000 RMB’000 2,523,732 905,871 2,922,212 3,320,026 5,445,944 4,225,897 – – 5,445,944 4,225,897	The Company 2013 2012 RMB’000 RMB’000 2,523,732 905,871 2,922,212 3,320,026 5,445,944 4,225,897 – – 5,445,944 4,225,897
			4,225,897 –
			4,225,897

Cash and cash equivalents are denominated in the following currencies:

RMB HKD USD Other currencies	The Group 2013 2012 RMB’000 RMB’000 4,457,684 4,624,308 38,484 35,398 4,319,262 4,029,804 199,032 141,460 9,014,462 8,830,970	The Company 2013 2012 RMB’000 RMB’000 3,791,364 3,941,974 12 61 1,620,509 257,901 34,059 25,961 5,445,944 4,225,897	The Company 2013 2012 RMB’000 RMB’000 3,791,364 3,941,974 12 61 1,620,509 257,901 34,059 25,961 5,445,944 4,225,897
			4,225,897

– VII-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2013, certain of the Group’s current time deposits of RMB2,100,000 (2012: RMB1,000,000) were pledged to the customs as guarantees for import.

30 ISSUED CAPITAL

		The Group and	the Company
	Number of	A Share of	H Share of
	shares	RMB1 each	RMB1 each	Total
	’000	’000	’000	’000
Issued and fully paid:
At 1 January 2012,
31 December 2012 and 2013	11,683,125	7,932,125	3,751,000	11,683,125

As at 31 December 2013, all issued shares are registered, fully paid and divided into 11,683,125,000 shares (2012: 11,683,125,000 shares) of RMB1.00 each, comprising 7,932,125,000 A Shares and 3,751,000,000 H Shares (2012: 7,932,125,000 A Shares and 3,751,000,000 H Shares).

31 OTHER RESERVES AND RETAINED EARNINGS

(A) Special Reserve

At 1 January Accrued during the year Used during the year At 31 December	The Group 2013 2012 RMB’000 RMB’000 2,229 – 176,601 164,475 (140,552) (162,246) 38,278 2,229	The Company 2013 2012 RMB’000 RMB’000 449 – 158,844 146,428 (124,461) (145,979) 34,832 449	The Company 2013 2012 RMB’000 RMB’000 449 – 158,844 146,428 (124,461) (145,979) 34,832 449
			449

According to “Circular on Printing and Distributing the Administrative Measures for the Withdrawal and Use of Expenses for Safety Production of Enterprises” issued by the Ministry of Finance and the Safety Production General Bureau on 14 February 2012, the Group is required to accrue a “Safety Fund” to improve the production safety. The Group should accrue the Safety Fund from 1 January 2012. The accrual standard rate is 1% of the revenue from transportation services of the PRC entities of the Group. The fund is accrued according to revenue and in a progressive way monthly.

(B) Other Reserves

Capital surplus RMB’000 Balance at 1 January 2012 17,024,548 Currency translation difference – Others 225 Balance at 31 December 2012 17,024,773 Balance at 1 January 2013 17,024,773 Currency translation difference – Others 659 Balance at 31 December 2013 17,025,432 Balance at 1 January 2012 till 31 December 2013	The Group Statutory surplus reserve Translation RMB’000 RMB’000 1,355,763 (1,319,249) – (19,426) – – 1,355,763 (1,338,675) 1,355,763 (1,338,675) – (147,204) – – 1,355,763 (1,485,879) The Company Capital surplus Statutory surplus reserve RMB’000 RMB’000 17,657,126 1,355,763	Total RMB’000 17,061,062 (19,426) 225
		17,041,861
		17,041,861 (147,204) 659
		16,895,316

		Total RMB’000 19,012,889

– VII-66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(C) Accumulated Losses

At 1 January Profit/(loss) for the year Accrued special reserve during the year Used special reserve during the year Others At 31 December	The Group 2013 2012 RMB’000 RMB’000 (2,198,638) (2,720,854) (2,610,098) 524,921 (176,601) (164,475) 140,552 162,246 (475) (476) (4,845,260) (2,198,638)	The Company 2013 2012 RMB’000 RMB’000 (1,083,225) (600,683) (1,016,486) (482,093) (158,844) (146,428) 124,461 145,979 – – (2,134,094) (1,083,225)	The Company 2013 2012 RMB’000 RMB’000 (1,083,225) (600,683) (1,016,486) (482,093) (158,844) (146,428) 124,461 145,979 – – (2,134,094) (1,083,225)
			(1,083,225)

Capital surplus mainly represents share premium and reserves arising from business combinations under common control.

In accordance with the PRC regulations and the articles of association of the companies of the Group, before distributing the net profit of each year, companies of the Group registered in the PRC are required to set aside 10% of their statutory net profit for the year after offsetting any prior year’s losses as determined under relevant PRC accounting standards to the statutory surplus reserve fund. When the balance of this reserve reaches 50% of each company’s share capital, any further appropriation is optional. The statutory surplus reserve fund can be utilised to offset prior years’ losses or to issue bonus shares. However, the statutory surplus reserve fund must be maintained at a minimum of 25% of the entity’s share capital after this issuance.

32 INTEREST-BEARING BANK AND OTHER BORROWINGS

Non-current Long-term bank borrowings Borrowing from parent and ultimate holding company (note 42(c)) Current Short-term bank borrowings Commercial paper notes Long-term bank borrowings – current portion Borrowing from a subsidiary Representing: Borrowing from a related party – unsecured Bank borrowings – unsecured – secured	The Group 2013 2012 RMB’000 RMB’000 8,317,131 13,363,812 2,600,000 2,000,000 10,917,131 15,363,812 1,707,132 – 2,438,760 – 3,874,303 1,528,272 – – 8,020,195 1,528,272 18,937,326 16,892,084 2,600,000 2,000,000 12,379,878 10,125,924 3,957,448 4,766,160 18,937,326 16,892,084	The Company 2013 2012 RMB’000 RMB’000 – 923,969 2,600,000 2,000,000 2,600,000 2,923,969 304,845 – – – – 12,571 1,694,938 817,115 1,999,783 829,686 4,599,783 3,753,655 4,294,938 2,817,115 304,845 936,540 – – 4,599,783 3,753,655	The Company 2013 2012 RMB’000 RMB’000 – 923,969 2,600,000 2,000,000 2,600,000 2,923,969 304,845 – – – – 12,571 1,694,938 817,115 1,999,783 829,686 4,599,783 3,753,655 4,294,938 2,817,115 304,845 936,540 – – 4,599,783 3,753,655
			2,923,969

			– – 12,571 817,115
			829,686
			3,753,655
			2,817,115 936,540 –
			3,753,655

– VII-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The maturity periods of the borrowings are as follows:

Within one year In the second year In the third to fifth year After fifth year	The Group 2013 2012 RMB’000 RMB’000 8,020,195 1,528,272 7,067,374 4,387,980 2,454,772 8,816,735 1,394,985 2,159,097 18,937,326 16,892,084	The Company 2013 2012 RMB’000 RMB’000 1,999,783 829,686 2,600,000 12,571 – 2,911,398 – – 4,599,783 3,753,655	The Company 2013 2012 RMB’000 RMB’000 1,999,783 829,686 2,600,000 12,571 – 2,911,398 – – 4,599,783 3,753,655
			3,753,655

The exposure of the Group and the Company’s borrowings to interest-rate changes and the contractual repricing dates is as follows:

Within 6 months 6 to 12 months In the second to fifth year After fifth year	The Group 2013 2012 RMB’000 RMB’000 15,657,359 11,634,164 – 121,500 2,600,000 4,402,380 679,967 734,040 18,937,326 16,892,084	The Company 2013 2012 RMB’000 RMB’000 1,999,783 817,115 – – 2,600,000 2,936,540 – – 4,599,783 3,753,655	The Company 2013 2012 RMB’000 RMB’000 1,999,783 817,115 – – 2,600,000 2,936,540 – – 4,599,783 3,753,655
			3,753,655

As at 31 December 2013, the secured long-term bank borrowings of the Group were secured by the following collateral:

(i) Legal mortgage over certain container vessels, containers and port and depot infrastructure of the Group with a net book value of approximately RMB5,942,678,000 (2012: RMB6,033,486,000) (note 17(b)), and
(ii) Charges over shares of certain vessels-owning subsidiaries of the Group.

An analysis of the carrying amounts of the Group and the Company’s borrowings by type and currency is as follows:

RMB – at fixed rates USD – at fixed rates – at floating rates	The Group 2013 2012 RMB’000 RMB’000 2,600,000 3,985,840 375,122 1,393,579 15,962,204 11,512,665 18,937,326 16,892,084	The Company 2013 2012 RMB’000 RMB’000 2,600,000 2,000,000 – 936,540 1,999,783 817,115 4,599,783 3,753,655	The Company 2013 2012 RMB’000 RMB’000 2,600,000 2,000,000 – 936,540 1,999,783 817,115 4,599,783 3,753,655
			3,753,655

– VII-68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The weighted average effective interest rates at the respective statement of financial position dates are set out as follows:

Bank borrowings – RMB – USD Borrowing from a related party – RMB	The Group 2013 2012 RMB’000 RMB’000 5.67% 6.35% 2.71% 2.55% 4.75% 5.02%	The Company 2013 2012 RMB’000 RMB’000 – – 1.76% 3.60% 4.69% 5.02%	The Company 2013 2012 RMB’000 RMB’000 – – 1.76% 3.60% 4.69% 5.02%
			5.02%

The carrying amounts of the current bank borrowings approximate their fair values as at the statement of financial position dates as the impact of discounting is not significant.

The carrying amounts and the fair values of the non-current borrowings, which are based on cash flows discounted using a rate of 6.55% (2012: 6.55%), are as follows:

Carrying amounts Fair values	The Group 2013 2012 RMB’000 RMB’000 10,917,131 15,363,812 10,872,225 15,350,360	The Company 2013 2012 RMB’000 RMB’000 2,600,000 2,923,969 2,555,094 2,855,874	The Company 2013 2012 RMB’000 RMB’000 2,600,000 2,923,969 2,555,094 2,855,874
			2,855,874

The Group has the following undrawn borrowing facilities as at 31 December 2013:

Floating rate: – Expiring within one year – Expiring beyond one year	The Group 2013 2012 RMB’000 RMB’000 – 807,812 1,704,466 – 1,704,466 807,812	The Group 2013 2012 RMB’000 RMB’000 – 807,812 1,704,466 – 1,704,466 807,812
		807,812

DOMESTIC CORPORATE BONDS
	The Group and the Company
	2013	2012
	RMB’000	RMB’000
Non-current domestic corporate bonds	1,791,530	1,789,078

On 12 June 2007, the Company issued domestic corporate bonds in the PRC with a face value of RMB1,800,000,000, pursuant to the approval obtained from the National Development and Reform Commission of the PRC. The bonds are denominated in RMB and for a ten-year period fully repayable by 12 June 2017, and bear interest at a fixed rate of 4.51% per annum. The bonds are guaranteed by Bank of China, Shanghai branch, and have been listed on the interbank bond market in the PRC.

– VII-69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The bonds were initially recognised at their fair value of RMB1,800,000,000, after deducting the transaction costs that are directly attributable to the bonds amounting to approximately RMB24,512,000. As at 31 December 2013, the estimated fair value of the bonds is approximately RMB1,706,526,000 (2012: RMB1,662,124,000). The fair value is calculated based on the discounted cash flows using applicable discount rates from the prevailing market interest rates offered to the Group for debts with substantially the same characteristics and maturity dates. The discount rate used was approximately 6.55% (2012: 6.55%) per annum.

34 FINANCE LEASE OBLIGATIONS – THE GROUP

Finance lease obligations Within one year In the second year In the third to fifth year After fifth year Less: within one year (current portion)	Minimum lease payment RMB’000 46,996 46,991 129,835 38,284	2013 Finance charges RMB’000 12,223 10,120 16,898 1,495	Net present value of minimum lease payment RMB’000 34,773 36,871 112,937 36,789	Minimum lease payment RMB’000 136,414 48,457 142,855 78,899	2012 Finance charges RMB’000 16,780 12,593 24,302 4,932	Net present value of minimum lease payment RMB’000 119,634 35,864 118,553 73,967
	215,110	28,513	186,597	270,211	41,827	228,384

The average effective interest rate of finance lease obligations of the Group is 5.80% (2012: 6.40%) per annum.

The carrying amounts of finance lease obligations approximate their fair value as at the statement of financial position dates. The fair values were determined based on discounted cash flows using average borrowing rates.

All finance lease obligations are denominated in USD.

35 DEFERRED INCOME TAX

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority.

Deferred income tax assets: – Deferred income tax assets to be settled after more than 12 months Deferred income tax liabilities: – Deferred income tax liabilities to be settled after more than 12 months	The Group 2013 2012 RMB’000 RMB’000 496,534 496,859 (27) (11) 496,507 496,848	The Company 2013 2012 RMB’000 RMB’000 491,889 491,889 – – 491,889 491,889	The Company 2013 2012 RMB’000 RMB’000 491,889 491,889 – – 491,889 491,889
			491,889

– VII-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The movements in the deferred income tax assets/(liabilities) are as follows:

Beginning of year Charged to consolidated statement of profit or loss (note 12) End of year	The Group 2013 2012 RMB’000 RMB’000 496,848 12,562 (341) 484,286 496,507 496,848	The Company 2013 2012 RMB’000 RMB’000 491,889 6,250 – 485,639 491,889 491,889	The Company 2013 2012 RMB’000 RMB’000 491,889 6,250 – 485,639 491,889 491,889
			491,889

The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:

Deferred income tax assets:

The Group At 1 January 2012 Charged to consolidated statement of profit or loss At 31 December 2012 Charged to consolidated statement of profit or loss At 31 December 2013 The Company At 1 January 2012 Charged to consolidated statement of profit or loss At 1 January 2013, 31 December 2012 and 2013 Deferred income tax liabilities: The Group At 1 January 2012 Credited to consolidated statement of profit or loss At 31 December 2012 Credited to consolidated statement of profit or loss At 31 December 2013 The Company At 1 January 2012, 31 December 2012 and 2013	Tax losses RMB’000 3,282 485,639 488,921 (3,282) 485,639 – 485,639 485,639	Others RMB’000 9,311 (1,373) 7,938 2,957 10,895 6,250 – 6,250	Others RMB’000 9,311 (1,373) 7,938 2,957 10,895 6,250 – 6,250	Total RMB’000 12,593 484,266
				496,859 (325)
				496,534
				6,250 485,639
				491,889

				Others RMB’000 (31) 20
				(11) (16)
				(27)
				–

As at 31 December 2013, the Group and the Company recognised income tax assets of RMB485,639,000, in respect of cumulative tax losses amounted to RMB1,942,556,000 (“The Cumulative Tax Losses”), because it is estimated that taxable profits will be available against which the Cumulative Tax Losses will be utilised according to a profit forecast of the Group.

– VII-71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

No deferred tax assets has been recognised by the Group and the Company on cumulative tax losses amounting to approximately RMB2,543,670,000 and RMB2,097,444,000, respectively, because it is uncertain that the temporary differences can be reversed in the foreseeable future. Tax losses amounting to approximately RMB2,406,036,000 of the Group will expire within five years from 1 January 2013. Tax losses amounting to approximately RMB137,634,000 of the Group are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. All tax losses of the Company will expire within five years from 1 January 2013.

36 TRADE PAYABLES

Trade payables – Subsidiaries – Fellow subsidiaries – Third parties	The Group 2013 2012 RMB’000 RMB’000 – – 795,372 937,097 3,095,007 2,946,748 3,890,379 3,883,845	The Company 2013 2012 RMB’000 RMB’000 3,389,343 3,304,164 616,931 402,048 596,045 758,309 4,602,319 4,464,521	The Company 2013 2012 RMB’000 RMB’000 3,389,343 3,304,164 616,931 402,048 596,045 758,309 4,602,319 4,464,521
			4,464,521

The ageing analysis of the trade payables based on invoice dates is as follows:

Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months 1 to 2 years	The Group 2013 2012 RMB’000 RMB’000 3,642,819 3,742,546 121,760 70,593 89,017 7,898 15,353 37,792 21,430 25,016 3,890,379 3,883,845	The Company 2013 2012 RMB’000 RMB’000 4,594,742 4,446,147 3,557 5,247 1,259 2,481 2,761 271 – 10,375 4,602,319 4,464,521	The Company 2013 2012 RMB’000 RMB’000 4,594,742 4,446,147 3,557 5,247 1,259 2,481 2,761 271 – 10,375 4,602,319 4,464,521
			4,464,521

The carrying amounts of the trade payables are denominated in the following currencies:

RMB HKD USD Other currencies	The Group 2013 2012 RMB’000 RMB’000 1,979,837 1,584,610 77,549 81,012 1,665,597 2,097,789 167,396 120,434 3,890,379 3,883,845	The Company 2013 2012 RMB’000 RMB’000 3,303,602 3,534,388 14,565 25,991 1,237,492 832,513 46,660 71,629 4,602,319 4,464,521	The Company 2013 2012 RMB’000 RMB’000 3,303,602 3,534,388 14,565 25,991 1,237,492 832,513 46,660 71,629 4,602,319 4,464,521
			4,464,521

The carrying amounts of the trade payables approximate their fair values as at the statement of financial position dates.

– VII-72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

37 PROVISIONS

	Legal claims
	RMB’000
The Group and the Company
At 1 January 2012, 31 December 2012 and 2013 Utilised during the year	25,000

The provision for legal claims of RMB25,000,000 is related to a legal claim brought against the Company by customers of the Company. In the opinion of the Company’s directors, after taking into account legal advice, the outcome of this legal claim will not give rise to any significant loss beyond the amounts provided as at 31 December 2013.

38 DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Cash and bank balances Trade payables Other payables and accruals Interest-bearing bank and other borrowings Non-controlling interests Gain on disposal of subsidiaries Satisfied by: Cash	2013 RMB’000 2,321,996 59,708 (32,573) (7,520) (1,403,340) (422,222)
	240,001
	756,050
	756,050

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash consideration Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2013 RMB’000 756,050 (59,708)
	696,342

– VII-73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

39 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS

(A) Reconciliation of the Loss Before Income Tax to Net Cash Generated From/(Used In) Operations:

Profit/(loss) before income tax:
From continuing operations
From a discontinued operation (note 14)
Depreciation (notes 17)
Amortisation (notes 18, 19)
Dividend income from available-for-sale financial assets
Share of results of associated companies (note 22)
Share of results of joint ventures (note 23)
Interest expense
Finance charge of finance lease obligations (note 11)
Interest income
Change in fair value of share-based compensation liability
(note 9)
Provision for impairment of trade receivables
Gains on disposal of items of property, plant and equipment
Loss on disposal of a joint venture
Gain on disposal of subsidiaries (note 38)
Operating (loss)/profit before working capital changes
Increase in inventories
Increase in trade and notes receivables
Decrease/(increase) in prepayments and other receivables
Increase in restricted cash
Increase in trade payables
Increase/(decrease) in accruals and other payables
Net cash (used in)/generated from operations

Year ended 31 December
2013
2012
RMB’000
RMB’000
(2,828,388)
(26,447)
356,119
180,979
1,540,612
1,527,116
9,559
9,139
(12,576)
(11,497)
(43,666)
(39,277)
(55,175)
(51,166)
518,692
519,781
15,956
29,350
(117,409)
(163,256)
(17,261)
8,064
4,434
16,433
18,238
(1,145,291)
481
–
(240,001)
–
(850,385)
853,928
(319,032)
(31,651)
(332,805)
(503,069)
178,172
(1,949)
(1,100)
(1,000)
61,643
63,417
191,929
(150,088)
(1,071,578)
229,588

(B) Proceeds from Disposal of Items of Property, Plant and Equipment Comprise:

Net book amount (note 17) (Loss)/gains on disposal of items of property, plant and equipment Decrease of receipts in advance Proceeds from disposal of items of property, plant and equipment	2013 RMB’000 179,647 (18,238) – 161,409	2012 RMB’000 2,263,150 1,145,291 (19,129) 3,389,312

– VII-74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

40 COMMITMENTS

(A) Capital Commitments

As at 31 December 2013 and 2012, the Group and the Company had the following significant capital commitments which were not provided for in the statements of financial position:

	The Group		The Company	The Company
	2013	2012	2013	2012
	RMB’000	RMB’000	RMB’000	RMB’000
Contracted but not provided for:
– Vessels under construction	6,492,589	4,515,252	–	722,631

(B) Lease Commitments – the Group and the Company are the Lessees

As at 31 December 2013 and 2012, the Group and the Company had future aggregate minimum lease payments under non-cancelable operating leases as follows:

Land and buildings: – Within one year – In the second to fifth year – After fifth year Vessels chartered-in and containers under operating leases: – Within one year – In the second to fifth year – After fifth year	The Group 2013 2012 RMB’000 RMB’000 38,988 53,440 59,239 62,747 12,651 9,333 110,878 125,520 2,548,751 2,545,261 6,032,487 6,827,364 868,228 1,490,589 9,449,466 10,863,214 9,560,344 10,988,734	The Company 2013 2012 RMB’000 RMB’000 3,689 6,222 2,889 4,063 – – 6,578 10,285 32,559 38,315 – 5,226 – – 32,559 43,541 39,137 53,826	The Company 2013 2012 RMB’000 RMB’000 3,689 6,222 2,889 4,063 – – 6,578 10,285 32,559 38,315 – 5,226 – – 32,559 43,541 39,137 53,826
			10,285
			38,315 5,226 –
			43,541

			53,826

Note:

After the disposal of certain containers in 2012, the Group entered into operating lease agreements whereby the Group leased back these containers from the purchaser with an initial lease term of two years to four years. The rental payable by the Group was determined on the terms agreed with by both parties on an arm’s length basis.

– VII-75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(C) Future Operating Lease Arrangements – the Group and the Company are the Lessors

As at 31 December 2013 and 2012, the Group and the Company had future aggregate minimum lease receipts under non-cancellable operating leases, where the Group and the Company are the lessors as follows:

Vessels chartered-out under operating leases: – Within one year – In the second to fifth year – After fifth year	The Group 2013 2012 RMB’000 RMB’000 53,656 206,942 16,875 599,429 3,125 270,708 73,656 1,077,079	The Company 2013 2012 RMB’000 RMB’000 599,737 714,105 1,074,273 2,102,365 55,510 165,428 1,729,520 2,981,898	The Company 2013 2012 RMB’000 RMB’000 599,737 714,105 1,074,273 2,102,365 55,510 165,428 1,729,520 2,981,898
			2,981,898

(D) Other Commitments

As at 31 December 2013 and 2012, the Group had the following significant commitments which were not provided for in the statements of financial position:

Investments: – Contracted but not provided for – Authorised but not contracted for	The Group 2013 2012 RMB’000 RMB’000 312,000 332,000 39,200 94,200 351,200 426,200	The Group 2013 2012 RMB’000 RMB’000 312,000 332,000 39,200 94,200 351,200 426,200
		426,200

As at 31 December 2013, the investment commitments included capital commitments in relation to the Group’s interests in jointly ventures amounting to RMB191,200,000 and to the Group’s interests in an associate amounting to RMB160,000,000.

41 CONTINGENT LIABILITIES

As at 31 December 2013, the Group and the Company have no significant contingent liabilities.

42 SIGNIFICANT RELATED-PARTY TRANSACTIONS

The Group is part of a larger group of companies under China Shipping Group and has extensive transactions and relationships with members of the China Shipping Group incorporated in the PRC. China Shipping Group itself is a state-owned enterprise and is controlled by the PRC government. Neither of them produces financial statements for public use.

As the Group is controlled by China Shipping Group, it is considered to be indirectly controlled by the PRC government, which controls a substantial number of entities in the PRC. As the Group has early adopted the revised standard of HKAS 24 “Related Party Disclosure” since 1 January 2010, the Group and the Company are not required to disclose details of transactions with the government and other government-related entities.

– VII-76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(A) For the Years Ended 31 December 2013 and 2012, the Directors are of the view that the Following Companies are Significant Related Parties that have Transactions with the Group:

Name Relationship with the Group China Shipping (Group) Company Parent and ultimate holding company Rich Shipping Co., Ltd. Fellow subsidiary China Shipping (Turkey) Agency Co., Ltd. Fellow subsidiary China Shipping (Group) Mediterranean Shipping Rep. Office Fellow subsidiary China Shipping (Group) Africa Rep. Office Fellow subsidiary China Shipping Development Co., Ltd. Fellow subsidiary China Shipping Logistics Co., Ltd. Fellow subsidiary China Shipping Agency Co., Ltd. Fellow subsidiary China Shipping Air Cargo Co., Ltd. Fellow subsidiary China Shipping Industry Co., Ltd. Fellow subsidiary China Shipping Investment Co., Ltd. Fellow subsidiary China Shipping International Trading Co., Ltd. Fellow subsidiary China Shipping Telecommunications Co., Ltd. Fellow subsidiary Dong Fang International Investment Co., Ltd. Fellow subsidiary China Shipping Agency (Australia) Holdings Pte Ltd. Fellow subsidiary China Shipping Japan Co., Ltd. Fellow subsidiary China Shipping Agency (Korea) Co., Ltd. Fellow subsidiary China Shipping (Europe) Holding GmbH Fellow subsidiary China Shipping (Hong Kong) Holdings Co., Ltd. Fellow subsidiary China Shipping (North America) Holding Co., Ltd. Fellow subsidiary China Shipping (Western Asia) Holdings Co., Ltd. Fellow subsidiary China Shipping (South Eastern Asia) Holding Co., Ltd. Fellow subsidiary Shanghai Universal Logistics Equipment Co., Ltd. Fellow subsidiary China Shipping International Ship Management Co., Ltd. Fellow subsidiary China Shipping & Sinopec Suppliers Co., Ltd. Fellow subsidiary China Shipping Finance Co., Ltd. Fellow subsidiary and associated company Dalian Vanguard International Logistics Co., Ltd. Jointly-controlled entity

In addition to the related party information shown elsewhere in these consolidated financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of business between the Group and its related parties during the years and balances arising from related party transactions for the year ended 31 December 2013 and 2012.

(B) Significant Transactions with Related Parties

Transactions with parent and ultimate holding company Non-current borrowing Interest expense from non-current borrowing Transactions with fellow subsidiaries Revenue: Liner services Fuel supply Information technology services	2013 RMB’000 600,000 106,262 155,343 1,125,712 14,094	2012 RMB’000 2,000,000 79,684
		271,447 – 10,057

– VII-77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Expenditure: Lease of containers Lease of chassis Lease of properties Cargo and liner agency services Container management services Ship repair services Supply of fresh water, vessel fuel, lubricants, spare parts and other materials Depot services Information technology services Provision of crew members Loading and unloading services Purchase of containers Transactions with China Shipping Finance Co., Ltd. Borrowings Interest expense from borrowings Interest income from deposits (C) Balances with Related Parties	2013 RMB’000 182,287 22,088 20,072 587,593 150,070 75,580 2,127,274 8,559 43,054 31,926 583,709 479,025 643,040 934 93,682	2012 RMB’000 235,795 23,566 19,421 574,862 137,430 36,001 2,171,813 10,569 31,634 39,787 551,652 212,432
		– – 66,683

Balances with parent and ultimate holding company Borrowings Interest payables Balances with fellow subsidiaries Trade receivables Less: provisions Trade payables Balances with CS Finance Interest receivables Interest payables Borrowings Deposits	2013 RMB’000 (2,600,000) (79,247) 349,396 (10,482) 338,914 (795,372) 10,468 402 363,040 3,052,729	2012 RMB’000 (2,000,000) (73,684)
		397,881 (12,649)
		385,232
		(937,097)
		55,524 – – 3,054,718

The balances are unsecured and interest-free.

– VII-78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(D) Transactions with Other State-Owned Enterprises

The Group has transactions with other state-controlled entities including but not limited to the following:

Purchases of services, bunker and spare parts, etc.
Purchase of assets
Bank deposits and borrowings
Interest income and expense

These transactions are conducted in the ordinary course of business of the Group.

(E) Key Management Compensation

Basic salaries and allowances Pension and others welfare Fair value of the Rights (note 9)	2013 RMB’000 3,428 1,532 (1,025) 3,935	2012 RMB’000 9,923 1,044 2,136
		13,103

43 PARTICULARS OF SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES

(A) Subsidiaries

As at 31 December 2013, the Company has direct and indirect interests in the following subsidiaries:

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
Established and operating	in the PRC
China Shipping Container	5 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Dalian Co., Ltd.	2003	company				agency
China Shipping Container	26 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Guangzhou	2003	company				agency
Co., Ltd.
China Shipping Container	14 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Hainan Company	2003	company				agency
Limited
China Shipping Container	13 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Qingdao	2003	company				agency
Company Limited
China Shipping Container	13 January	Limited liability	RMB71,140,000	100%	–	Cargo and liner
Lines Shanghai Co.,	2003	company				agency
Ltd.

– VII-79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
China Shipping Container	15 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Shenzhen	2003	company				agency
Co., Ltd.
China Shipping Container	3 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Tianjin Company	2003	company				agency
Limited
China Shipping Container	6 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Xiamen Co., Ltd.	2003	company				agency
China Shipping Container	5 December	Limited liability	RMB38,000,000	90%	10%	Cargo and liner
Lines (Yangpu) Co.,	2002	company				agency
Ltd.
Shanghai Puhai Shipping	19 November	Limited liability	RMB682,911,111	98.2%	1.8%	International
Lines Co., Ltd.	1992	company				container
						shipping
China Shipping Container	20 May 2003	Limited liability	RMB1,550,000	10%	90%	Cargo and liner
Lines (Fuzhou) Co.,		company				agency
Ltd.
China Shipping Container	5 November	Limited liability	RMB3,000,000	–	100%	Cargo and liner
Lines (Haikou) Co.,	2003	company				agency
Ltd.
China Shipping Container	19 September	Limited liability	RMB6,500,000	45%	55%	Transportation
Lines (Jiangsu) Co.,	2003	company
Ltd.
China Shipping Container	12 March	Limited liability	RMB5,000,000	10%	90%	Cargo and liner
Lines Lianyungang	2003	company				agency
Co., Ltd.
China Shipping Container	6 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Lines (Qinhuangdao)		company				agency
Co., Ltd.
China Shipping Container	18 July 2003	Limited liability	RMB500,000	–	100%	Cargo and liner
Lines (Rizhao) Co.,		company				agency
Ltd.
Lianyungang New	11 July 2007	Limited liability	RMB470,000,000	–	55%	Operation of
Oriental International		company				container
Terminal Co., Ltd.						terminal
Lianyungang Xinsanli	17 June 2003	Limited liability	RMB1,000,000	–	40%	Debugging
Container Service		company				services for
Co., Ltd.						containers

– VII-80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
Lianyungang Sea-railway	24 February	Limited liability	RMB1,000,000	–	51%	Cargo and liner
Multi-modal	1998	company				agency
Transportation Co., Ltd.
China Shipping Container	18 February	Limited liability	RMB1,000,000	–	100%	Operation of
Terminal Development	2008	company				container
(Shanghai) Co., Ltd.						terminal
Shanghai China Shipping	16 March	Limited liability	RMB30,000,000	–	50%	Operation of
Container Terminal	2000	company				container
Co., Ltd.						terminal
Nanning China Shipping	18 September	Limited liability	RMB1,000,000	–	100%	Cargo and liner
Container Lines	2008	company				agency
Co., Ltd.
China Shipping Container	17 April 2009	Limited liability	RMB2,000,000	100%	–	Provision of
Lines (Dalian)		company				information
Information Processing						processing
Co., Ltd						service
China Shipping Container	18 June 2003	Limited liability	RMB7,000,000	45%	55%	Cargo and liner
Lines (Zhejiang)		company				agency
Co., Ltd.
Dandong China Shipping	18 April 2003	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Dongguan China Shipping	14 May 2004	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Fangchenggang China	6 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Shipping Container		company				agency
Lines Co., Ltd.
Jiangmen China Shipping	21 August	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines	2003	company				agency
Co., Ltd.
Jinzhou China Shipping	18 March	Limited liability	RMB1,500,000	–	100%	Cargo and liner
Container Lines	2003	company				agency
Co., Ltd.
Quanzhou China Shipping	2 September	Limited liability	RMB1,550,000	10%	90%	Cargo and liner
Container Lines	2003	company				agency
Co., Ltd.
Shantou China Shipping	18 April 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines		company				agency
Co., Ltd.

– VII-81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
Yingkou China Shipping	9 January	Limited liability	RMB1,000,000	10%	90%	Cargo and liner
Container Lines	2003	company				agency
Co., Ltd.
Zhanjiang China Shipping	23 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Zhongshan China	15 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Shipping Container		company				agency
Lines
Co., Ltd.
Weihai China Shipping	8 September	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines	2004	company				agency
Co., Ltd.
Yantai China Shipping	21 December	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines	2006	company				agency
Co., Ltd.
Longkou China Shipping	23 February	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines	2006	company				agency
Co., Ltd.
China Shipping Container	25 April 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Lines Chongqing		company				agency
Co., Ltd.
Changsha China Shipping	13 April 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
China Shipping Container	26 March	Limited liability	RMB1,500,000	–	100%	Cargo and liner
Lines Qinzhou Co.,	2010	company				agency
Ltd.
Zhangzhou China	11 June 2010	Limited liability	RMB1,550,000	–	100%	Cargo and liner
Shipping Container		company				agency
Lines
Co., Ltd.
Tangshan China Shipping	27 August	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Lines	2010	company				agency
Co., Ltd.
China Shipping Container	29 March	Limited liability	RMB1,500,000	–	100%	Cargo and liner
Lines Wuhu Co., Ltd.	2005	company				agency
Nantong China Shipping	21 June 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.

– VII-82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
China Shipping Container	26 May 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Lines Wuhan Co., Ltd.		company				agency
Jiujiang China Shipping	27 April 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Zhangjiagang China	15 March	Limited liability	RMB5,500,000	–	100%	Cargo and liner
Shipping Container	2005	company				agency
Lines Co., Ltd.
China Shipping (Yangpu)	13 December	Limited liability	RMB6,000,000	100%	–	Transportation,
Refrigeration Storage &	2001	company				storage and
Transportation Co., Ltd.						other
						services
China Shipping Yangshan	8 November	Limited liability	RMB239,000,000	100%	–	Placement,
International Container	2006	company				storage and
Storage &						other
Transportation Co., Ltd.						services for
						refrigerated
						containers
Shanghai Inchon	4 July 1998	Limited liability	USD2,000,000	–	75.5%	Transportation
International Ferry		company
Co., Ltd.
China Shipping Terminal	18 April 2001	Limited liability	RMB2,039,705,065	100%	–	Operation of
Development Co., Ltd.		company				container
						terminal
China Shipping Container	15 June 2006	Limited liability	RMB8,000,000	–	100%	Cargo and liner
Lines (Shenzhen)		company				agency
Agency Co., Ltd.
Universal Logistics	25 July 2006	Limited liability	RMB5,000,000	–	100%	Provision of
(China Shipping,		company				shipping
Shenzhen) Co., Ltd.						services
Shenzhen China Shipping	27 October	Limited liability	RMB2,000,000	–	100%	Provision of
Refrigeration Storage &	2006	company				shipping
Transportation Co., Ltd.						services
Jinzhou New Age	29 September	Limited liability	RMB320,843,634	–	51%	Operation of
Container Terminal	2001	company				container
Co., Ltd.						terminal
Suzhou China Shipping	15 February	Limited liability	RMB5,000,000	–	100%	Operation of
Container Lines	2012	company				container
Co., Ltd.						terminal

– VII-83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
Jiaxing China Shipping	28 December	Limited liability	RMB5,000,000	–	100%	Operation of
Container Lines	2011	company				container
Co., Ltd.						terminal
Duanzhou China Shipping	13 January	Limited liability	RMB500,000	–	100%	Operation of
Container Line, Co.,	2012	company				container
Ltd.						terminal
Cangzhou China Shipping	6 April 2012	Limited liability	RMB500,000	–	100%	Operation of
Container Lines Co.,		company				container
Ltd.						terminal
CSCL Wuhan Real Estate	19 September	Limited liability	RMB11,100,000	100%	–	Real estate
Investment Consulting	2012	company				management
Co., Ltd.
Shanghai Zhenjing	11 November	Limited liability	RMB80,000,000	100%		Real estate
Industrial Co., Ltd.	2013	company				management
Incorporated and operating in Hong Kong
China Shipping Container	3 July 2002	Limited liability	HKD1,000,000	100%	–	International
Lines (Hong Kong)		company	and			container
Co., Ltd.			USD1,627,558,800			shipping and
						liner agency
China Shipping Container	11 June 1999	Limited liability	HKD10,000,000	–	100%	Cargo and liner
Lines (Hong Kong)		company				agency
Agency Co., Ltd.
Universal Shipping (Asia)	11 June 1999	Limited liability	HKD66,000,000	–	100%	Provision of
Co., Ltd.		company				shipping
						services
Shanghai Puhai Shipping	4 July 2007	Limited liability	HKD1,000,000	–	100%	International
(Hong Kong) Co., Ltd.		company	and			container
			USD52,550,000			shipping and
						liner agency
CSCL Spring Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Summer Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Mercury Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Mars Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Neptune Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel

– VII-84 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
CSCL Venus Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Star Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Uranus Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Saturn Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Jupiter Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
Incorporated and operating in Panama
PH. Xiang Xiu Shipping	8 August 2008	Limited liability	USD2	–	100%	Ownership of
S.A.		company				vessel
Incorporated in the British	Virgin Islands
China Shipping Container	28 October	Limited liability	USD514,465,000	–	100%	Sales, purchase
Lines (Asia) Co., Ltd.	2002	company				and lease of
						vessels and
						containers
Yangshan A Shipping	23 December	Limited liability	USD50,000	–	100%	Ownership of
Company Limited	2003	company				vessel
Yangshan B Shipping	23 December	Limited liability	USD50,000	–	100%	Ownership of
Company Limited	2003	company				vessel
Yangshan C Shipping	23 April 2004	Limited liability	USD50,000	–	100%	Ownership of
Company Limited		company				vessel
Yangshan D Shipping	23 April 2004	Limited liability	USD50,000	–	100%	Ownership of
Company Limited		company				vessel
Incorporated in the Marshall Islands
Yangshan E Shipping	11 September	Limited liability	USD50,000	–	100%	Ownership of
Company Limited	2007	company				vessel

– VII-85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

				Issued/
	Date of			registered and
	incorporation/		Type of	fully paid up	Attributable		Principal
Name	establishment		legal entity	share capital	equity	interest	activities
					Directly	Indirectly
					held	held
Incorporated in the Republic		of Cyprus
Arisa Navigation	18 June 2002		Limited liability	CYP1,000	–	100%	Ownership of
Company Limited			company				vessel
Incorporated in South Africa
China Shipping (Africa)	11	September	Private company	USD2,000,000	100%	–	No restriction
Holdings (PTY) Ltd.		2012
China Shipping	29 October		Private company	ZAR1,700,000	–	100%	No restriction
(South Africa)		2013
Agency (PTY) Ltd
Incorporated in Brazil
China Shipping (South	27 May 2013		Private company	BRL5,852,000	95%	5%	No restriction
America) Holdings Ltda
Incorporated in Singapore
Golden Sea Shipping	13 August		Limited liability	SGD1,000,000	–	100%	Shipping lines
Pte. Ltd.		2012	company
China Shipping	29 August		Limited liability	USD5,000,000	–	91%	Provision of
(Singapore) Petroleum		2012	company				bunker
Co., Ltd.

(B) Associated Companies

As at 31 December 2013, the Group has equity interests in the following associated companies:

						Attributable
	Date of		Type of	Place of	Registered	equity	Principal
Name	establishment		legal entity	operation	capital	interest	activities
Established in the	PRC
China Shipping	30 December		Limited liability	PRC	RMB600,000,000	25%	Provision of
Finance Co.,		2009	company				finance
Ltd.							service
Angang Vehicle	12 October		Limited liability	PRC	RMB136,600,000	20.07%	Provision of
Transportation		1989	company				vehicle
Co., Ltd.							transportation
							service
Ningbo Meishan	1	April 2011	Limited liability	PRC	RMB100,000,000	20%	Operation of
Bonded Port			company				container
Area New Bay							terminal
Terminal
Management
Co., Ltd.

China Shipping Finance Co., Ltd. and Angang Vehicle Transportation Co., Ltd. are associated companies directly held by the Company.

– VII-86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(C) Joint Ventures

As at 31 December 2013, the Group has direct equity interests in the following joint ventures:

						Attributable
	Date of		Type of	Place of	Registered	equity	Principal
Name	establishment		legal entity	operation	capital	interest	activities
Established in the	PRC
China International	18 January		Limited liability	PRC	HKD100,000	50%	Provision of
Ship		2006	company				monitoring,
Management							maintenance,
Co., Ltd.							and
							management
							services for
							vessels
China Shipping	24 November		Limited liability	PRC	RMB10,000,000	50%	Operation of
Zhanjianggang		1999	company				container
Container							terminal
Terminal
Co., Ltd.
Dalian Vanguard	8	October	Limited liability	PRC	RMB74,000,000	50%	Logistics
International		2008	company
Logistics
Co., Ltd.
Yingkou New	24 December		Limited liability	PRC	RMB40,000,000	40%	Operation of
Century		2007	company				container
Container							terminal
Terminal
Co., Ltd.
Dalian Dagang	7	July 1999	Limited liability	PRC	RMB10,000,000	35%	Operation of
Container			company				container
Terminal							terminal
Co., Ltd.
Guangzhou Nansha	17 March		Limited liability	PRC	RMB1,260,000,000	40%	Operation of
Port Stevedoring		2003	company				container
Corporation							terminal
Limited
Qinhuangdao Port	30 October		Limited liability	PRC	RMB400,000,000	30%	Operation of
New Harbour		2007	company				container
Container							terminal
Terminal
Co., Ltd.
Dalian International	17 October		Limited liability	PRC	RMB1,400,000,000	30%	Operation of
Container		2007	company				container
Terminal							terminal
Co., Ltd.
Jinzhou Port	31 October		Limited liability	PRC	RMB10,000,000	45%	Operation of
Container-		2011	company				container
Railway Logistic							terminal
Co., Ltd.
Qinzhou	1	April 2010	Limited liability	PRC	RMB500,000,000	40%	Operation of
International			company				container
Container							terminal
Terminal
Co., Ltd.

– VII-87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

					Attributable
	Date of	Type of	Place of	Registered	equity	Principal
Name	establishment	legal entity	operation	capital	interest	activities
Lianyungang	31 October	Limited liability	PRC	RMB100,000,000	49%	Operation of
Xindongrun Port	2012	company				container
Stevedoring						terminal
Co., Ltd.
Lianyungang	21 December	Limited liability	PRC	RMB3,400,000	30%	Logistics
Gangtie	2011	company
International
Container Joint
Transport
Co., Ltd.

Dalian Vanguard International Logistics Co., Ltd. and Jinzhou Port Container-Railway Logistic Co., Ltd. are joint ventures directly held by the Company.

The English names of certain subsidiaries, associated companies and joint ventures referred to in these financial statements represent management’s best efforts at translating the Chinese names of these companies as no English names have been registered.

44 COMPARATIVE AMOUNTS

In 2013, the Group changed the presentation of container demurrage fees charged to customers (“the Demurrage charges”). The Demurrage charges by the Group in year 2013 were reclassified from deduction of costs of services to revenue. For the purpose of alignment, the Group represented the comparative figures for year 2012 (“the Representation”). The result of the Representation increased the revenue and costs of services of the Group for the year ended 31 December 2012 each by RMB843,575,000.

The comparative statement of profit or loss has been re-presented as if the operation discontinued during the current year had been discontinued at the beginning of the comparative period.

45 APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 26 March 2014.

– VII-88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

FIVE YEARS FINANCIAL SUMMARY

Consolidated Results

	2009	2010	2011	2012	2013
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Revenue	19,502,679	34,498,808	27,908,895	32,997,924	33,917,357
Operating profit/(loss)	(6,346,452)	4,240,988	(2,663,225)	436,096	(2,418,070)
Finance costs	(196,023)	(164,393)	(140,523)	(506,357)	(457,618)
Profit/(loss) before income
tax from continuing
operations	(6,541,248)	4,110,382	(2,800,054)	(26,447)	(2,828,387)
Income tax (expense)/credit	(9,417)	(51,440)	(42,381)	460,547	(36,290)
Profit/(loss) for the year from
continuing operations	(6,550,665)	4,058,942	(2,842,435)	434,100	(2,864,677)
Profit for the year from a
discontinued operation	78,923	174,299	141,962	139,510	280,632
Profit for the year attributable
to non-controlling interests	(17,306)	(30,107)	(42,996)	(48,689)	(26,053)
Profit/(loss) for the year
attributable to equity
holders of the Company	(6,489,048)	4,203,134	(2,743,469)	524,921	(2,610,098)
Dividends	–	–	–	–	–

Consolidated Assets and Liabilities

	2009	2010	2011	2012	2013
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Non-current assets	34,779,624	35,498,563	39,094,542	38,281,157	33,233,743
Current assets	9,512,678	13,517,562	10,317,948	12,924,106	17,583,145
Current liabilities	7,608,711	8,654,025	9,791,948	6,350,317	13,703,549
Non-current liabilities	10,705,393	10,399,857	12,719,853	17,381,285	12,895,285
Net assets	25,978,198	29,962,243	26,900,689	27,473,661	24,218,054

– VII-89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The following is an extract of the audited consolidated financial statements of the Group for the year ended 31 December 2014 prepared in accordance with the HKFRS:

Consolidated Statement of Profit or Loss

For the year ended 31 December 2014

Notes
CONTINUING OPERATIONS
Revenue
5
Costs of services
6
Gross profit/(loss)
Selling, administrative and general expenses
6
Other income
7
Other gains, net
8
Operating profit/(loss)
Finance costs
11
Share of profits and losses of:
Associates
21
Joint ventures
22
Profit/(Loss) before income tax from continuing
operations
Income tax expense
12
Profit/(Loss) for the year from continuing
operations
DISCONTINUED OPERATION
Profit for the year from a discontinued operation
14
PROFIT/(LOSS) FOR THE YEAR
Attributable to:
Owners of parent
13
Non-controlling interests
EARNINGS/(LOSS) PER SHARE
ATTRIBUTABLE TO ORDINARY
EQUITY HOLDERS OF THE PARENT
16
(Expressed in RMB per share)
– Basic and diluted
For profit/(loss) for the year
For profit/(loss) from continuing operations

Year ended 31 December
2014
2013
RMB’000
RMB’000
36,077,425
33,917,357
(34,839,333)
(36,004,215)
1,238,092
(2,086,858)
(963,275)
(916,383)
788,350
451,194
898,527
133,977
1,961,694
(2,418,070)
(468,294)
(457,618)
77,915
41,760
6,209
5,541
1,577,524
(2,828,387)
(547,530)
(36,290)
1,029,994
(2,864,677)
38,756
280,632
1,068,750
(2,584,045)
1,044,036
(2,610,098)
24,714
26,053
1,068,750
(2,584,045)
RMB0.089
(RMB0.223)
RMB0.086
(RMB0.245)

Details of the dividends payable and proposed for the year are disclosed in note 15 to the financial statements.

The notes are an integral part of these consolidated financial statements.

– VII-90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

Profit/(Loss) for the year
Other comprehensive profit/(loss) to be reclassified
to profit or loss in subsequent periods
Cash flow hedges:
Effective portion of changes in fair value of
hedging instruments arising during the year
Share of other comprehensive loss of associates
Exchange differences on translation of
foreign operations
Net other comprehensive loss to be reclassified to
profit or loss in subsequent periods
Total comprehensive income/(loss) for the year
Attributable to:
Owners of parent
Non-controlling interests

Year ended 31 December
2014
2013
RMB’000
RMB’000
1,068,750
(2,584,045)
4,715
–
(32,334)
–
10,724
(147,475)
(16,895)
(147,475)
1,051,855
(2,731,520)
1,027,451
(2,757,302)
24,404
25,782
1,051,855
(2,731,520)

The notes are an integral part of these consolidated financial statements.

– VII-91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Financial Position

As at 31 December 2014

Notes
ASSETS
Non-current assets
Property, plant and equipment
17
Investment properties
Leasehold land and land use rights
18
Intangible assets
19
Investments in associates
21
Investments in joint ventures
22
Derivative financial instruments
23
Deferred tax assets
35
Total non-current assets
Current assets
Inventories
27
Trade and notes receivables
28
Prepayments and other receivables
Derivative financial instruments
23
Restricted cash
29
Cash and cash equivalents
29
Assets of a disposal group classified as
held for sale
14
Total current assets
Total assets
EQUITY
Equity attributable to owners of the parent
Share capital
30
Special reserves
31(a)
Other reserves
31(b)
Accumulated losses
31(c)
Non-controlling interests
Total equity

As at 31 December
2014
2013
RMB’000
RMB’000
36,369,808
32,290,294
2,093
2,148
–
75,991
18,916
20,406
3,754,380
297,303
52,402
51,067
4,026
–
10,479
496,534
40,212,104
33,233,743
1,185,498
1,545,370
2,384,511
2,476,402
401,953
375,245
697
–
500
2,100
9,355,888
9,014,462
13,329,047
13,413,579
–
4,169,566
13,329,047
17,583,145
53,541,151
50,816,888
11,683,125
11,683,125
20,150
38,278
16,873,604
16,895,316
(3,784,442)
(4,845,260)
24,792,437
23,771,459
85,046
446,595
24,877,483
24,218,054

– VII-92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes LIABILITIES Non-current liabilities Interest-bearing bank and other borrowings 32 Domestic corporate bonds 33 Finance lease obligations 34 Deferred tax liabilities 35 Total non-current liabilities Current liabilities Trade payables 36 Other payables and accruals Interest-bearing bank and other borrowings 32 Finance lease obligations – current portion 34 Tax payable Provisions 37 Liabilities directly associated with the assets classified as held for sale 14 Total current liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at 31 December 2014 2013 RMB’000 RMB’000 13,463,254 10,917,131 1,793,981 1,791,530 150,281 186,597 75 27 15,407,591 12,895,285 3,825,897 3,890,379 658,358 757,256 8,690,651 8,020,195 36,978 34,773 19,193 14,060 25,000 25,000 13,256,077 12,741,663 – 961,886 13,256,077 13,703,549 28,663,668 26,598,834 53,541,151 50,816,888 72,970 3,879,596 40,285,074 37,113,339	As at 31 December 2014 2013 RMB’000 RMB’000 13,463,254 10,917,131 1,793,981 1,791,530 150,281 186,597 75 27 15,407,591 12,895,285 3,825,897 3,890,379 658,358 757,256 8,690,651 8,020,195 36,978 34,773 19,193 14,060 25,000 25,000 13,256,077 12,741,663 – 961,886 13,256,077 13,703,549 28,663,668 26,598,834 53,541,151 50,816,888 72,970 3,879,596 40,285,074 37,113,339
		12,895,285

		3,890,379 757,256 8,020,195 34,773 14,060 25,000
		12,741,663 961,886
		13,703,549
		26,598,834
		50,816,888

		3,879,596

		37,113,339

The notes are an integral part of these consolidated financial statements.

– VII-93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Statement of Financial Position

As at 31 December 2014

Notes
ASSETS
Non-current assets
Property, plant and equipment
17
Intangible assets
19
Deferred tax assets
35
Investments in subsidiaries
20
Investments in associates
21
Investments in joint ventures
22
Total non-current assets
Current assets
Inventories
27
Trade and notes receivables
28
Prepayments and other receivables
Cash and cash equivalents
29
Assets of a disposal group classified as
held for sale
14
Total current assets
Total assets
EQUITY
Share capital
30
Special reserves
31(a)
Other reserves
31(b)
Accumulated losses
31(c)
Total equity

As at 31 December
2014
2013
RMB’000
RMB’000
16,487,795
17,389,782
12,011
11,207
6,250
491,889
12,146,838
13,241,339
3,644,569
213,972
41,500
41,500
32,338,963
31,389,689
652,209
912,977
1,069,273
1,188,531
237,268
201,871
5,394,887
5,445,944
7,353,637
7,749,323
–
2,133,649
7,353,637
9,882,972
39,692,600
41,272,661
11,683,125
11,683,125
14,902
34,832
19,012,889
19,012,889
(1,437,547)
(2,134,094)
29,273,369
28,596,752

– VII-94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes LIABILITIES Non-current liabilities Interest-bearing bank and other borrowings 32 Domestic corporate bonds 33 Total non-current liabilities Current liabilities Trade payables 36 Other payables and accruals Interest-bearing bank and other borrowings 32 Provision 37 Total current liabilities Total liabilities Total equity and liabilities Net current (liabilities)/assets Total assets less current liabilities	As at 31 December 2014 2013 RMB’000 RMB’000 600,000 2,600,000 1,793,981 1,791,530 2,393,981 4,391,530 4,948,341 4,602,319 2,054,512 1,657,277 997,397 1,999,783 25,000 25,000 8,025,250 8,284,379 10,419,231 12,675,909 39,692,600 41,272,661 (671,613) 1,598,593 31,667,350 32,988,282	As at 31 December 2014 2013 RMB’000 RMB’000 600,000 2,600,000 1,793,981 1,791,530 2,393,981 4,391,530 4,948,341 4,602,319 2,054,512 1,657,277 997,397 1,999,783 25,000 25,000 8,025,250 8,284,379 10,419,231 12,675,909 39,692,600 41,272,661 (671,613) 1,598,593 31,667,350 32,988,282
		4,391,530
		4,602,319 1,657,277 1,999,783 25,000
		8,284,379
		12,675,909

		41,272,661

		1,598,593

		32,988,282

The notes are an integral part of these consolidated financial statements.

– VII-95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Changes in Equity

For the year ended 31 December 2014

Attributable to owners of parent

At 1 January 2013 (Loss)/profit for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive (loss)/income for the year ended 31 December 2013 Transaction with owners Capital injection from non-controlling interests Disposal of subsidiaries Dividends paid to non-controlling interests Accrued special reserve during the year Used special reserve during the year Others At 31 December 2013	Issued capital RMB’000 11,683,125 – – – – – – – – – 11,683,125	Special reserves RMB’000 2,229 – – – – – – 176,601 (140,552) – 38,278	Other reserve RMB’000 17,041,861 – (147,204) (147,204) – – – – – 659 16,895,316	Accumulated losses RMB’000 (2,198,638) (2,610,098) – (2,610,098) – – – (176,601) 140,552 (475) (4,845,260)	Total RMB’000 26,528,577 (2,610,098) (147,204) (2,757,302) – – – – – 184 23,771,459	Non- controlling interests RMB’000 945,084 26,053 (271) 25,782 45,428 (422,222) (147,477) – – – 446,595	Total equity RMB’000 27,473,661
							(2,584,045) (147,475)
							(2,731,520)
							45,428 (422,222) (147,477) – – 184
							24,218,054

The notes are an integral part of these consolidated financial statements.

– VII-96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Attributable to owners of parent

At 1 January 2014 Profit for the year Other comprehensive income for the year: Share of other comprehensive loss of associates Cash flow hedges, net of tax Exchange differences on translation of foreign operations Total comprehensive income for the year ended 31 December 2014 Transaction with owners Capital injection from non-controlling interests Disposal of subsidiaries Liquidation of a subsidiary Dividends paid to non-controlling interests Accrued special reserve during the year Used special reserve during the year Others At 31 December 2014	Issued capital RMB’000 11,683,125 – – – – – – – – – – – – 11,683,125	Special reserves RMB’000 38,278 – – – – – – (883) – – 174,364 (191,609) – 20,150	Other reserve RMB’000 16,895,316 – (32,334) 4,715 11,034 (16,585) 594 (6,395) – – – – 674 16,873,604	Accumulated losses RMB’000 (4,845,260) 1,044,036 – – – 1,044,036 – – – – (174,364) 191,609 (463) (3,784,442)	Total RMB’000 23,771,459 1,044,036 (32,334) 4,715 11,034 1,027,451 594 (7,278) – – – – 211 24,792,437	Non- controlling interests RMB’000 446,595 24,714 – – (310) 24,404 41,935 (422,270) (946) (4,522) – – (150) 85,046	Total equity RMB’000 24,218,054
							1,068,750 (32,334) 4,715 10,724
							1,051,855
							42,529 (429,548) (946) (4,522) – – 61
							24,877,483

The notes are an integral part of these consolidated financial statements.

– VII-97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

Notes
Cash flows from operating activities
Cash generated from/(used in) operations
39(a)
Income tax paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Purchase of items of property, plant and equipment and
intangible assets
Purchase of an investment property
Proceeds from disposal of items of property, plant and equipment
39(b)
Disposal of subsidiaries
38
Disposal of joint ventures
Increase in investments in joint ventures and associates
Increase in investments in available-for-sale financial investments
Dividends received from associates
Dividends received from joint ventures
Dividends received from available-for-sale financial assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Capital injection from non-controlling shareholders
New bank loans
Repayment of bank loans
Capital element of finance lease payments
Interest element of finance lease payments
Liquidation of a subsidiary
Dividends paid to non-controlling interests
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
29
Effect of foreign exchange rate changes, net
Cash and cash equivalents at end of year
29
ANALYSIS OF BALANCES OF CASH AND CASH
EQUIVALENTS
Cash and cash equivalents as stated in the statement of
financial position
Cash and short term deposits attributable to a discontinued
operation
Cash and cash equivalents as stated in the statement of cash flows

Year ended 31
December
2014
2013
RMB’000
RMB’000
2,819,487 (1,071,578)
(106,399)
(72,607)
2,713,088 (1,144,185)
(5,909,290) (2,637,863)
–
(2,227)
126,606
161,409
231,051
696,342
–
28,389
(7,538)
(21,020)
(499,445)
(284,057)
19,308
17,466
6,205
44,621
12,600
12,576
161,178
126,158
(5,859,325) (1,858,206)
(574,690)
(587,056)
42,529
45,428
11,636,482 19,589,402
(8,151,048)(14,947,659)
(34,111)
(126,648)
(12,135)
(15,956)
(946)
–
(4,522)
(20,286)
2,901,559
3,937,225
(244,678)
934,834
9,602,804
8,830,970
(2,238)
(163,000)
9,355,888
9,602,804
9,355,888
9,014,462
–
588,342
9,355,888
9,602,804

The notes are an integral part of these consolidated financial statements.

– VII-98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

The address of the Company’s registered office is Room A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC.

The Company and its subsidiaries (together, the “Group”) are principally engaged in holding, chartering and operating container vessels for the provision of international and domestic container marine transportation services, and the operation of container terminals.

2.1 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and accounting principles generally accepted in Hong Kong. These financial statements also comply with the applicable requirements of the Hong Kong Companies Ordinance relating to the preparation of financial statements, which for this financial year and the comparative period continue to be those of the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), “Accounts and Audit”, which are set out in sections 76 to 87 of Schedule 11 to that Ordinance. The financial statements have been prepared under the historical cost convention, except for cash-settled share-based compensation plan which has been measured at fair value as explained in the accounting policies set out below. Disposal groups held for sale are stated at the lower of their carrying amounts and fair values less costs to sell as further explained in note 2.4. These financial statements are presented in RMB and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2014. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

– VII-99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the following revised standards and new interpretation for the first time for the current year’s financial statements.

Amendments to HKFRS 10, HKFRS 12 Investment Entities and HKAS 27 (2011) Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge Accounting HK(IFRIC)-Int 21 Levies Amendment to HKFRS 2 included in Definition of Vesting Condition[1] Annual Improvements 2010-2012 Cycle Amendment to HKFRS 3 included in Accounting for Contingent Consideration in a Business Annual Improvements 2010-2012 Cycle Combination[1] Amendment to HKFRS 13 included in Short-term Receivables and Payables Annual Improvements 2010-2012 Cycle Amendment to HKFRS 1 included in Meaning of Effective HKFRSs Annual Improvements 2011-2013 Cycle

1 Effective from 1 July 2014

The adoption of the above revised standards and interpretation has had no significant financial effect on these financial statements.

(a) Amendments to HKFRS 10 include a definition of an investment entity and provide an exception to the consolidation requirement for entities that meet the definition of an investment entity. Investment entities are required to account for subsidiaries at fair value through profit or loss rather than consolidate them. Consequential amendments were made to HKFRS 12 and HKAS 27 (2011). The amendments to HKFRS 12 also set out the disclosure requirements for investment entities. The amendments have had no impact on the Group as the Company does not qualify as an investment entity as defined in HKFRS 10.
(b) The HKAS 32 Amendments clarify the meaning of “currently has a legally enforceable right to set off” for offsetting financial assets and financial liabilities. The amendments also clarify the application of the offsetting criteria in HKAS 32 to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments have had no impact on the Group as the Group does not have any offsetting arrangement.
(c) The HKAS 39 Amendments provide an exception to the requirement of discontinuing hedge accounting in situations where over-the-counter derivatives designated in hedging relationships are directly or indirectly, novated to a central counterparty as a consequence of laws or regulations, or the introduction of laws or regulations. For continuance of hedge accounting under this exception, all of the following criteria must be met: (i) the novations must arise as a consequence of laws or regulations, or the introduction of laws or regulations; (ii) the parties to the hedging instrument agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each of the parties; and (iii) the novations do not result in changes to the terms of the original derivative other than changes directly attributable to the change in counterparty to achieve clearing. The amendments have had no impact on the Group as the Group has not novated any derivatives during the current and prior years.
(d) HK(IFRIC)-Int 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. The interpretation also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognised before the specified minimum threshold is reached. The interpretation has had no impact on the Group as the Group applied, in prior years, the recognition principles under HKAS 37 Provisions, Contingent Liabilities and Contingent Assets which for the levies incurred by the Group are consistent with the requirements of HK(IFRIC)-Int 21.

– VII-100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(e) The HKFRS 2 Amendment clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions, including (i) a performance condition must contain a service condition; (ii) a performance target must be met while the counterparty is rendering service; (iii) a performance target may relate to the operations or activities of an entity, or to those of another entity in the same group; (iv) a performance condition may be a market or non-market condition; and (v) if the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied. The amendment has had no impact on the Group.
(f) The HKFRS 3 Amendment clarifies that contingent consideration arrangements arising from a business combination that are not classified as equity should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of HKFRS 9 or HKAS 39. The amendment has had no impact on the Group.
(g) The HKFRS 13 Amendment clarifies that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. The amendment has had no impact on the Group.

2.3 NEW AND REVISED HKFRSS AND NEW DISCLOSURE REQUIREMENTS UNDER THE HONG KONG COMPANIES ORDINANCE NOT YET ADOPTED

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKFRS 9	_Financial Instruments_4
Amendments to HKFRS 10 and	Sale or Contribution of Assets between an Investor and
HKAS 28 (2011)	_its Associate or Joint Venture_2
Amendments to HKFRS 11	_Accounting for Acquisitions of Interests in Joint Operations_2
HKFRS 10, HKFRS 12 and HKAS 28	_Investment Entities: Applying the Consolidation Exception_2
HKFRS 14	_Regulatory Deferral Accounts_5
HKFRS 15	_Revenue from Contracts with Customers_3
Amendments to HKAS 1	_Disclosure Initiative_2
Amendments to HKAS 16 and HKAS 38	Clarification of Acceptable Methods of Depreciation and
	_Amortisation_2
Amendments to HKAS 16 and HKAS 41	_Agriculture: Bearer Plants_2
Amendments to HKAS 19	_Defined Benefit Plans: Employee Contributions_1
Amendments to HKAS 27 (2011)	_Equity Method in Separate Financial Statements_2
Annual Improvements 2010-2012 Cycle	Amendments to a number of HKFRSs1
Annual Improvements 2011-2013 Cycle	Amendments to a number of HKFRSs1
Annual Improvements 2012-2014 Cycle	Amendments to a number of HKFRSs2

1 Effective for annual periods beginning on or after 1 July 2014
2 Effective for annual periods beginning on or after 1 January 2016
3 Effective for annual periods beginning on or after 1 January 2017
4 Effective for annual periods beginning on or after 1 January 2018
5 Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group

In addition, the Hong Kong Companies Ordinance (Cap. 622) will affect the presentation and disclosure of certain information in the consolidated financial statements for the year ending 31 December 2015. The Group is in the process of making an assessment of the impact of these changes.

– VII-101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Further information about those HKFRSs that are expected to be applicable to the Group is as follows:

In September 2014, the HKICPA issued the final version of HKFRS 9, bringing together all phases of the financial instruments project to replace HKAS 39 and all previous versions of HKFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. The Group expects to adopt HKFRS 9 from 1 January 2018. The Group expects that the adoption of HKFRS 9 will have an impact on the classification and measurement of the Group’s financial assets. Further information about the impact will be available nearer the implementation date of the standard.

The amendments to HKFRS 10 and HKAS 28 (2011) address an inconsistency between the requirements in HKFRS 10 and in HKAS 28 (2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full recognition of a gain or loss when the sale or contribution of assets between an investor and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognised in the investor’s profit or loss only to the extent of the unrelated investor’s interest in that associate or joint venture. The amendments are to be applied prospectively. The Group expects to adopt the amendments from 1 January 2016.

The amendments to HKFRS 11 require that an acquirer of an interest in a joint operation in which the activity of the joint operation constitutes a business must apply the relevant principles for business combinations in HKFRS 3. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to HKFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation. The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on 1 January 2016.

HKFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in HKFRS 15 provide a more structured approach for measuring and recognising revenue. The standard also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates. The standard will supersede all current revenue recognition requirements under HKFRSs. The Group expects to adopt HKFRS 15 on 1 January 2017 and is currently assessing the impact of HKFRS 15 upon adoption.

Amendments to HKAS 16 and HKAS 38 clarify the principle in HKAS 16 and HKAS 38 that revenue reflects a pattern of economic benefits that are generated from operating business (of which the asset is part) rather than the economic benefits that are consumed through the use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are to be applied prospectively. The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on 1 January 2016 as the Group has not used a revenue-based method for the calculation of depreciation of its non-current assets.

The Annual Improvements to HKFRSs 2010-2012 Cycle issued in January 2014 sets out amendments to a number of HKFRSs. Except for those described in note 2.2, the Group expects to adopt the amendments from 1 January 2015. None of the amendments are expected to have a significant financial impact on the Group. Details of the amendment most applicable to the Group are as follows:

HKFRS 8 Operating Segments : Clarifies that an entity must disclose the judgements made by management in applying the aggregation criteria in HKFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics used to assess whether the segments are similar. The amendments also clarify that a reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker.

HKAS 1 Amendments are intended to assist entities in applying judgment when meeting the presentation and disclosure requirements in HKFRS, and do not effect recognition and measurement. The Company will adopt HKAS 1 Amendments on 1 January 2016 and is currently assessing the impact of HKAS 1 Amendments upon adoption.

– VII-102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The results of subsidiaries are included in the Company’s profit or loss to the extent of dividends received and receivable. The Company’s investments in subsidiaries that are not classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are stated at cost less any impairment losses.

Investments in Associates and Joint Ventures

Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The Group’s share of the post-acquisition results and other comprehensive income of associates and joint ventures is included in the consolidated profit or loss and consolidated other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s investments in the associates or joint ventures, except where unrealised losses provide evidence of an impairment of the assets transferred. Goodwill arising from the acquisition of associates or joint ventures is included as part of the Group’s investments in associates or joint ventures.

The results of associates and joint ventures are included in the Company’s profit or loss to the extent of dividends received and receivable. The Company’s investments in associates and joint ventures are treated as non-current assets and are stated at cost less any impairment losses.

– VII-103 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

When an investment in an associate or a joint venture is classified as held for sale, it is accounted for in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations .

Business Combinations and Goodwill

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

Fair Value Measurement

The Group measures its derivative financial instruments at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

– VII-104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Level 1 –

based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2

– based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly

Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Impairment of Non-Financial Assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets, and non-current assets/a disposal group classified as held for sale), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises (only if there are revalued assets in the financial statements), unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related Parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group

– VII-105 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly-controlled by a person identified in (a); and
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Property, Plant and Equipment and Depreciation

Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The estimated useful lives used for this purpose are as follows:

	Estimated useful lives
Container vessels	25 years from the date of first registration
Improvements under operating leases	5 years or the period of the lease, whichever
	is the shorter
Buildings	30 to 40 years
Containers	12 years
Port and depot infrastructure	20 to 50 years
Loading machinery	8 to 20 years
Motor vehicles, computer, office equipment and	3 to 8 years
furniture

– VII-106 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Investment Properties

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in profit or loss during the financial period in which they are incurred.

Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of the retirement or disposal.

Non-Current Assets and Disposal Groups Held for Sale

Leasehold Land and Land Use Rights

– VII-107 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Intangible Assets (Other than Goodwill)

(a) Port line use rights

(b) Computer software

it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed eight years.

Leases

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases, including prepaid land lease payments under finance leases, are included in property, plant and equipment, and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to profit or loss so as to provide a constant periodic rate of charge over the lease terms.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to profit or loss on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under operating leases net of any incentives received from the lessor are charged to profit or loss on the straight-line basis over the lease terms.

– VII-108 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

When the lease payments cannot be allocated reliably between the land and buildings elements, the entire lease payments are included in the cost of the land and buildings as a finance lease in property, plant and equipment.

Investments and Other Financial Assets

Initial recognition and measurement

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income and gains in profit or loss. The loss arising from impairment is recognised in profit or loss in finance costs for loans and in other expenses for receivables.

Available-for-sale financial investments

After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in profit or loss in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the available-for-sale investment revaluation reserve to the statement of profit or loss in other gains or losses. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income and dividend income, respectively and are recognised in profit or loss as other income in accordance with the policies set out for “Revenue recognition” below.

– VII-109 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Derecognition of Financial Assets

the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of Financial Assets

Financial assets carried at amortised cost

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

– VII-110 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Assets carried at cost

Available-for-sale financial investments

For available-for-sale financial investments, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired.

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is removed from other comprehensive income and recognised in profit or loss.

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss – is removed from other comprehensive income and recognised in profit or loss. Impairment losses on equity instruments classified as available for sale are not reversed through profit or loss. Increases in their fair value after impairment are recognised directly in other comprehensive income.

The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. Impairment losses on debt instruments are reversed through profit or loss if the subsequent increase in fair value of the instruments can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

Financial Liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group’s financial liabilities include trade payables, other payables and accruals, interest-bearing bank and other borrowings, domestic corporate bonds and finance lease obligations.

– VII-111 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Financial guarantee contracts

Derecognition of Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

Offsetting of Financial Instruments

Derivative Financial Instruments and Hedge Accounting

Initial recognition and subsequent measurement

The Group uses derivative financial instruments, such as interest rate swaps, to hedge its interest rate risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:

fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment; or
cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction, or a foreign currency risk in an unrecognised firm commitment; or
hedges of a net investment in a foreign operation.

– VII-112 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting, the risk management objective and its strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the hedging instrument’s effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges which meet the strict criteria for hedge accounting are accounted for as follows:

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the hedging reserve, while any ineffective portion is recognised immediately in profit or loss as other expenses.

Amounts recognised in other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised in other comprehensive income are transferred to the initial carrying amount of the non-financial asset or non-financial liability.

Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised in other comprehensive income are transferred to profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, the amounts previously recognised in other comprehensive income remain in other comprehensive income until the forecast transaction occurs or the foreign currency firm commitment is met.

Current versus non-current classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).

Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item.
Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract.
Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instruments are separated into current portions and non-current portions only if a reliable allocation can be made.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on weighted average basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cost of inventories includes the transfer from equity of gains and losses on qualifying cash flow hedges in respect of the purchases of raw materials.

– VII-113 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Cash and Cash Equivalents

Issued Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Provisions

Income Tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

– VII-114 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Government Grants

Where the grant relates to an asset, the fair value is deducted from the carrying amount of the asset and released to profit or loss by way of a reduced depreciation charge.

Revenue Recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) Liner services, freight revenues from the operation of the international and domestic containerised transportation business are recognised on a percentage of completion basis, which is determined on the time proportion method of each individual vessel voyage;
(b) from chartering of vessels under operating leases, over the periods of the respective leases on the straight-line basis;
(c) from container terminal operation, when the services are rendered;
(d) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset; and
(e) dividend income, when the shareholders’ right to receive payment has been established.

Share-Based Payments

– VII-115 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Other Employee Benefits

(a) Pension obligations

The Group’s contributions to the above defined contribution schemes are charged to the consolidated statement of profit or loss as incurred.

(b) Housing benefits

Borrowing Costs

Where funds have been borrowed generally, and used for the purpose of obtaining qualifying assets, a capitalisation rate ranging between 2.19% and 2.73% has been applied to the expenditure on the individual assets.

Contingent Liabilities and Contingent Assets

Dividends

– VII-116 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Foreign Currencies

Certain subsidiaries incorporated outside Mainland China have Hong Kong dollars (“HKD”), United States dollars (“USD”), South African rand (“ZAR”), Brazilian real (“BRL”) and Nigerian Naira (“NGN”) as their functional currencies. The functional currency of Mainland China subsidiaries is the RMB. As the Group mainly operates in Mainland China, the RMB is used as the presentation currency of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed of, at which time the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

– VII-117 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Judgements

Lease accounting

Estimation Uncertainty

(i) Impairment of container vessels and containers

The Group assesses whether vessels and containers have any indication of impairment, in accordance with the accounting policy stated in note 2.4 to the financial statements for the year ended 31 December 2014. As at 31 December 2014, after reviewing the external and internal evidence, the directors considered the indication of impairment, and an assessment of the recoverable amounts of the assets has been conducted.

(ii) Useful lives and residual values of property, plant and equipment

Were the useful lives to differ by 10% from management’s estimates as at 31 December 2014 with all other variables held constant, the estimated depreciation expense of property, plant and equipment for the year would have been approximately RMB145,115,000 lower or RMB177,363,000 higher for the year ended 31 December 2014.

Were the residual values to differ by 10% from management’s estimates as at 31 December 2014 with all other variables held constant, the estimated depreciation expense of property, plant and equipment for the year would have been approximately RMB31,583,000 lower or higher for the year ended 31 December 2014.

(iii) Income taxes and deferred income tax

(iv) Provision of cost of services

– VII-118 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

4 FINANCIAL RISK MANAGEMENT

4.1 Financial Risk Factors

(a) Market risk

(i) Foreign exchange risk

As at 31 December 2014, if RMB had strengthened/weakened by 5% against the USD/HKD with all other variables held constant, post-tax profit for the year would have been RMB15,493,000 lower/higher (2013: post-tax profit of RMB51,195,000 lower/higher), mainly as a result of foreign exchange losses/gains on translation of USD/HKD-denominated trade and notes receivables, prepayments and other receivables and cash and cash equivalents, and foreign exchange gains/losses on translation of USD/HKD-denominated bank borrowings, trade payables, finance lease obligations and other payables and accruals.

(ii) Cash flow and fair value interest rate risk

Other than the short-term deposits placed with bank balances and cash at bank, the Group has no other significant interest bearing assets. The risk on the Group’s income and operating cash flows from changes in market interest rates is low.

The Group’s interest rate risk arises from borrowings, domestic corporate bonds, and finance lease obligations. Bank borrowings issued at variable rates expose the Group to cash flow interest rate risk; finance lease obligations, domestic corporate bonds and bank borrowings issued at fixed rates expose the Group to fair value interest rate risk. As at 31 December 2014 and 2013, around 12% and 37% of the Group’s borrowings, domestic corporate bonds, and finance lease obligations were at fixed rates, respectively. During 2014 and 2013, the Group’s bank borrowings at variable rates were denominated in USD. The weighted average effective interest rates and terms of repayment of the Group’s borrowings are disclosed in note 32.

As at 31 December 2014, if interest rates had been 100 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been RMB235,663,000 lower/higher (2013: post-tax loss of RMB201,143,000 higher/lower), mainly as a result of higher/lower interest expense on floating rate bank borrowings.

(iii) Price risk

The container transport and logistics activities are sensitive to economic fluctuations. The Group is exposed to freight rate risk. The Group’s revenue will increase/decrease by RMB315,368,000 (2013: increase/decrease RMB303,609,000) for a 1% increase/reduction of the average container freight rates with all other variables held constant.

The Group is also exposed to fluctuations in bunker prices. Bunker cost is part of the voyage expenses and is a significant cost item to the Group. Management monitors conditions and bunker price fluctuations and where appropriate, bunker forward contracts are used to lock up the price of part of the Group’s bunker requirements. As at 31 December 2014, the Group did not have bunker forward contracts (2013: Nil).

– VII-119 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(b) Credit risk

The Group has no significant concentration of credit risk. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The Group has policies that limit the amount of credit exposure to any financial institutions. The total carrying amounts of trade and notes receivables, prepayments and other receivables and cash and cash equivalents represents the maximum credit exposure of the Group. The Group has also policies in place to ensure that services are rendered to customers with appropriate credit history and the Group performs periodic credit evaluations of its customers.

Maximum credit risk exposure relating to off-balance sheet financial guarantees is related to the Company which provides to subsidiaries loans and other banking facilities amounting to approximately RMB8,998 million (2013: RMB7,685 million) as at 31 December 2014, being the face value of the borrowings under guarantee and with a maturity term to year 2017 (2013: to year 2015).

(c) Liquidity risk

Management monitors rolling forecasts of the Group’s liquidity reserve comprises undrawn borrowing facilities (note 32) and cash and cash equivalents (note 29)) on the basis of expected cash flows. This is generally carried out at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location and take into account the liquidity of the market in which the entity operates. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary; monitoring liquidity ratios against internal and external regulatory requirements; and maintaining debt financing plans.

For the year ended 31 December 2014, the Group’s operating profit and profit for the year amounted to RMB1,961,694,000 and RMB1,029,994,000, respectively. The net operating cash inflow amounted to RMB2,713,088,000.

The directors of the Company believe that based on the Group’s available unused banking facilities in excess of RMB2,061 million and its cash and cash equivalents of RMB9,356 million, the Group has sufficient financial resources to satisfy its working capital requirements and payments of liabilities and its forthcoming future capital commitments as and when they fall due.

The table below analyses the Group and the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest calculated based on the interest rate at the end of the reporting period).

The Group

	Less than	Between 1 and	Between 2 and	Over
	1 year	2 years	5 years	5 years
	RMB’000	RMB’000	RMB’000	RMB’000
At 31 December 2014
Interest-bearing bank and other
borrowings (note 32)	8,690,651	2,734,020	7,371,352	3,357,882
Domestic corporate bonds (note 33)	–	–	1,800,000	–
Interest payables in relation to the
borrowings and domestic
corporate bonds	480,065	351,036	508,396	261,630
Finance lease obligations (note 34)	47,128	47,147	121,585	–
Trade payables (note 36)	3,825,897	–	–	–
Other payables and accruals	503,860	–	–	–

– VII-120 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

	Less than	Between 1 and	Between 2 and	Over
	1 year	2 years	5 years	5 years
	RMB’000	RMB’000	RMB’000	RMB’000
At 31 December 2013
Interest-bearing bank and other
borrowings (note 32)	8,020,195	7,067,374	2,454,772	1,394,985
Domestic corporate bonds (note 33)	–	–	1,800,000	–
Interest payables in relation to the
borrowings and domestic
corporate bonds	455,318	310,720	280,762	20,544
Finance lease obligations (note 34)	46,996	46,991	129,835	38,284
Trade payables (note 36)	3,890,379	–	–	–
Other payables and accruals	524,851	–	–	–

The Company

At 31 December 2014 Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Interest payables in relation to the borrowings and domestic corporate bonds Trade payables (note 36) Other payables and accruals At 31 December 2013 Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Interest payables in relation to the borrowings and domestic corporate bonds Trade payables (note 36) Other payables and accruals	Less than 1 year RMB’000 997,397 – 107,434 4,948,341 1,996,841 1,999,783 – 199,745 4,602,319 1,581,488	Between 1 and 2 years RMB’000 600,000 – 81,180 – – 2,600,000 – 176,891 – –	Between 2 and 5 years RMB’000 – 1,800,000 81,180 – – – 1,800,000 162,360 – –	Over 5 years RMB’000 – – – – –
				– – – – –

4.2 Capital Risk Management

– VII-121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The gearing ratios of the Group at 31 December 2014 and 2013 were as follows:

Interest-bearing bank and other borrowings (note 32) Domestic corporate bonds (note 33) Finance lease obligations (note 34) Less: Cash and cash equivalents (note 29) Net debt Total equity Gearing ratio (net debt/total equity)	2014 RMB’000 22,153,905 1,793,981 187,259 (9,355,888) 14,779,257 24,877,483 59.4%	2013 RMB’000 18,937,326 1,791,530 221,370 (9,014,462)
		11,935,764 24,218,054

		49.3%

Note:

The increase of gearing ratio is mainly due to the increase in borrowings and decrease of total equity of the Group as a result of operating loss.

5 REVENUE AND SEGMENT INFORMATION

The chief operating decision-maker assesses the performance of the operating segments based on a measure of operating profit/(loss), which is reconciled to profit/(loss) before income tax.

The container terminal and related business was classified as held for sale and its carrying amount will be recovered principally through a sale transaction approved by the Board rather than through continuing operation. For the years ended 31 December 2014 and 2013, all the losses/profits from continuing operations are generated through container shipping and related business.

Revenue from the major trade districts and shipping lanes is set out below:

Pacific Europe/Mediterranean Asia Pacific China Domestic Other Lanes Logistic Services and Others Turnover	Year ended 31 December 2014 2013 RMB’000 RMB’000 9,366,710 9,847,162 8,921,941 7,836,977 6,777,882 5,846,905 5,772,195 6,213,860 1,064,590 727,804 4,174,107 3,444,649 36,077,425 33,917,357	Year ended 31 December 2014 2013 RMB’000 RMB’000 9,366,710 9,847,162 8,921,941 7,836,977 6,777,882 5,846,905 5,772,195 6,213,860 1,064,590 727,804 4,174,107 3,444,649 36,077,425 33,917,357
		33,917,357

No revenue derived from a single customer or a group of customers under common control amounted to 10% or more of the Group’s revenue for the years ended 31 December 2014 and 2013.

– VII-122 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

6 COSTS AND EXPENSES BY NATURE

Costs of services, and selling, administrative and general expenses of continuing operations are analysed as follows:

Costs of services Container repositioning and management Bunkers consumed or sold Operating lease rentals Port charges Depreciation (note 17) Employee benefit expenses (note 9) Sub-route costs and others Selling, administrative and general expenses Employee benefit expenses (note 9) Rental expenses Telecommunication and utilities expenses Depreciation (note 17) Repair and maintenance expenses Auditors’ remuneration Amortisation (note 18 and note 19) (Reversal)/provision for impairment of trade receivables (note 28) Office expenses and others OTHER INCOME Interest income Government grant related to income Refund of value-added tax (“VAT”) (Note a) Information technology services fees	2014 RMB’000 10,473,533 9,315,693 2,958,644 2,024,404 1,531,369 1,289,719 7,245,971 34,839,333 554,912 95,325 67,008 25,217 5,925 12,800 6,194 (210) 196,104 963,275 35,802,608 2014 RMB’000 199,594 279,784 295,002 13,970 788,350	2013 RMB’000 9,997,141 10,213,356 3,366,099 1,970,053 1,431,610 1,302,847 7,723,109
		36,004,215
		513,829 48,326 68,920 26,728 3,091 13,800 8,497 4,725 228,467
		916,383
		36,920,598

		2013 RMB’000 130,557 135,756 170,787 14,094
		451,194

7 OTHER INCOME

Note:

(a) Starting from 1 January 2012, the Company, Shanghai Puhai Shipping Lines Co., Ltd. and Yangshan International Container Storage & Transportation Co., Ltd., subsidiaries of the Group, are entitled to a refund of VAT, in accordance with “Circular of the Ministry of Finance and the State Administration of Taxation on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries” (“the Circular”).

– VII-123 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

8 OTHER GAINS, NET

Losses on disposal of items of property, plant and equipment Gains on disposal of subsidiaries (note 38) Compensation Net foreign exchange (losses)/gains Gains on physical inventory count (Note a)	2014 RMB’000 (18,399) 947,456 – (30,530) – 898,527	2013 RMB’000 (19,846) – 5,241 29,778 118,804 133,977

Note:

(a) During the year ended 31 December 2013, the Company identified an inventory count surplus of the spare parts during the physical inventory count and the surplus of RMB118,804,000 was recognised in other gains, net.

9 EMPLOYEE BENEFIT EXPENSES

An analysis of staff costs, including directors’ and supervisors’ emoluments, is set out below:

Staff salaries and hiring of crews Social welfare benefits Change in fair value of share-based compensation liabilities	2014 RMB’000 1,098,753 745,141 737 1,844,631	2013 RMB’000 1,119,217 714,720 (17,261) 1,816,676

Until the liabilities relating to the Rights are settled, the Group re-measures the fair value of the liabilities at the end of the reporting period by using a binomial option valuation model. Changes in fair value of the liabilities are recognised in the consolidated statement of profit or loss.

– VII-124 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Movements in the number of share appreciation rights outstanding and their related weighted average exercise prices during the year are as follows:

At 1 January Forfeited At 31 December	2014 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 85,052 2.68 (5,177) 2.84 79,875	2013 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 93,850 2.83 (8,798) 2.83 85,052	2013 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 93,850 2.83 (8,798) 2.83 85,052
			85,052

Up to 31 December 2014, no rights granted have been exercised (2013: Nil). As at 31 December 2014, the expiry dates of the outstanding Rights fell in the year of 2015.

The fair value of the liability relating to the Rights is estimated on the end of each reporting period by using a binomial option valuation model based on an expected volatility of 60%, exercise price shown above, expected dividend yield of 2% and risk-free interest rate of 0.1%. The volatility compared with the valuation report measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices of the Company and other comparable companies.

During the year ended 31 December 2014, the Group recognised a loss of approximately RMB737,000 (2013: a gain of RMB17,261,000) as a result of the increase in fair value of the share-based compensation liability related to the Rights from approximately RMB23,488,000 as at 31 December 2013 to approximately RMB24,225,000 as at 31 December 2014. As at 31 December 2014, the unrecognised compensation cost of the outstanding Rights was approximately RMB477,273 (2013: RMB1,050,000) which is expected to be recognised in the next year.

10 EMOLUMENTS OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(A) Directors’ and Supervisors’ Emoluments

The remuneration of every director and supervisor is set out below:

			Pension and		Unit of
Name of director and			other social		the Rights
supervisor	Fees	Salary	welfare	Total	granted (note 9)
	RMB’000	RMB’000	RMB’000	RMB’000
For the year ended
31 December 2014
Directors
Mr. Zhang Guofa	–	–	–	–	2,218,050
Mr. Huang Xiaowen	–	–	–	–	3,334,050
Ms. Su Min	–	–	–	–	–
Mr. Ding Nong	–	–	–	–	–
Mr. Liu Xihan (a)	–	–	–	–	–
Mr. Yu Zenggang (a)	–	–	–	–	–
Mr. Chen Jihong	–	–	–	–	–
Mr. Zhao Hongzhou	–	799	128	927	2,604,000
Mr. Wang Daxiong (b)	–	–	–	–	1,240,000
Mr. Zhang Rongbiao (b)	–	–	–	–	–
Ms. Zhang Nan	138	–	–	138	–
Mr. Zhang Songshen	300	–	–	300	–
Mr. Chen Lishen	75	–	–	75	–
Mr. Guan Yimin	138	–	–	138	–
Mr. Shi Xin	138	–	–	138	–

– VII-125 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

Name of director and supervisor Supervisors Mr. Xu Wenrong Mr. Ye Hongjun Mr. Tu Shiming Mr. Shen Zhongying Mr. Shen Kangchen Mr. Wang Xiuping (j) Mr. Zhu Donglin (c) Senior management Mr. Huang Xinming (d) Mr. Qian Weizhong (e) Mr. Li Zhigang (f) Mr. Feng Xingguo Mr. Sui Jun Mr. Gu Zhongdong (g) Mr. Chen Wei (g) Mr. Chen Shuai (g) Mr. Zhang Mingwen Mr. Yu Zhen (h) Mr. Ye Yumang (i)	Fees RMB’000 – – – 138 – 180 – – – – – – – – – – – – 1,107	Salary RMB’000 – – 631 – – – 658 349 500 – 643 638 480 480 663 663 399 67 6,970	Pension and other social welfare RMB’000 – – 120 – – – 60 62 63 – 119 122 58 76 59 59 52 – 978	Total RMB’000 – – 751 138 – 180 718 411 563 – 762 760 538 556 722 722 451 67 9,055	Unit of the Rights granted (note 9) – – 246,450 – – – – 2,604,000 – 1,399,650 1,240,000 1,395,000 – – 1,395,000 – – 1,240,000
					18,916,200

Notes:

(a) Appointed on 26 June 2014
(b) Resigned on 26 June 2014
(c) Appointed on 27 January 2014
(d) Resigned on 4 March 2014
(e) Appointed on 4 March 2014
(f) Resigned on 10 January 2014 (g) Appointed on 7 January 2014
(h) Appointed on 29 April 2014
(i) Resigned on 29 April 2014
(j) Resigned on 27 January 2014

– VII-126 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Name of director and supervisor For the year ended 31 December 2013 Directors Mr. Li Shaode (a) Mr. Xu Lirong (a) Mr. Zhang Guofa Mr. Huang Xiaowen Mr. Zhao Hongzhou Mr. Zhang Jianhua (b) Ms. Su Min Mr. Wang Daxiong Mr. Xu Hui (b) Mr. Chen Jihong Mr. Ding Nong Mr. Lin Jianqing (b) Mr. Zhang Rongbiao Ms. Zhang Nan Mr. Wu Daqi (b) Mr. Shen Kangchen (b) Mr. Jim Poon (b) Mr. Shen Zhongying (b) Mr. Zhang Songshen (c) Mr. Chen Lishen (c) Mr. Guan Yimin (c) Mr. Shi Xin (c) Supervisors Mr. Chen Decheng (b) Mr. Xu Wenrong (c) Mr. Tu Shiming Mr. Kou Laiqi (b) Mr. Ye Hongjun (c) Mr. Wang Xiuping Mr. Hua Min (b) Mr. Shen Kangchen (c) Ms. Pan Yingli (b) Mr. Shen Zhongying (c) Senior management Mr. Huang Xinming Mr. Li Zhigang Mr. Feng Xingguo Mr. Sui Jun Mr. Liu Chong (d) Mr. Zhang Mingwen Mr. Ye Yumang	Fees RMB’000 – – – – – – – – – – – – – 100 – 50 150 50 150 50 50 50 50 – – – – – 50 50 50 50 – – – – – – – 900	Salary RMB’000 – – – – 703 – – – – – – – – – – – – – – – – – – – 589 – – 638 – – – – 703 583 595 596 80 508 363 5,358	Pension and other social welfare RMB’000 – – – – 322 – – – – – – – – – – – – – – – – – – – 309 – – 16 – – – – 358 313 307 307 37 145 65 2,179	Total RMB’000 – – – – 1,025 – – – – – – – – 100 – 50 150 50 150 50 50 50 50 – 898 – – 654 50 50 50 50 1,061 896 902 903 117 653 428 8,437	Unit of the Rights granted (note 9) 3,382,100 – 2,218,050 3,334,050 2,604,000 1,240,000 – 1,240,000 1,085,000 – – 525,450 – – – – – – – – – – 948,600 – 246,450 156,550 – 1,395,000 – – – – 2,604,000 1,399,650 1,240,000 1,395,000 – – 1,240,000
					26,253,900

Notes:

(a) Resigned on 2 December 2013
(b) Resigned on 28 June 2013
(c) Appointed on 28 June 2013
(d) Resigned on 18 April 2013

– VII-127 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

No directors or supervisors of the Company waived any emoluments during the year ended 31 December 2014 (2013: Nil). No discretionary bonus was paid to any of the directors or supervisors of the Company during the year ended 31 December 2014 (2013: Nil).

In year 2014, fair value of the Rights granted to the directors and supervisors of the Company increased by approximately RMB115,000 (2013: decreased by approximately RMB5,045,000).

(B) Five Highest Paid Individuals

The five highest paid employees during the year included one director, one supervisor and three senior managers (2013: one director, one supervisor and three senior managers), details of whose remuneration are set out in note 10(a) above.

(C) During the year ended 31 December 2014, no emoluments were paid by the group to any of the directors, supervisors or the five highest paid individuals as an inducement to join or upon joining the group or as compensation for loss of office (2013: Nil).

11 FINANCE COSTS

Interest expenses: – Borrowings and domestic corporate bonds – Finance lease obligations Total interest expenses Less: Amount capitalised in vessels under construction	2014 RMB’000 499,845 12,230 512,075 (43,781) 468,294	2013 RMB’000 502,527 15,956
		518,483 (60,865)
		457,618

The capitalisation rate applied to funds borrowed and bonds issued generally and utilised for the vessels under construction was 2.19% (2013: 3.56%) per annum for the year ended 31 December 2014.

12 INCOME TAX EXPENSE

Current income tax – PRC corporate income tax (Note (a)) – Hong Kong profits tax (Note (b)) – Others Deferred income tax (note 35)	2014 RMB’000 57,205 1,597 2,625 486,103 547,530	2013 RMB’000 35,562 387 – 341
		36,290

Notes:

(a) PRC corporate income tax (“CIT”)

According to the Corporate Income Tax Law of the People’s Republic of China, which was effective from 1 January 2008, the CIT rate applicable of the Company and its subsidiaries incorporated in PRC was 25% for the year ended 31 December 2014 and 2013.

Pursuant to relevant CIT regulations, the dividends received by the Company from its overseas subsidiaries are subject to CIT at a rate of 25%.

– VII-128 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(b) Hong Kong profits tax

Hong Kong profits tax was provided at the rate of 16.5% (2013: 16.5%) on the estimated assessable profits of the Group’s companies operated in Hong Kong for the year ended 31 December 2014.

(c) The taxation on the Group’s profit/(loss) before income tax differs from the theoretical amount that would arise using the taxation rate applicable to the Company as follows:

Profit/(loss) before income tax from continuing operations Less: Share of results of associates Share of results of joint ventures Tax calculated at an income tax rate of 25% (2013: 25%) Tax losses for which no deferred income tax asset was recognised Derecognition of tax losses previously recognised (Income)/loss not subject to tax Effect of different tax rate or tax base of subsidiaries and others	2014 RMB’000 1,577,524 (77,915) (6,209) 1,493,400 373,350 17,511 316,850 (189,402) 29,221 547,530	2013 RMB’000 (2,828,387) (41,760) (5,541) (2,875,688) (718,922) 289,750 – 425,243 40,219 36,290

13 PROFIT ATTRIBUTABLE TO OWNERS OF PARENT

The profit attributable to owners of parent includes a gain of RMB676,618,000 for the year ended 31 December 2014, which has been dealt with in the financial statements of the Company (2013: loss of RMB1,016,486,000).

14 DISCONTINUED OPERATION

On 11 October 2013, the Company announced the decision of its board of directors to dispose of China Shipping Terminal Company Limited (“CSTD”). CSTD engages in operating container terminals. The disposal was completed on 20 June 2014.

The results of CSTD for the period ended 20 June 2014 and the year ended 31 December 2013 are presented below:

	Period ended	Year ended
	20 June 2014	31 December 2013
	RMB’000	RMB’000
Revenue	132,876	399,386
Costs of services	(79,620)	(223,406)
Selling, administrative and general expenses	(25,745)	(66,269)
Other income	22,945	27,192
Other (losses)/gains, net	(7,023)	244,706
Finance costs	(21,786)	(77,030)
Share of profits and losses of:
Associates	1,289	1,906
Joint ventures	25,617	49,634

– VII-129 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

Profit of the discontinued operation Loss recognised on the remeasurement to fair value Profit before tax from the discontinued operation Income tax: Related to pre-tax profit Profit for the year from the discontinued operation	Period ended 20 June 2014 RMB’000 48,553 – 48,553 (9,797) 38,756	Year ended 31 December 2013 RMB’000 356,119 –
		356,119 (75,487)
		280,632

The net cash flows incurred by CSTD for the period ended 20 June 2014 and the year ended 31 December 2013 are as follows:

Operating activities Investing activities Financing activities Exchange gain/(loss) on cash and cash equivalents Net cash inflow Earnings per share: Basic, from the discontinued operation Diluted, from the discontinued operation	Period ended 20 June 2014 RMB’000 19,112 (483,783) 313,926 2,901 (147,844) 0.31 cents 0.31 cents	Year ended 31 December 2013 RMB’000 (112,733) 464,632 111,566 (4,903)
		458,562

		2.24 cents 2.24 cents

The calculation of basic earnings per share from the discontinued operation is based on:

	2014	2013
Profit attributable to ordinary equity holders of the parent
from the discontinued operation	RMB36,046,000	RMB261,150,000
Weighted average number of ordinary shares in issue during
the year (note 16)	11,683,125,000	11,683,125,000

Diluted earnings per share amounts are the same as the basic earnings per share.

15 DIVIDENDS

The directors do not recommend a dividend in respect of the year ended 31 December 2014 (2013: Nil).

– VII-130 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

16 EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share amount is calculated by dividing the profit/(loss) attributable to owners of parent by the weighted average number of ordinary shares in issue during the year.

	2014	2013
Earnings
Profit/(loss) attributable to ordinary equity holders of the
parent, used in the basic earnings per share calculation
(RMB’000)
From continuing operations	1,007,990	(2,871,248)
From a discontinued operation	36,046	261,150
Shares
Weighted average number of ordinary shares in issue
(thousands)	11,683,125	11,683,125

Diluted earnings/(loss) per share amounts are the same as the basic earnings/(loss) per share, as the Company did not have any potential dilutive ordinary shares during the years ended 31 December 2014 and 2013.

17 PROPERTY, PLANT AND EQUIPMENT

Container vessels RMB’000 34,166,375 (6,689,080)	Vessels under construction RMB’000 2,237,195 –	Improvements under operating leases RMB’000 104,086 (90,101)	Buildings RMB’000 330,666 (66,214)	The Construction in progress RMB’000 1,739,011 –	Group Containers RMB’000 2,581,886 (912,864)	Port and depot infrastructure RMB’000 1,071,949 (129,320)	Loading machinery RMB’000 1,470,253 (340,989)	Motor vehicles, computer, office equipment and furniture RMB’000 553,518 (349,431)	Total RMB’000 44,254,939 (8,577,999)
27,477,295	2,237,195	13,985	264,452	1,739,011	1,669,022	942,629	1,129,264	204,087	35,676,940
27,477,295 (317,879) 1,488,665 286,914 (163,624) – – (1,283,318)	2,237,195 (50,806) (1,488,665) 1,646,106 – – – –	13,985 (18) – 6,081 (99) – (10,653) (4,175)	264,452 (6) – 13,572 – – (43,330) (11,022)	1,739,011 – – 18,363 – (1,737,080) (1,751) –	1,669,022 (54,196) – 578,068 (10,737) – (133) (116,294)	942,629 – – 2,411 – – (928,543) (16,497)	1,129,264 (1,798) – 5,077 (2,941) (580,067) (491,683) (57,852)	204,087 (696) – 10,529 (2,246) (4,849) (10,020) (51,454)	35,676,940 (425,399) – 2,567,121 (179,647) (2,321,996) (1,486,113) (1,540,612)
27,488,053	2,343,830	5,121	223,666	18,543	2,065,730	–	–	145,351	32,290,294
35,174,284 (7,686,231)	2,343,830 –	95,413 (90,292)	287,309 (63,643)	18,543 –	3,058,922 (993,192)	– –	– –	448,479 (303,128)	41,426,780 (9,136,486)
27,488,053	2,343,830	5,121	223,666	18,543	2,065,730	–	–	145,351	32,290,294
27,488,053 46,924 6,539,672 56,179 (129,531) – (1,370,025)	2,343,830 5,677 (6,539,672) 4,981,236 – – –	5,121 7 56,983 26,246 – – (11,112)	223,666 – – – (176) (175,906) (1,331)	18,543 – (57,358) 46,298 – – –	2,065,730 8,413 – 838,928 (10,332) (12) (134,347)	– – – – – – –	– – – – – – –	145,351 112 375 21,957 (1,473) (78,447) (39,771)	32,290,294 61,133 – 5,970,844 (141,512) (254,365) (1,556,586)
32,631,272	791,071	77,245	46,253	7,483	2,768,380	–	–	48,104	36,369,808
41,365,275 (8,734,003)	791,071 –	178,890 (101,645)	52,978 (6,725)	7,483 –	3,891,517 (1,123,137)	– –	– –	358,808 (310,704)	46,646,022 (10,276,214)
32,631,272	791,071	77,245	46,253	7,483	2,768,380	–	–	48,104	36,369,808

– VII-131 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

At 1 January 2013 Cost Accumulated depreciation and impairment losses Net book amount Year ended 31 December 2013 Opening net book amount Transfers Additions Disposals Depreciation Closing net book amount At 31 December 2013 Cost Accumulated depreciation and impairment losses Net book amount Year ended 31 December 2014 Opening net book amount Transfers Additions Disposals Depreciation Closing net book amount At 31 December 2014 Cost Accumulated depreciation and impairment losses Net book amount	Container vessels RMB’000 21,673,068 (5,187,431) 16,485,637 16,485,637 1,488,665 48,180 (92,102) (839,268) 17,091,112 23,117,812 (6,026,700) 17,091,112 17,091,112 – 43,259 (118,543) (853,935) 16,161,893 23,042,528 (6,880,635) 16,161,893	Vessels under construction RMB’000 1,267,093 – 1,267,093 1,267,093 (1,488,665) 221,572 – – – – – – – – – – – – – – –	Improvements under operating leases RMB’000 – – – – – – – – – – – – – 55,714 – – (4,643) 51,071 55,714 (4,643) 51,071	The Company Buildings Construction in progress RMB’000 RMB’000 195,778 1,932 (47,177) – 148,601 1,932 148,601 1,932 – – – 16,612 (143,832) – (3,388) – 1,381 18,544 51,946 18,544 (50,565) – 1,381 18,544 1,381 18,544 – (55,714) – 37,170 – – (38) – 1,343 – 51,946 – (50,603) – 1,343 –	Motor vehicles, computer, office equipment and furniture RMB’000 196,115 (142,626) 53,489 53,489 – 238,284 (48) (12,980) 278,745 434,351 (155,606) 278,745 278,745 – 6,217 (423) (11,051) 273,488 440,145 (166,657) 273,488	Total RMB’000 23,333,986 (5,377,234)
						17,956,752
						17,956,752 – 524,648 (235,982) (855,636)
						17,389,782
						23,622,653 (6,232,871)
						17,389,782
						17,389,782 – 86,646 (118,966) (869,667)
						16,487,795
						23,590,333 (7,102,538)
						16,487,795

– VII-132 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(a) As at 31 December 2014, the net book value of the Group’s containers and motor vehicles held under finance leases amounted to approximately RMB240,991,000 (2013: RMB297,810,000).
(b) As at 31 December 2014, the net book value of container vessels and containers of the Group pledged as securities for the bank borrowings amounted to approximately RMB8,344,784,000 (2013: RMB5,942,678,000) (note 32).
(c) As at 31 December 2014, the net book value of the assets leased out under operating leases, where the Group and the Company are the lessors, comprised vessels under chartering arrangements amounting to RMB3,206,648,000 and RMB3,047,044,000 (2013: RMB761,099,504 and RMB4,239,201,000), respectively.
(d) During the year ended 31 December 2014, the capitalised borrowing costs of the Group and the Company included in vessels under construction and construction in progress amounted to approximately RMB43,781,000 and nil (2013: RMB60,865,000 and RMB23,246,000), respectively.
(e) As at 31 December 2014, the accumulated impairment losses of the container vessels of the Group included under “accumulated depreciation and impairment losses” amounted to RMB17,886,000 (2013: RMB26,363,000).
(f) Depreciation expenses of RMB1,531,369,000 has been charged to consolidated statement of profit or loss within costs of services and RMB25,217,000 has been charged to consolidated statement of profit or loss within selling, administrative and general expenses (note 6) (2013: RMB1,431,610,000 has been charged to consolidated statement of profit or loss within costs of services; RMB26,728,000 has been charged to consolidated statement of profit or loss within selling, administrative and general expenses and RMB82,274,000 was included in the profit for the year from a discontinued operation).

18 LEASEHOLD LAND AND LAND USE RIGHTS

Year ended 31 December 2013 Opening net book value Assets included in a discontinued operation Disposals Amortisation charge for the year (note 6) Closing net book amount At 31 December 2013 Cost Accumulated amortisation Net book amount Year ended 31 December 2014 Opening net book value Disposal of subsidiaries Closing net book amount At 31 December 2014 Cost Accumulated amortisation Net book amount	The Group RMB’000 92,981 (14,583) – (2,407) 75,991 90,341 (14,350) 75,991 75,991 (75,991) – – – –	The Company RMB’000 10,877 – (10,528) (349) – – – – – – – – – –

The Group’s and the Company’s leasehold land and land use rights are located in the PRC, and are held on lease periods ranging from 30 to 50 years.

– VII-133 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

19 INTANGIBLE ASSETS

Year ended 31 December 2013 Opening net book value Exchange difference Additions Assets included in a discontinued operation Amortisation charge for the year (note 6) Closing net book amount At 31 December 2013 Cost Accumulated amortisation Net book amount Year ended 31 December 2014 Opening net book value Exchange difference Additions Disposal of subsidiaries Amortisation charge for the year (note 6) Closing net book amount At 31 December 2014 Cost Accumulated amortisation Net book amount	Port line use rights RMB’000 2,673 – – (2,615) (58) – – – – – – – – – – – – –	The Group Computer software RMB’000 26,057 (123) 2,506 (940) (7,094) 20,406 43,627 (23,221) 20,406 20,406 9 4,886 (191) (6,194) 18,916 47,455 (28,539) 18,916	Total RMB’000 28,730 (123) 2,506 (3,555) (7,152) 20,406 43,627 (23,221) 20,406 20,406 9 4,886 (191) (6,194) 18,916 47,455 (28,539) 18,916	The Company Computer software RMB’000 11,206 – 2,091 – (2,090)
				11,207
				18,211 (7,004)
				11,207

				11,207 – 3,355 – (2,551)
				12,011
				21,568 (9,557)
				12,011

The Group’s port line use rights to the port line located in Jinzhou, the PRC, can be used for 50 years since the year 2008. The amortisation of intangible assets of RMB6,194,000 (2013: RMB6,626,000) has been charged to “selling, administrative and general expenses”.

INVESTMENTS IN SUBSIDIARIES – THE COMPANY
	2014	2013
	RMB’000	RMB’000
Investments in subsidiaries – unlisted shares, at cost	12,146,838	13,241,339

– VII-134 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The changes in investments in subsidiaries during the year comprised the following:

(i) During the year, the Company disposed its 100% equity interests in its subsidiaries, Shanghai China Shipping International Container Storage and Transportation Co., Ltd. (“CS Yangshan”), Shanghai Zhengjin Industrials Co., Ltd. (“Zhengjin”) and China Shipping Terminal Development Co., Ltd. (“CSTD”). Further details of this disposal are included in note 38 to the financial statements;
(ii) In January 2014, the Company acquired a 60% equity interest in Golden Sea Shipping Pte. Ltd. from a fellow subsidiary of the Company at a cash consideration of USD1,747,400;
(iii) In August 2014, the Company made capital investment in a subsidiary, Golden Sea Shipping Pte. Ltd. by cash injection of USD6,000,000, representing a 60% equity interest in the subsidiary;
(iv) In July 2014, the Company made capital investments in a newly established company, Shenzhen E-Shipping Gateway Co., Ltd. by cash injection of RMB10,000,000 representing a 50% equity interest in the subsidiary;
(v) In August 2014, the Company made capital investment in a subsidiary, China Shipping Container Lines (Fuzhou) Co., Ltd. by cash injection of RMB345,000, representing a 10% directly equity interest and the Company holds 90% equity interest of China Shipping Container Lines (Fuzhou) Co., Ltd through its other subsidiaries; and
(vi) The fair value of share option benefits amounting to approximately RMB18,709,000 (2013: RMB18,140,000) attributable to directors and employees (note 9) of subsidiaries is recorded as investments in subsidiaries.

The list of the principal subsidiaries of the Company as at 31 December 2014 is set out in note 43(a).

21 INVESTMENTS IN ASSOCIATES

The Group

Beginning of year Increase in investments (Note a) Share of profit of associates Share of other comprehensive income of associates Others Interests in associates included in a discontinued operation Dividend received End of year	2014 RMB’000 297,303 3,430,597 77,915 (32,334) 207 – (19,308) 3,754,380	2013 RMB’000 293,965 20,000 43,666 – – (42,862) (17,466)
		297,303

The Company

Unlisted investments, at cost Beginning of year Increase in investments (Note a) End of year	2014 RMB’000 213,972 3,430,597 3,644,569	2013 RMB’000 213,972 –
		213,972

– VII-135 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes:

(a) In June 2014, the Company subscribed a 49% equity interest in China Shipping Terminal Development (H.K.) Co., Ltd. (“CSTD HK”) at a consideration of its 100% equity interest in its subsidiary, CSTD. Further details are included in note 38 to the financial statements.
(b) The interests in associates as at 31 December 2014 included goodwill of RMB41,303,000 (2013: RMB670,000). The Group’s share of the result of its associates, all of which are unlisted, and the aggregated assets and liabilities (excluding goodwill), are as follows:

		2014				2013
		Angang Vehicle			Angang Vehicle	*Ningbo
	CSTD	Transportation	CS		Transportation	Mei Shan	CS
	HK	Co., Ltd.	Finance	Total	Co., Ltd.	Port	Finance	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total assets	4,161,534	96,513	2,799,595	7,057,642	97,721	43,089	2,442,152	2,582,962
Total liabilities	567,645	43,985	2,529,064	3,140,694	32,871	227	2,210,369	2,243,467
Net assets	3,593,889	52,528	270,531	3,916,948	64,850	42,862	231,783	339,495
Revenue	131,257	162,452	102,127	395,836	123,936	3,000	96,040	222,976
Net profit	21,541	3,138	53,236	77,915	360	1,906	41,400	43,666
Percentage of interest held	49.00%	20.07%	25.00%		20.07%	20.00%	25.00%

Interests in Ningbo Meishan Bonded Port Area New Bay Terminal Management Co., Ltd. (“Ningbo Mei Shan Port”) were included in the discontinued operation as at 31 December 2013.
(c) CSTD HK, which is considered a material associate of the Group, engages in operating container terminals and is accounted for using the equity method.

The following table illustrates the summarised financial information in respect of CSTD HK adjusted for any differences in accounting policies and reconciled to the carrying amount in the financial statements:

Revenue
Net profit
Other comprehensive income
Total comprehensive income for the year
Dividend received
Current assets
Non-current assets, excluding goodwill
Current liabilities
Non-current liabilities
Non-controlling interests
Net assets, excluding goodwill
Reconciliation to the Group’s interest in the associate:
Proportion of the Group’s ownership
Group’s share of net assets of the associate, excluding goodwill
Goodwill on acquisition (less cumulative impairment)
Carrying amount of the investment

2014
RMB’000
372,517
136,282
(108,019)
28,263
–
740,686
7,752,241
(816,497)
(341,963)
(416,064)

6,918,403

49%
3,390,017
25,452
3,415,469

(d) The details of the associates of the Group and the Company as at 31 December 2014 are set out in note 43(b).

– VII-136 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

22 INVESTMENTS IN JOINT VENTURES

The Group

Beginning of year Increase in investments Share of profit of joint ventures Others Dividends declared by joint ventures Liquidation of joint ventures Interests in joint ventures included in a discontinued operation Exchange differences End of year The Company Unlisted investments, at cost Beginning of year Increase in investments End of year	2014 RMB’000 51,067 – 6,209 – (4,919) – – 45 52,402 2014 RMB’000 41,500 – 41,500	2013 RMB’000 1,329,542 1,020 55,175 665 (44,679) (28,870) (1,261,501) (285)
		51,067

		2013 RMB’000 41,500 –
		41,500

Notes:

(a) There are no significant contingent liabilities relating to the Group and the Company’s interests in the joint ventures, and no significant contingent liabilities of the ventures themselves.
(b) There was no goodwill included in the interests in joint ventures as at 31 December 2014 (2013: RMB31,959,000). The Group’s share of the results of its joint ventures, all of which are unlisted, and their aggregated assets and liabilities (excluding goodwill), are as follows:

	2014
	Total
	RMB’000
Total assets	130,408
Total liabilities	78,006
Net assets	52,402
Revenue	39,051
Net profit	6,209
Percentage of interest held	45%-50%

– VII-137 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			2013
	*Guangzhou
	Nansha	*Dalian
	Port	International	Others
	Stevedoring	Container	included in
	Corporation	Terminal	continuing
	Limited	Co., Ltd.	operations	*Others	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total assets	1,377,335	941,941	131,787	630,679	3,081,742
Total liabilities	718,621	544,544	80,720	393,330	1,737,215
Net assets	658,714	397,397	51,067	237,349	1,344,527
Revenue	297,814	109,372	37,255	212,805	657,246
Net profit	45,876	(4,505)	5,541	8,263	55,175
Percentage of
interest held	40%	30%	45%-50%	30%-49%

Interests in these joint ventures were included in the discontinued operation as at 31 December 2013.
(c) The details of the joint ventures of the Group and the Company as at 31 December 2014 are set out in note 43(c).

23 DERIVATIVE FINANCIAL INSTRUMENTS – THE GROUP

Interest rate swaps Portion classified as non-current: Interest rate swaps Current portion	2014 Assets RMB’000 4,723 4,026 697	2013 Assets RMB’000 –
		–
		–

Cash Flow Hedges

At 31 December 2014, the Group had interest rate swap agreements in place with a total notional amount of US$377,355,600 whereby they receive interests at variable rates equal to the 3 month London Interbank Offered Rate (“LIBOR”) on the notional amounts and pay interests at fixed rates of 1.37% to 1.58%. The swaps are used to hedge the exposure to changes in the cash flow of its secured loans with variable rates. The secured loans and the interest rate swap agreements have the same critical terms. The hedge of the interest rate swaps was assessed to be effective.

24 FINANCIAL INSTRUMENTS BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below:

Assets per statement of financial position: Loans and receivables – Trade and notes receivables (note 28) – Other receivables – Restrict cash (note 29) – Cash and cash equivalents (note 29)	The Group 2014 2013 RMB’000 RMB’000 2,384,511 2,476,402 245,418 255,517 500 2,100 9,355,888 9,014,462 11,986,317 11,748,481	The Company 2014 2013 RMB’000 RMB’000 1,069,273 1,188,531 187,087 201,872 – – 5,394,887 5,445,944 6,651,247 6,836,347	The Company 2014 2013 RMB’000 RMB’000 1,069,273 1,188,531 187,087 201,872 – – 5,394,887 5,445,944 6,651,247 6,836,347
			6,836,347

– VII-138 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Derivative financial instruments (note 23) Liabilities per statement of financial position: Financial liabilities at amortised cost – Trade payables (note 36) – Other payables and accruals – Interest-bearing bank and other borrowings (note 32) – Domestic corporate bonds (note 33) – Finance lease obligations (note 34)	The Group 2014 2013 RMB’000 RMB’000 4,723 – 3,825,897 3,890,379 503,860 524,851 22,153,905 18,937,326 1,793,981 1,791,530 187,259 221,370 28,464,902 25,365,456	The Company 2014 2013 RMB’000 RMB’000 – – 4,948,341 4,602,319 1,996,841 1,581,488 1,597,397 4,599,783 1,793,981 1,791,530 – – 10,336,560 12,575,120	The Company 2014 2013 RMB’000 RMB’000 – – 4,948,341 4,602,319 1,996,841 1,581,488 1,597,397 4,599,783 1,793,981 1,791,530 – – 10,336,560 12,575,120
			4,602,319 1,581,488 4,599,783 1,791,530 –
			12,575,120

25 FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group’s and the Company’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

Group

Financial assets Derivative financial instruments Financial liabilities Long term borrowing Domestic corporate bonds Finance lease obligations	Carrying amounts 2014 2013 RMB’000 RMB’000 4,723 – 13,463,254 10,917,131 1,793,981 1,791,530 150,281 186,597 15,407,516 12,895,258	Fair values 2014 2013 RMB’000 RMB’000 4,723 – 13,451,171 10,872,225 1,784,964 1,706,526 150,281 186,597 15,386,416 12,765,348	Fair values 2014 2013 RMB’000 RMB’000 4,723 – 13,451,171 10,872,225 1,784,964 1,706,526 150,281 186,597 15,386,416 12,765,348
			10,872,225 1,706,526 186,597
			12,765,348

Company

Financial liabilities Long term borrowing Domestic corporate bonds	Carrying amounts 2014 2013 RMB’000 RMB’000 600,000 2,600,000 1,793,981 1,791,530 2,393,981 4,391,530	Fair values 2014 2013 RMB’000 RMB’000 587,917 2,555,094 1,784,964 1,706,526 2,372,881 4,261,620	Fair values 2014 2013 RMB’000 RMB’000 587,917 2,555,094 1,784,964 1,706,526 2,372,881 4,261,620
			4,261,620

– VII-139 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group’s corporate finance department headed by the finance manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The finance manager reports directly to the chief financial officer and the audit committee. At each reporting date, the finance department analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer. The valuation process and results are discussed with the audit committee twice a year for interim and annual financial reporting.

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with AAA credit ratings. Derivative financial instruments, including interest rate swaps, are measured using valuation techniques similar to swap models, using present value calculations. The models incorporate various market observable inputs including the credit quality of counterparties and interest rate curves. The carrying amounts of interest rate swaps are the same as their fair values.

As at 31 December 2014, the marked to market value of the derivative asset position was net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments recognised at fair value.

Fair Value Hierarchy

Level 1 – Quoted market prices that are unadjusted in active markets for identical assets or liabilities Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:

Group

As at 31 December 2014

Assets measured at fair value: Derivative financial instruments Liabilities for which fair values are disclosed: Long term borrowing Domestic corporate bonds Finance lease obligations	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Total RMB’000 RMB’000 RMB’000 4,723 – 4,723 – 13,463,254 13,463,254 – 1,793,981 1,793,981 – 150,281 150,281 – 15,407,516 15,407,516	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Total RMB’000 RMB’000 RMB’000 4,723 – 4,723 – 13,463,254 13,463,254 – 1,793,981 1,793,981 – 150,281 150,281 – 15,407,516 15,407,516
		13,463,254 1,793,981 150,281
		15,407,516

– VII-140 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2013

Liabilities for which fair values are disclosed: Long term borrowing Domestic corporate bonds Finance lease obligations Company	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 10,917,131 1,791,530 186,597
	12,895,258

As at 31 December 2014

Liabilities for which fair values are disclosed: Long term borrowing Domestic corporate bonds	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 600,000 1,793,981
	2,393,981

As at 31 December 2013

Liabilities for which fair values are disclosed: Long term borrowing Domestic corporate bonds	Fair value measurement using significant unobservable inputs (Level 3) RMB’000 2,600,000 1,791,530
	4,391,530

– VII-141 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

26 CREDIT QUALITY OF FINANCIAL ASSETS

(A) Trade and Notes Receivables

As at 31 December 2014, the Group’s trade and notes receivables of RMB2,344,820,000 (2013: RMB2,064,190,000) and the Company’s trade and notes receivables of RMB971,335,000 (2013: RMB1,208,953,000) were due within three months. Trade and notes receivables that were due within three months mainly represent those due from customers with good credit history and a low default rate. Trade and notes receivables that were either past due or impaired are disclosed in note 28.

None of the financial assets that are fully performing has been renegotiated in the last year.

(B) Cash and Cash Equivalents

The Group categorises its cash in banks into the following:

Group 1 – Major international banks (Citibank, ABN AMRO Bank, etc.)
• Group 2 – Top four banks in the PRC (China Construction Bank, Bank of China, Agricultural Bank of China and Industrial and Commercial Bank of China)
• Group 3 – Other reputable PRC banks

Group 1 Group 2 Group 3*	The Group 2014 2013 RMB’000 RMB’000 945,942 1,002,671 3,435,441 4,246,825 4,974,505 3,764,966 9,355,888 9,014,462	The Company 2014 2013 RMB’000 RMB’000 213,308 514,784 2,403,372 3,248,361 2,778,207 1,682,799 5,394,887 5,445,944	The Company 2014 2013 RMB’000 RMB’000 213,308 514,784 2,403,372 3,248,361 2,778,207 1,682,799 5,394,887 5,445,944
			5,445,944

Included cash on hand held by companies of the Group

27 INVENTORIES

Bunkers Others	The Group 2014 2013 RMB’000 RMB’000 899,160 1,420,095 286,338 125,275 1,185,498 1,545,370	The Company 2014 2013 RMB’000 RMB’000 383,922 789,955 268,287 123,022 652,209 912,977	The Company 2014 2013 RMB’000 RMB’000 383,922 789,955 268,287 123,022 652,209 912,977
			912,977

– VII-142 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

28 TRADE AND NOTES RECEIVABLES

The ageing analysis of the trade and notes receivables based on invoice dates is as follows:

The carrying amounts of trade and notes receivables approximated their fair values as at the end of reporting periods.

Trade receivables – Subsidiaries – Fellow subsidiaries (note 42(c)) – Third parties Notes receivable RMB USD HKD Other currencies	The Group 2014 2013 RMB’000 RMB’000 – – 333,418 338,914 1,858,108 1,850,220 2,191,526 2,189,134 192,985 287,268 2,384,511 2,476,402 The Group 2014 2013 RMB’000 RMB’000 1,396,135 1,292,324 887,172 1,023,454 46,155 95,206 55,049 65,418 2,384,511 2,476,402	The Company 2014 2013 RMB’000 RMB’000 285,435 145,647 175,048 64,813 440,164 726,606 900,647 937,066 168,626 251,465 1,069,273 1,188,531 The Company 2014 2013 RMB’000 RMB’000 707,178 1,011,085 344,880 167,654 6,613 20 10,602 9,772 1,069,273 1,188,531	The Company 2014 2013 RMB’000 RMB’000 285,435 145,647 175,048 64,813 440,164 726,606 900,647 937,066 168,626 251,465 1,069,273 1,188,531 The Company 2014 2013 RMB’000 RMB’000 707,178 1,011,085 344,880 167,654 6,613 20 10,602 9,772 1,069,273 1,188,531
			1,188,531

The carrying amounts of the trade and notes receivables are denominated in the following currencies:

Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months Over 1 year Less: Provision for impairment of receivables	The Group 2014 2013 RMB’000 RMB’000 2,344,821 2,064,190 56,954 333,358 49,410 74,461 222 70,223 952 2,525 2,452,359 2,544,757 (67,848) (68,355) 2,384,511 2,476,402	The Company 2014 2013 RMB’000 RMB’000 971,335 1,208,953 31,647 887 49,376 622 196 2,206 35,746 – 1,088,300 1,212,668 (19,027) (24,137) 1,069,273 1,188,531	The Company 2014 2013 RMB’000 RMB’000 971,335 1,208,953 31,647 887 49,376 622 196 2,206 35,746 – 1,088,300 1,212,668 (19,027) (24,137) 1,069,273 1,188,531
			1,212,668 (24,137)
			1,188,531

The maximum exposure to credit risk at the reporting date is the total carrying value of the receivables mentioned above. The Group does not hold any collateral as security.

– VII-143 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Credit Policy

As at 31 December 2014, based on the invoice date, trade receivables of the Group and the Company that were aged over three months amounted to RMB107,539,000 and RMB116,965,000 (2013: RMB480,567,000 and RMB3,715,000), respectively. They are regarded as over-due and partially impaired, and the related amounts of provisions, estimated by management based on historic experiences of credit losses amounted to RMB67,848,000 and RMB19,027,000 (2013: RMB68,355,000 and RMB24,137,000), respectively.

The movements in the provision for impairment of trade and notes receivables are as follows:

At 1 January Disposal of subsidiaries Provision for impairment of trade receivables (note 6) Provision balance included in a discontinued operation At 31 December	The Group 2014 2013 RMB’000 RMB’000 68,355 65,401 (297) – (210) 4,435 – (1,481) 67,848 68,355	The Company 2014 2013 RMB’000 RMB’000 24,137 25,198 – – (5,110) (1,061) – – 19,027 24,137	The Company 2014 2013 RMB’000 RMB’000 24,137 25,198 – – (5,110) (1,061) – – 19,027 24,137
			24,137

The creation and release of provision for impaired receivables have been included in “selling, administrative and general expenses from continuing operations” in the consolidated statement of profit or loss (note 6) (2013: a reversal of RMB290,000 has been included in the profits for the year from a discontinued operation).

29 CASH AND CASH EQUIVALENTS

Cash at banks and in hand Short-term bank deposits Less: Restricted cash	The Group 2014 2013 RMB’000 RMB’000 4,358,371 3,575,544 4,998,017 5,441,018 9,356,388 9,016,562 (500) (2,100) 9,355,888 9,014,462	The Company 2014 2013 RMB’000 RMB’000 1,301,520 2,523,732 4,093,367 2,922,212 5,394,887 5,445,944 – – 5,394,887 5,445,944	The Company 2014 2013 RMB’000 RMB’000 1,301,520 2,523,732 4,093,367 2,922,212 5,394,887 5,445,944 – – 5,394,887 5,445,944
			5,445,944 –
			5,445,944

– VII-144 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Cash and cash equivalents are denominated in the following currencies:

RMB HKD USD Other currencies	The Group 2014 2013 RMB’000 RMB’000 4,476,370 4,457,684 56,153 38,484 4,607,985 4,319,262 215,380 199,032 9,355,888 9,014,462	The Company 2014 2013 RMB’000 RMB’000 3,678,832 3,791,364 33 12 1,704,277 1,620,509 11,745 34,059 5,394,887 5,445,944	The Company 2014 2013 RMB’000 RMB’000 3,678,832 3,791,364 33 12 1,704,277 1,620,509 11,745 34,059 5,394,887 5,445,944
			5,445,944

As at 31 December 2014, certain of the Group’s current time deposits of RMB500,000 (2013: RMB2,100,000) were pledged to the Customs as guarantees for import.

30 SHARE CAPITAL

		The Group and the Company	The Group and the Company
	Number of
	shares	A Shares	H Shares	Total
	RMB’000	RMB’000	RMB’000	RMB’000
Issued and fully paid:
At 1 January 2013,
31 December 2013 and 2014	11,683,125	7,932,125	3,751,000	11,683,125

Note:

As at 31 December 2014, all issued shares are registered, fully paid and divided into 11,683,125,000 shares (2013: 11,683,125,000 shares) of RMB1.00 each, comprising 7,932,125,000 A Shares and 3,751,000,000 H Shares (2013: 7,932,125,000 A Shares and 3,751,000,000 H Shares).

31 OTHER RESERVES AND RETAINED EARNINGS

(A) Special Reserve

At 1 January Disposal of subsidiaries Accrued during the year Used during the year At 31 December	The Group 2014 2013 RMB’000 RMB’000 38,278 2,229 (883) – 174,364 176,601 (191,609) (140,552) 20,150 38,278	The Company 2014 2013 RMB’000 RMB’000 34,832 449 – – 160,531 158,844 (180,461) (124,461) 14,902 34,832	The Company 2014 2013 RMB’000 RMB’000 34,832 449 – – 160,531 158,844 (180,461) (124,461) 14,902 34,832
			34,832

According to “Circular on Printing and Distributing the Administrative Measures for the Withdrawal and Use of Expenses for Safety Production of Enterprises” issued by the Ministry of Finance and the Safety Production General Bureau on 14 February 2012, the Group is required to accrue a “Safety Fund” to improve the production safety. The Group should accrue the Safety Fund from 1 January 2012. The accrual standard rate is 1% of the revenue from transportation services of the PRC entities of the Group. The fund is accrued monthly according to revenue and in a progressive way.

– VII-145 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(B) Other Reserves

Capital surplus RMB’000 Balance at 1 January 2013 17,024,773 Currency translation difference – Others 659 Balance at 31 December 2013 17,025,432 Balance at 1 January 2014 17,025,432 Share of other comprehensive loss of associates (32,334) Cash flow hedges, net of tax 4,715 Capital injection from non- controlling Interests 594 Disposal of subsidiaries (6,395) Currency translation difference – Others 674 Balance at 31 December 2014 16,992,686 Balance at 1 January 2013 till 31 December 2014	The Group Statutory surplus reserve Translation RMB’000 RMB’000 1,355,763 (1,338,675) – (147,204) – – 1,355,763 (1,485,879) 1,355,763 (1,485,879) – – – – – – – – – 11,034 – – 1,355,763 (1,474,845) Capital surplus The Company Statutory surplus reserve RMB’000 RMB’000 17,657,126 1,355,763	Total RMB’000 17,041,861 (147,204) 659 16,895,316 16,895,316 (32,334) 4,715 594 (6,395) 11,034 674 16,873,604 Total RMB’000 19,012,889

(C) Accumulated Losses

At 1 January Profit/(loss) for the year Accrued special reserve during the year Used special reserve during the year Others At 31 December	The Group 2014 2013 RMB’000 RMB’000 (4,845,260) (2,198,638) 1,044,036 (2,610,098) (174,364) (176,601) 191,609 140,552 (463) (475) (3,784,442) (4,845,260)	The Company 2014 2013 RMB’000 RMB’000 (2,134,094) (1,083,225) 676,618 (1,016,486) (160,531) (158,844) 180,460 124,461 – – (1,437,547) (2,134,094)

Capital surplus mainly represents share premium and reserves arising from business combinations under common control.

– VII-146 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

In accordance with the PRC regulations and the articles of association of the companies of the Group, before distributing the net profit of each year, each of the companies of the Group registered in the PRC is required to set aside 10% of its statutory net profit for the year after offsetting any prior year’s losses as determined under relevant PRC accounting standards to the statutory surplus reserve fund. When the balance of the reserve reaches 50% of the company’s share capital, any further appropriation is optional. The statutory surplus reserve fund can be utilised to offset prior years’ losses or to issue bonus shares. However, the statutory surplus reserve fund must be maintained at a minimum of 25% of the entity’s share capital after this issuance.

32 INTEREST-BEARING BANK AND OTHER BORROWINGS

Non-current Long-term bank borrowings Borrowing from parent and ultimate holding company (note 42(c)) Current Short-term bank borrowings Commercial paper notes Long-term bank borrowings – current portion Borrowing from a subsidiary Representing: Borrowing from a related party – unsecured Bank borrowings – unsecured – secured The maturity periods of the borrowings Within one year In the second year In the third to fifth year After fifth year	The Group 2014 2013 RMB’000 RMB’000 12,251,354 8,317,131 1,211,900 2,600,000 13,463,254 10,917,131 1,407,370 1,707,132 2,447,600 2,438,760 4,835,681 3,874,303 – – 8,690,651 8,020,195 22,153,905 18,937,326 1,211,900 2,600,000 13,281,412 12,379,878 7,660,593 3,957,448 22,153,905 18,937,326 are as follows: The Group 2014 2013 RMB’000 RMB’000 8,690,651 8,020,195 2,734,020 7,067,374 7,371,352 2,454,772 3,357,882 1,394,985 22,153,905 18,937,326	The Company 2014 2013 RMB’000 RMB’000 – – 600,000 2,600,000 600,000 2,600,000 611,900 304,845 – – – – 385,497 1,694,938 997,397 1,999,783 1,597,397 4,599,783 985,497 4,294,938 611,900 304,845 – – 1,597,397 4,599,783 The Company 2014 2013 RMB’000 RMB’000 997,397 1,999,783 600,000 2,600,000 – – – – 1,597,397 4,599,783	The Company 2014 2013 RMB’000 RMB’000 – – 600,000 2,600,000 600,000 2,600,000 611,900 304,845 – – – – 385,497 1,694,938 997,397 1,999,783 1,597,397 4,599,783 985,497 4,294,938 611,900 304,845 – – 1,597,397 4,599,783 The Company 2014 2013 RMB’000 RMB’000 997,397 1,999,783 600,000 2,600,000 – – – – 1,597,397 4,599,783
			4,599,783

– VII-147 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The exposure of the Group and the Company’s borrowings to interest-rate changes and the contractual repricing dates are as follows:

Within 6 months 6 to 12 months In the second to fifth year After fifth year	The Group 2014 2013 RMB’000 RMB’000 21,245,875 15,657,359 600,000 – 308,030 2,600,000 – 679,967 22,153,905 18,937,326	The Company 2014 2013 RMB’000 RMB’000 997,397 1,999,783 600,000 – – 2,600,000 – – 1,597,397 4,599,783	The Company 2014 2013 RMB’000 RMB’000 997,397 1,999,783 600,000 – – 2,600,000 – – 1,597,397 4,599,783
			4,599,783

As at 31 December 2014, the secured long-term bank borrowings of the Group were secured by the following collateral:

(i) Legal mortgage over certain container vessels, containers and port and depot infrastructure of the Group with a net book value of approximately RMB8,344,784,000 (2013: RMB5,942,678,000) (note 17(b)), and
(ii) Charges over shares of certain vessels-owning subsidiaries of the Group.

An analysis of the carrying amounts of the Group and the Company’s borrowings by type and currency is as follows:

RMB – at fixed rates USD – at fixed rates – at floating rates	The Group 2014 2013 RMB’000 RMB’000 600,000 2,600,000 613,980 375,122 20,939,925 15,962,204 22,153,905 18,937,326	The Company 2014 2013 RMB’000 RMB’000 600,000 2,600,000 305,950 – 691,447 1,999,783 1,597,397 4,599,783	The Company 2014 2013 RMB’000 RMB’000 600,000 2,600,000 305,950 – 691,447 1,999,783 1,597,397 4,599,783
			4,599,783

The weighted average effective interest rates at the end of reporting periods are set out as follows:

Bank borrowings – RMB – USD Borrowing from a related party – RMB – USD	The Group 2014 2013 RMB’000 RMB’000 – 5.67% 2.16% 2.71% 3.60% 4.75% 2.86% –	The Company 2014 2013 RMB’000 RMB’000 – – 1.25% 1.76% 3.60% 4.69% 0.17% 0.17%	The Company 2014 2013 RMB’000 RMB’000 – – 1.25% 1.76% 3.60% 4.69% 0.17% 0.17%
			4.69% 0.17%

The carrying amounts of the current bank borrowings approximated their fair values as at the end of reporting periods as the impact of discounting is not significant.

– VII-148 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The carrying amounts and the fair values of the non-current borrowings, which are based on cash flows discounted using a rate of 6.00% (2013: 6.55%), are as follows:

Carrying amounts Fair values	The Group 2014 2013 RMB’000 RMB’000 13,463,254 10,917,131 13,451,171 10,872,225	The Company 2014 2013 RMB’000 RMB’000 600,000 2,600,000 587,917 2,555,094	The Company 2014 2013 RMB’000 RMB’000 600,000 2,600,000 587,917 2,555,094
			2,555,094

The Group had the following undrawn borrowing facilities as at 31 December 2014:

Floating rate: – Expiring within one year – Expiring beyond one year 33 DOMESTIC CORPORATE BONDS Non-current domestic corporate bonds	The Group 2014 2013 RMB’000 RMB’000 305,950 – 1,755,168 1,704,466 2,061,118 1,704,466 The Group and the Company 2014 2013 RMB’000 RMB’000 1,793,981 1,791,530

The bonds were initially recognised at their fair value of RMB1,800,000,000, after deducting the transaction costs that are directly attributable to the bonds amounting to approximately RMB24,512,000. As at 31 December 2014, the estimated fair value of the bonds was approximately RMB1,784,964,000 (2013: RMB1,706,526,000). The fair value is calculated based on the discounted cash flows using applicable discount rates from the prevailing market interest rates offered to the Group for debts with substantially the same characteristics and maturity dates. The discount rate used was approximately 6.00% (2013: 6.55%) per annum.

– VII-149 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

34 FINANCE LEASE OBLIGATIONS – THE GROUP

Finance lease obligations Within one year In the second year In the third to fifth year After fifth year Less: Within one year (current portion)	Minimum lease payment RMB’000 47,128 47,147 121,585 –	2014 Finance charges RMB’000 10,150 7,939 10,512 –	Net present value of minimum lease payment RMB’000 36,978 39,208 111,073 –	Minimum lease payment RMB’000 46,996 46,991 129,835 38,284	2013 Finance charges RMB’000 12,223 10,120 16,898 1,495	Net present value of minimum lease payment RMB’000 34,773 36,871 112,937 36,789
	168,732	18,451	150,281	215,110	28,513	186,597

The average effective interest rate of finance lease obligations of the Group is 5.78% (2013: 5.80%) per annum.

The carrying amounts of finance lease obligations approximated their fair value as at the end of reporting periods. The fair values were determined based on discounted cash flows using approximately 6.00% (2013: 6.55%) per annum.

All finance lease obligations are denominated in USD.

35 DEFERRED INCOME TAX

Deferred income tax assets: – Deferred income tax assets to be settled after more than 12 months Deferred income tax liabilities: – Deferred income tax liabilities to be settled after more than 12 months	The Group 2014 2013 RMB’000 RMB’000 10,479 496,534 (75) (27) 10,404 496,507	The Company 2014 2013 RMB’000 RMB’000 6,250 491,889 – – 6,250 491,889	The Company 2014 2013 RMB’000 RMB’000 6,250 491,889 – – 6,250 491,889
			491,889

– VII-150 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The movements in the deferred income tax assets/(liabilities) are as follows:

Beginning of year Charged to consolidated statement of profit or loss (note 12) End of year	The Group 2014 2013 RMB’000 RMB’000 496,507 496,848 (486,103) (341) 10,404 496,507	The 2014 RMB’000 491,889 (485,639) 6,250	Company 2013 RMB’000 491,889 –
			491,889

The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:

Deferred income tax assets:

The Group At 1 January 2013 Charged to consolidated statement of profit or loss At 31 December 2013 Charged to consolidated statement of profit or loss At 31 December 2014 The Company At 1 January 2013 and 31 December 2013 Charged to consolidated statement of profit or loss At 31 December 2014 Deferred income tax liabilities: The Group At 1 January 2013 Charged to consolidated statement of profit or loss At 31 December 2013 Charged to consolidated statement of profit or loss At 31 December 2014 The Company At 1 January 2013, 31 December 2013 and 2014	Tax losses RMB’000 488,921 (3,282) 485,639 (485,639) – 485,639 (485,639) –	Others RMB’000 7,938 2,957 10,895 (416) 10,479 6,250 – 6,250	Others RMB’000 7,938 2,957 10,895 (416) 10,479 6,250 – 6,250	Total RMB’000 496,859 (325)
				496,534 (486,055)
				10,479
				491,889 (485,639)
				6,250

				Others RMB’000 (11) (16)
				(27) (48)
				(75)
				–

– VII-151 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2014, the Group and the Company derecognised deferred income tax assets of RMB316,850,000 in respect of cumulative tax losses amounting to RMB1,267,401,000 (“The Cumulative Tax Losses”). No deferred tax asset has been recognised by the Group and the Company on cumulative tax losses amounting to approximately RMB3,620,530,000 and RMB3,364,845,000 respectively, as it is uncertain that taxable profits will be available against which the tax losses can be utilised. Tax losses amounting to approximately RMB3,478,916,000 of the Group will expire in one to five years from 1 January 2015 and the remaining tax losses amounting to approximately RMB141,614,000 are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. All tax losses of the Company will expire in two to four years from 1 January 2015.

36 TRADE PAYABLES

Trade payables – Subsidiaries – Fellow subsidiaries (note 42(c)) – Third parties	The Group 2014 2013 RMB’000 RMB’000 – – 873,069 795,372 2,952,828 3,095,007 3,825,897 3,890,379	The Company 2014 2013 RMB’000 RMB’000 3,739,259 3,389,343 753,980 616,931 455,102 596,045 4,948,341 4,602,319	The Company 2014 2013 RMB’000 RMB’000 3,739,259 3,389,343 753,980 616,931 455,102 596,045 4,948,341 4,602,319
			4,602,319

The ageing analysis of the trade payables based on invoice dates is as follows:

Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months 1 to 2 years	The Group 2014 2013 RMB’000 RMB’000 3,782,579 3,642,819 8,961 121,760 11,196 89,017 14,847 15,353 8,314 21,430 3,825,897 3,890,379	The Company 2014 2013 RMB’000 RMB’000 4,940,612 4,594,742 4,138 3,557 999 1,259 2,521 2,761 71 – 4,948,341 4,602,319	The Company 2014 2013 RMB’000 RMB’000 4,940,612 4,594,742 4,138 3,557 999 1,259 2,521 2,761 71 – 4,948,341 4,602,319
			4,602,319

The carrying amounts of the trade payables are denominated in the following currencies:

RMB HKD USD Other currencies	The Group 2014 2013 RMB’000 RMB’000 1,910,611 1,979,837 71,067 77,549 1,734,502 1,665,597 109,717 167,396 3,825,897 3,890,379	The Company 2014 2013 RMB’000 RMB’000 3,634,419 3,303,602 3 14,565 1,311,492 1,237,492 2,427 46,660 4,948,341 4,602,319	The Company 2014 2013 RMB’000 RMB’000 3,634,419 3,303,602 3 14,565 1,311,492 1,237,492 2,427 46,660 4,948,341 4,602,319
			4,602,319

The carrying amounts of the trade payables approximated their fair values as at the end of reporting periods.

– VII-152 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

37 PROVISION

	Legal claims
	RMB’000
The Group and the Company
At 1 January 2013, 31 December 2013 and 2014	25,000

38 DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Leasehold land and land use rights Intangible assets Available-for-sale financial assets Investments in associates Investments in joint ventures Inventories Trade and notes receivables Prepayments and other receivables Cash and bank balances Interest-bearing bank and other borrowings – non-current Trade payables Other payables and accruals Interest-bearing bank and other borrowings – current Tax payable Non-controlling interests Special reserves Other reserves Gain on disposal of subsidiaries Satisfied by: Cash Interests in associates	2014 RMB’000 1,689,362 90,306 3,431 1,145,642 44,151 1,238,676 10,867 117,756 78,741 492,648 (372,000) (29,436) (220,066) (707,000) 208 (422,270) 3,161,016 (883) (6,395) 947,456 4,101,194 678,134 3,423,060 4,101,194	2013 RMB’000 2,321,996 – – – – – – – – 59,708 – (32,573) (7,520) (1,403,340) – (422,222)
		516,049

		– –
		240,001
		756,050

		756,050 –
		756,050

On 22 November 2013, the Company listed 100% equity interest in its subsidiary, Shanghai China Shipping Yangshan International Container Storage and Transportation Co., Ltd. (“CS Yangshan”) on the Shanghai United Assets and Equity Exchange (“SUAEE”) for open bidding by public bidders in compliance with the relevant laws and regulations on transfer of state-owned equity interests in the PRC. On 3 January 2014, China Shipping Logistics Co., Ltd. bid the equity interest at a consideration of RMB305,411,000 and entered into the equity transfer agreement with the Company. The equity transaction certificate by SUAEE with respect to the disposal has been issued and the agreement has become effective on 6 January 2014.

– VII-153 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

On 22 November 2013, the Company listed 100% equity interest in its subsidiary, Shanghai Zhengjin Industrials Co., Ltd. (“Zhengjin”) on SUAEE for open bidding by public bidders in compliance with the relevant laws and regulations on transfer of state-owned equity interests in the PRC. On 3 January 2014, China Shipping Investment Co., Ltd. bid the equity interest at a consideration of RMB372,723,000 and entered into the equity transfer agreement with the Company. The equity transaction certificate by SUAEE with respect to the disposal has been issued and the agreement has become effective on 6 January 2014.

On 20 June 2014, the Company disposed of 100% equity interest in its subsidiary, China Shipping Terminal Development Co., Ltd. (“CSTD”) to China Shipping Terminal Development (H.K.) Co., Ltd. (“CSTD HK”) after approval by State-owned Assets Supervision and Administration Commission of the State Council of the PRC which was settled through the issuance of 2,782,975,935 new shares which is equal to 49% equity interest in CSTD HK to the Company. The consideration of the subscription which equals to the valuation result was RMB3,423,060,000. The net assets attributable to the Group disposed amounted to RMB2,770,845,000. The Group had a gain on disposal of RMB652,215,000.

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash consideration Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2014 RMB’000 678,134 (447,083) 231,051	2013 RMB’000 756,050 (59,708) 696,342

39 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS

(A) Reconciliation of the Profit/(Loss) Before Income Tax to Net Cash Generated From/(Used In) Operations:

Profit/(loss) before income tax:
From continuing operations
From a discontinued operation (note 14)
Depreciation (note 17)
Amortisation (notes 18, 19)
Dividend income from available-for-sale financial assets
Share of results of associates
Share of results of joint ventures
Interest expense
Finance charge of finance lease obligations (note 11)
Interest income
Change in fair value of share-based compensation liability
(note 9)
Provision for impairment of trade receivables
Gains on disposal of items of property, plant and equipment
Loss on disposal of a joint venture
Gain on disposal of subsidiaries (note 38)
Operating profit/(loss) before working capital changes
Decrease/(increase) in inventories
Decrease/(increase) in trade and notes receivables
(Increase)/decrease in prepayments and other receivables
Decrease/(increase) in restricted cash
(Decrease)/increase in trade payables
(Decrease)/increase in accruals and other payables
Net cash generated from/(used in) operations

Year ended 31 December
2014
2013
RMB’000
RMB’000
1,577,524
(2,828,388)
48,553
356,119
1,596,318
1,540,612
6,718
9,559
(19,201)
(12,576)
(79,204)
(43,666)
(31,826)
(55,175)
477,755
518,692
12,230
15,956
(201,610)
(117,409)
737
(17,261)
(566)
4,434
28,403
18,238
–
481
(947,456)
(240,001)
2,468,375
(850,385)
360,689
(319,032)
81,793
(332,805)
(13,157)
178,172
1,600
(1,100)
(52,640)
61,643
(27,173)
191,929
2,819,487
(1,071,578)

– VII-154 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(B) Proceeds from Disposal of Items of Property, Plant and Equipment Comprise:

Net book amount (note 17) Losses on disposal of items of property, plant and equipment Proceeds from disposal of items of property, plant and equipment from discontinued operations Proceeds from disposal of items of property, plant and equipment	2014 RMB’000 141,512 (18,399) 3,493 126,606	2013 RMB’000 179,647 (18,238) –
		161,409

40 COMMITMENTS

(A) Capital Commitments

As at 31 December 2014 and 2013, the Group and the Company had the following significant capital commitments which were not provided for in the statements of financial position:

	The	Group	The	Company
	2014	2013	2014	2013
	RMB’000	RMB’000	RMB’000	RMB’000
Contracted but not provided for:
– Vessels under construction	1,755,168	6,492,589	–	–

(B) Lease Commitments – The Group and the Company are the Lessees

As at 31 December 2014 and 2013, the Group and the Company had future aggregate minimum lease payments under non-cancelable operating leases as follows:

Land and buildings: – Within one year – In the second to fifth year – After fifth year Vessels chartered in and containers under operating leases: – Within one year – In the second to fifth year – After fifth year	The Group 2014 2013 RMB’000 RMB’000 82,526 38,988 177,947 59,239 44,971 12,651 305,444 110,878 2,724,802 2,548,751 5,091,447 6,032,487 1,039,428 868,228 8,855,677 9,449,466 9,161,121 9,560,344	The Company 2014 2013 RMB’000 RMB’000 37,013 3,689 107,499 2,889 – – 144,512 6,578 14,239 32,559 – – – – 14,239 32,559 158,751 39,137	The Company 2014 2013 RMB’000 RMB’000 37,013 3,689 107,499 2,889 – – 144,512 6,578 14,239 32,559 – – – – 14,239 32,559 158,751 39,137
			6,578

			32,559 – –
			32,559

			39,137

Note:

After the disposal of certain containers in 2012, the Group entered into operating lease agreements whereby the Group leased back the containers disposed of from the purchaser with an initial lease term of two years to four years. The rental payable by the Group was determined on the terms agreed with by both parties on an arm’s length basis.

– VII-155 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(C) Future Operating Lease Arrangements – The Group and the Company are the Lessors

As at 31 December 2014 and 2013, the Group and the Company had future aggregate minimum lease receipts under non-cancellable operating leases, where the Group and the Company are the lessors as follows:

Vessels chartered-out under operating leases: – Within one year – In the second to fifth year – After fifth year	The Group 2014 2013 RMB’000 RMB’000 488,492 53,656 429,016 16,875 3,300 3,125 920,808 73,656	The Company 2014 2013 RMB’000 RMB’000 290,012 599,737 607,012 1,074,273 20,139 55,510 917,163 1,729,520	The Company 2014 2013 RMB’000 RMB’000 290,012 599,737 607,012 1,074,273 20,139 55,510 917,163 1,729,520
			1,729,520

(D) Other Commitments

As at 31 December 2014 and 2013, the Group had the following significant commitments which were not provided for in the statements of financial position:

Investments: – Contracted but not provided for – Authorised but not contracted for	The Group 2014 2013 RMB’000 RMB’000 – 312,000 – 39,200 – 351,200	The Group 2014 2013 RMB’000 RMB’000 – 312,000 – 39,200 – 351,200
		351,200

41 CONTINGENT LIABILITIES

As at 31 December 2014, the Group and the Company had no significant contingent liabilities.

42 SIGNIFICANT RELATED-PARTY TRANSACTIONS

As the Group is controlled by China Shipping Group, it is considered to be indirectly controlled by the PRC government, which controls a substantial number of entities in the PRC. As the Group has early adopted the revised standard of HKAS 24 Related Party Disclosure since 1 January 2010, the Group and the Company are not required to disclose details of transactions with the government and other government-related entities.

– VII-156 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(A) For the years ended 31 December 2014 and 2013, the Directors are of the view that the following Companies are Significant Related Parties that have Transactions with the Group:

Name

Relationship with the Group

China Shipping (Group) Company Parent and ultimate holding company Rich Shipping Co., Ltd. Fellow subsidiary China Shipping (Turkey) Agency Co., Ltd. Fellow subsidiary China Shipping (Group) Mediterranean Shipping Rep. Office Fellow subsidiary China Shipping (Group) Africa Rep. Office Fellow subsidiary China Shipping Development Co., Ltd. Fellow subsidiary China Shipping Logistics Co., Ltd. Fellow subsidiary China Shipping Agency Co., Ltd. Fellow subsidiary China Shipping Air Cargo Co., Ltd. Fellow subsidiary China Shipping Industry Co., Ltd. Fellow subsidiary China Shipping Investment Co., Ltd. Fellow subsidiary China Shipping International Trading Co., Ltd. Fellow subsidiary China Shipping Telecommunications Co., Ltd. Fellow subsidiary Dong Fang International Investment Co., Ltd. Fellow subsidiary China Shipping Agency(Australia) Holdings Pte Ltd. Fellow subsidiary China Shipping Japan Co., Ltd. Fellow subsidiary China Shipping Agency (Korea) Co., Ltd. Fellow subsidiary China Shipping (Europe) Holding GmbH Fellow subsidiary China Shipping (Hong Kong) Holdings Co., Ltd. Fellow subsidiary China Shipping (North America) Holding Co., Ltd. Fellow subsidiary China Shipping (Western Asia) Holdings Co., Ltd. Fellow subsidiary China Shipping (South Eastern Asia) Holding Co., Ltd. Fellow subsidiary Shanghai Universal Logistics Equipment Co., Ltd. Fellow subsidiary China Shipping International Ship Management Co., Ltd. Fellow subsidiary China Shipping & Sinopec Suppliers Co., Ltd. Fellow subsidiary China Shipping Finance Co., Ltd. Fellow subsidiary and associate Dalian Vanguard International Logistics Co., Ltd. Joint ventures

In addition to the related party information shown elsewhere in these consolidated financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of business between the Group and its related parties during the years of 2014 and 2013 and balances arising from related party transactions for the years ended 31 December 2014 and 2013.

(B) Significant Transactions with Related Parties

Transactions with parent and ultimate holding company Non-current borrowing Interest expense from non-current borrowing Transactions with fellow subsidiaries Revenue: Liner services Fuel supply Port services Agency services Information technology services	2014 RMB’000 611,900 46,754 113,616 2,325,178 23,108 92,467 13,970	2013 RMB’000 600,000 106,262
		155,343 1,125,712 24,742 293 14,094

– VII-157 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Expenditure: Lease of containers Lease of vessels Lease of chassis Lease of properties Cargo and liner agency services Container management services Ship repair services Supply of fresh water, vessel fuel, lubricants, spare parts and other materials Depot services Information technology services Provision of crew members Loading and unloading services Purchase of containers Container ground transport costs Transactions with China Shipping Finance Co., Ltd. (“CS Finance”, a fellow subsidiary and associate) Borrowings Interest expense from borrowings Interest income from deposits	2014 RMB’000 154,107 3,300 17,912 82,658 574,328 178,912 47,432 1,462,340 14,573 29,955 506,001 1,211,294 682,779 2,939 500,000 6,899 46,020	2013 RMB’000 182,287 – 22,088 20,072 587,593 150,070 75,580 2,127,274 8,559 43,054 31,926 583,709 479,025 4,858
		643,040 934 93,682

Disposal of subsidiary

On 6 January 2014, the Company disposed of 100% equity interests in its subsidiaries, CS Yangshan and Zhengjin to fellow subsidiaries for considerations of RMB305,411,000 and RMB372,723,000 respectively (note 38).

On 22 June 2014, the Company disposed of a 100% equity interest in its subsidiary, CSTD to a fellow subsidiary and associate, CSTD HK, for a consideration of 49% equity interest in CSTD HK (note 38).

Disposal of a subsidiary’s equity interest

On 1 January 2014, the Company disposed of a 40% equity interest in its subsidiary, Golden Sea Shipping Pte. Ltd. to a fellow subsidiary, China Shipping (South Eastern Asia) Holding Co., Ltd., for a consideration of USD1,164,900.

(C) Balances with Related Parties

	2014	2013
	RMB’000	RMB’000
Balances with parent and ultimate holding company
Borrowings	(1,211,900)	(2,600,000)
Interest payables	(1,132)	(79,247)

– VII-158 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

Balances with fellow subsidiaries Trade receivables Provisions Trade payables Balances with CS Finance Interest receivables Interest payables Borrowings Deposits	2014 RMB’000 343,746 (10,328) 333,418 (873,069) 2014 RMB’000 5,421 – – 2,964,893	2013 RMB’000 349,396 (10,482) 338,914 (795,372) 2013 RMB’000 10,468 402 363,040 3,052,729

The balances are unsecured and interest-free.

(D) Transactions with other State-Owned Enterprises

The Group has transactions with other state-controlled entities including but not limited to the following:

Purchases of services, bunker and spare parts
Purchase of assets
Bank deposits and borrowings
Interest income and expense

These transactions are conducted in the ordinary course of business of the Group.

(E) Key Management Compensation

Basic salaries and allowances Pension and others welfare Fair value of the Rights	2014 RMB’000 4,882 670 37 5,589	2013 RMB’000 3,428 1,532 (1,025) 3,935

– VII-159 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

43 PARTICULARS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

(A) Subsidiaries

As at 31 December 2014, the Company had direct and indirect interests in the following subsidiaries:

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
Established and operating in the PRC
China Shipping Container	5 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Dalian Co., Ltd.	2003	company				agency
China Shipping Container	26 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Guangzhou	2003	company				agency
Co., Ltd.
China Shipping Container	14 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Hainan Company	2003	company				agency
Limited
China Shipping Container	13 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Qingdao Company	2003	company				agency
Limited
China Shipping Container	13 January	Limited liability	RMB71,140,000	100%	–	Cargo and liner
Lines Shanghai Co., Ltd.	2003	company				agency
China Shipping Container	15 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Shenzhen	2003	company				agency
Co., Ltd.
China Shipping Container	3 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Tianjin Company	2003	company				agency
Limited
China Shipping Container	6 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Xiamen Co., Ltd.	2003	company				agency
China Shipping Container	5 December	Limited liability	RMB38,000,000	90%	10%	Cargo and liner
Lines (Yangpu) Co., Ltd.	2002	company				agency
Shanghai Puhai Shipping	19 November	Limited liability	RMB682,911,111	98.2%	1.8%	International
Lines Co., Ltd.	1992	company				container
						shipping
China Shipping Container	20 May 2003	Limited liability	RMB5,000,000	10%	90%	Cargo and liner
Lines (Fuzhou) Co., Ltd.		company				agency
China Shipping Container	5 November	Limited liability	RMB3,000,000	–	100%	Cargo and liner
Lines (Haikou) Co., Ltd.	2003	company				agency
China Shipping Container	19 September	Limited liability	RMB6,500,000	45%	55%	Transportation
Lines (Jiangsu) Co., Ltd.	2003	company

– VII-160 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable			Principal
Name	establishment	legal entity	share capital	equity	interest		activities
				Directly	Indirectly
				held		held
China Shipping Container	12 March	Limited liability	RMB5,000,000	10%		90%	Cargo and liner
Lines Lianyungang	2003	company					agency
Co., Ltd.
China Shipping Container	6 May 2003	Limited liability	RMB500,000	10%		90%	Cargo and liner
Lines (Qinhuangdao) Co.,		company					agency
Ltd.
China Shipping Container	18 July 2003	Limited liability	RMB500,000	–	100%		Cargo and liner
Lines (Rizhao) Co., Ltd.		company					agency
Nanning China Shipping	18 September	Limited liability	RMB1,000,000	–	100%		Cargo and liner
Container Lines	2008	company					agency
Co., Ltd.
China Shipping Container	17 April 2009	Limited liability	RMB2,000,000	100%		–	Provision of
Lines (Dalian)		company					information
Information Processing							processing
Co., Ltd.							services
China Shipping Container	18 June 2003	Limited liability	RMB7,000,000	45%		55%	Cargo and liner
Lines (Zhejiang)		company					agency
Co., Ltd.
Dandong China Shipping	18 April 2003	Limited liability	RMB500,000	–	100%		Cargo and liner
Container Lines		company					agency
Co., Ltd.
Dongguan China Shipping	14 May 2004	Limited liability	RMB500,000	10%		90%	Cargo and liner
Container Lines		company					agency
Co., Ltd.
Fangchenggang China	6 May 2003	Limited liability	RMB500,000	10%		90%	Cargo and liner
Shipping Container Lines		company					agency
Co., Ltd.
Jiangmen China Shipping	21 August	Limited liability	RMB500,000	10%		90%	Cargo and liner
Container Lines	2003	company					agency
Co., Ltd.
China Shipping Container	18 March	Limited liability	RMB1,500,000	–	100%		Cargo and liner
Lines Jinzhou Co., Ltd.	2003	company					agency
Quanzhou China Shipping	2 September	Limited liability	RMB1,550,000	10%		90%	Cargo and liner
Container Lines	2003	company					agency
Co., Ltd.
Shantou China Shipping	18 April 2003	Limited liability	RMB500,000	10%		90%	Cargo and liner
Container Lines		company					agency
Co., Ltd.

– VII-161 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable			Principal
Name	establishment	legal entity	share capital	equity	interest		activities
				Directly	Indirectly
				held		held
China Shipping Container	9 January	Limited liability	RMB1,000,000	10%		90%	Cargo and liner
Lines Yingkou Co., Ltd.	2003	company					agency
Zhanjiang China Shipping	23 May 2003	Limited liability	RMB500,000	10%		90%	Cargo and liner
Container Lines		company					agency
Co., Ltd.
Zhongshan China Shipping	15 May 2003	Limited liability	RMB500,000	10%		90%	Cargo and liner
Container Lines		company					agency
Co., Ltd.
Weihai China Shipping	8 September	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Container Lines	2004	company					agency
Co., Ltd.
Yantai China Shipping	21 December	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Container Lines	2006	company					agency
Co., Ltd.
Longkou China Shipping	23 February	Limited liability	RMB500,000	10%		90%	Cargo and liner
Container Lines	2006	company					agency
Co., Ltd.
China Shipping Container	25 April 2005	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Lines Chongqing		company					agency
Co., Ltd.
China Shipping Container	13 April 2005	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Lines Hunan Co., Ltd.		company					agency
China Shipping Container	26 March	Limited liability	RMB1,500,000	–	100%		Cargo and liner
Lines Qinzhou Co., Ltd.	2010	company					agency
Zhangzhou China Shipping	11 June 2010	Limited liability	RMB1,550,000	–	100%		Cargo and liner
Container Lines		company					agency
Co., Ltd.
Tangshan China Shipping	27 August	Limited liability	RMB500,000	–	100%		Cargo and liner
Container Lines	2010	company					agency
Co., Ltd.
China Shipping Container	29 March	Limited liability	RMB1,500,000	–	100%		Cargo and liner
Lines Anhui Co., Ltd.	2005	company					agency
Nantong China Shipping	21 June 2005	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Container Lines		company					agency
Co., Ltd.
China Shipping Container	26 May 2005	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Lines Hubei Co., Ltd.		company					agency

– VII-162 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable			Principal
Name	establishment	legal entity	share capital	equity	interest		activities
				Directly	Indirectly
				held		held
Jiangxi China Shipping	27 April 2005	Limited liability	RMB5,000,000	–	100%		Cargo and liner
Container Lines		company					agency
Co., Ltd.
Zhangjiagang China	15 March	Limited liability	RMB5,500,000	–	100%		Cargo and liner
Shipping Container Lines	2005	company					agency
Co., Ltd.
China Shipping (Yangpu)	13 December	Limited liability	RMB6,000,000	100%		–	Transportation,
Refrigeration Storage &	2001	company					storage and
Transportation Co., Ltd.							other
							services
Shanghai Inchon	4 July 1998	Limited liability	USD2,000,000	–	75.5%		Transportation
International Ferry		company
Co., Ltd.
China Shipping Container	15 June 2006	Limited liability	RMB8,000,000	–	100%		Cargo and liner
Lines (Shenzhen) Agency		company					agency
Co., Ltd.
Universal Logistic	25 July 2006	Limited liability	RMB5,000,000	–	100%		Provision of
(Shenzhen) Co., Ltd.		company					shipping
							services
Shenzhen China Shipping	27 October	Limited liability	RMB2,000,000	–	100%		Provision of
Refrigeration Storage &	2006	company					shipping
Transportation Co., Ltd.							services
SuZhou China Shipping	15 February	Limited liability	RMB5,000,000	–	100%		Operation of
Container Lines	2012	company					container
Co., Ltd.							terminal
JiaXing China Shipping	28 December	Limited liability	RMB5,000,000	–	100%		Operation of
Container Lines	2011	company					container
Co., Ltd.							terminal
Duanzhou China Shipping	13 January	Limited liability	RMB500,000	–	100%		Operation of
Container Line,	2012	company					container
Co., Ltd.							terminal
Cangzhou China Shipping	6 April 2012	Limited liability	RMB500,000	–	100%		Operation of
Container Lines		company					container
Co., Ltd.							terminal
CSCL Wuhan Real Estate	19 September	Limited liability	RMB11,100,000	–	100%		Real estate
Investment Consulting	2012	company					Management
Co., Ltd.

– VII-163 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable			Principal
Name	establishment	legal entity	share capital	equity	interest		activities
				Directly	Indirectly
				held		held
CSCL (Changsha) Real	11 February	Limited liability	RMB8,500,000	–	100%		Real estate
Estate Investment	2014	company					management
Consulting Co., Ltd.
Ningde China Shipping	25 November	Limited liability	RMB500,000	–	100%		Cargo and liner
Container Lines	2014	company					agency
Co., Ltd.
E-shipping Global Supply	21 July 2014	Limited liability	RMB20,000,000	50%		–	Logistics
Chain Management		company
Co., Ltd.
Incorporated and operating	in Hong Kong
China Shipping Container	3 July 2002	Limited liability	HKD1,000,000	100%		–	International
Lines (Hong Kong)		company	and				container
Co., Ltd.			USD1,627,558,800				shipping and
							liner agency
China Shipping Container	11 June 1999	Limited liability	HKD10,000,000	–	100%		Cargo and liner
Lines (Hong Kong)		company					agency
Agency Co., Ltd.
Universal Shipping (Asia)	11 June 1999	Limited liability	HKD66,000,000	–	100%		Provision of
Co., Ltd.		company					shipping
							services
Shanghai Puhai Shipping	4 July 2007	Limited liability	HKD1,000,000	–	100%		International
(Hong Kong) Co., Ltd.		company	and				container
			USD52,550,000				shipping and
							liner agency
CSCL Mercury Shipping	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Co., Ltd.		company					vessel
CSCL Mars Shipping	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Co., Ltd.		company					vessel
CSCL Neptune Shipping	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Co., Ltd.		company					vessel
CSCL Venus Shipping	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Co., Ltd.		company					vessel
CSCL Star Shipping	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Co., Ltd.		company					vessel
CSCL Uranus Shipping Co.,	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Ltd.		company					vessel
CSCL Saturn Shipping Co.,	5 August 2010	Limited liability	HKD10,000	–	100%		Ownership of
Ltd.		company					vessel

– VII-164 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable		Principal
Name	establishment	legal entity	share capital	equity	interest	activities
				Directly	Indirectly
				held	held
CSCL Jupiter Shipping Co.,	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Ltd.		company				vessel
CSCL Spring Shipping Co.,	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Ltd.		company				vessel
CSCL Summer Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Autumn Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Winter Shipping Co.,	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Ltd.		company				vessel
CSCL Bohai Sea Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Yellow Sea Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL East China Sea	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL South China Sea	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL Globe Shipping	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Pacific Ocean	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
Incorporated and operating	in Panama
PH. Xiang Xiu Shipping	8 August 2008	Limited liability	USD2	–	100%	Ownership of
S.A.		company				vessel
Incorporated in the British	Virgin Islands
China Shipping Container	28 October	Limited liability	USD514,465,000	–	100%	Sales, purchase
Lines (Asia) Co., Ltd.	2002	company				and lease of
						vessels and
						containers
Yangshan A Shipping	23 December	Limited liability	USD50,000	–	100%	Ownership of
Company Limited	2003	company				vessel
Yangshan B Shipping	23 December	Limited liability	USD50,000	–	100%	Ownership of
Company Limited	2003	company				vessel

– VII-165 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/
	Date of		registered and
	incorporation/	Type of	fully paid up	Attributable			Principal
Name	establishment	legal entity	share capital	equity	interest		activities
				Directly	Indirectly
				held		held
Yangshan C Shipping	23 April 2004	Limited liability	USD50,000	–	100%		Ownership of
Company Limited		company					vessel
Yangshan D Shipping	23 April 2004	Limited liability	USD50,000	–	100%		Ownership of
Company Limited		company					vessel
Incorporated in the Marshall Islands
Yangshan E Shipping	11 September	Limited liability	USD50,000	–	100%		Ownership of
Company Limited	2007	company					vessel
Incorporated in the Republic of Cyprus
Arisa Navigation Company	18 June 2002	Limited liability	CYP1,000	–	100%		Ownership of
Limited		company					vessel
Incorporated in South Africa
China Shipping (Africa)	11 September	Private company	USD2,000,000	100%		–	No restriction
Holdings (PTY) Ltd.	2012
China Shipping	29 October	Private company	ZAR1,700,000	–		60%	No restriction
(South Africa)	2013
Agency (PTY) Ltd.
Incorporated in Brazil
China Shipping (South	27 May 2013	Private company	BRL5,852,000	95%		5%	No restriction
America) Holdings Ltda
Incorporated in Singapore
Golden Sea Shipping	13 August	Limited liability	SGD1,000,000	60%		–	Shipping lines
Pte. Ltd.	2012	company	and
			USD10,000,000
China Shipping (Singapore)	29 August	Limited liability	USD5,000,000	–		91%	Provision of
Petroleum Pte. Ltd.	2012	company					bunker
Incorporated in Nigeria
China Shipping (Nigeria)	21 May 2009	Private company	NGN50,000,000	–		60%	No restriction
Agency Ltd.

– VII-166 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(B) Associates

As at 31 December 2014, the Group and the Company had equity interests in the following associates:

					Attributable
	Date of	Type of	Place of	Registered	equity	Principal
Name	establishment	legal entity	operation	capital	interest	activities
Established in the PRC
China Shipping	30 December	Limited liability	PRC	RMB600,000,000	25%	Provision of
Finance	2009	company				finance
Co., Ltd.						services
Angang Vehicle	12 October	Limited liability	PRC	RMB136,600,000	20.07%	Provision of
Transportation	1989	company				vehicle
Co., Ltd.						transportation
						services
Incorporated in Hong Kong
China Shipping	30 July 2001	Limited liability	Hong Kong	HKD8,620,135,795	49%	Operation of
Terminal		company				container
Development						terminal
(Hong Kong)
Co., Ltd.

(C) Joint Ventures

As at 31 December 2014, the Group had direct equity interests in the following joint ventures:

						Attributable
	Date of		Type of	Place of	Registered	equity	Principal
Name	establishment		legal entity	operation	capital	interest	activities
Established in the PRC
Dalian Vanguard	8	October	Limited liability	PRC	RMB74,000,000	50%	Logistics
International		2008	company
Logistics
Co., Ltd.
Jinzhou Port	31 October		Limited liability	PRC	RMB10,000,000	45%	Operation of
Container-		2011	company				container
Railway Logistic							terminal
Co., Ltd.
Incorporated in Hong Kong
China International	18 January		Limited liability	Hong Kong	HKD100,000	50%	Provision of
Ship		2006	company				monitoring,
Management							maintenance
Co., Ltd.							and
							management
							services for
							vessels

– VII-167 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Dalian Vanguard International Logistics Co., Ltd. and Jinzhou Port Container-Railway Logistic Co., Ltd. are joint ventures directly held by the Company.

The English names of certain subsidiaries, associates and joint ventures referred to in these financial statements represent management’s best efforts at translating the Chinese names of these companies as no English names have been registered.

44 APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 26 March 2015.

– VII-168 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

FIVE YEARS FINANCIAL SUMMARY

Consolidated Results

2010 RMB’000 Revenue 34,498,808 Operating profit/(loss) 4,240,988 Finance costs (164,393) Profit/(loss) before income tax from continuing operations 4,110,382 Income tax (expense)/credit (51,440) Profit/(loss) for the year from continuing operations 4,058,942 Profit for the year from a discontinued operation 174,299 Profit for the year attributable to non- controlling interests (30,107) Profit/(loss) for the year attributable to equity holders of the Company 4,203,134 Dividends – Consolidated Assets and Liabilities 2010 RMB’000 Non-current assets 35,498,563 Current assets 13,517,562 Current liabilities 8,654,025 Non-current liabilities 10,399,857 Net assets 29,962,243	2011 RMB’000 27,908,895 (2,663,225) (140,523) (2,800,054) (42,381) (2,842,435) 141,962 (42,996) (2,743,469) – 2011 RMB’000 39,094,542 10,317,948 9,791,948 12,719,853 26,900,689	2012 RMB’000 32,997,924 436,096 (506,357) (26,447) 460,547 434,100 139,510 (48,689) 524,921 – 2012 RMB’000 38,281,157 12,924,106 6,350,317 17,381,285 27,473,661	2013 RMB’000 33,917,357 (2,418,070) (457,618) (2,828,387) (36,290) (2,864,677) 280,632 (26,053) (2,610,098) – 2013 RMB’000 33,233,743 17,583,145 13,703,549 12,895,285 24,218,054	2014 RMB’000 36,077,425 1,961,694 (468,294) 1,577,524 (547,530) 1,029,994 38,756 (24,714) 1,044,036 – 2014 RMB’000 40,212,104 13,329,047 13,256,077 15,407,591 24,877,483

– VII-169 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The following is an extract of the audited consolidated financial statements of the Group for the year ended 31 December 2015 prepared in accordance with the HKFRS:

Consolidated Statement of Profit or Loss

For the year ended 31 December 2015

Notes
CONTINUING OPERATIONS
Revenue
5
Costs of services
6
Gross (loss)/profit
Selling, administrative and general expenses
6
Other income
7
Other (loss)/gains, net
8
Operating (loss)/profit
Finance costs
11
Share of profits of:
Associates
18
Joint ventures
19
(Loss)/profit before income tax from continuing
operations
Income tax expense
12
(Loss)/profit for the year from continuing
operations
DISCONTINUED OPERATION
Profit for the year from a discontinued operation
(LOSS)/PROFIT FOR THE YEAR
Attributable to:
Owners of the parent
Non-controlling interests
(LOSS)/EARNINGS PER SHARE
ATTRIBUTABLE TO ORDINARY EQUITY
HOLDERS OF THE PARENT
(Expressed in RMB per share)
Basic and diluted
– For (loss)/profit for the year
15
– For (loss)/profit from continuing operations

Year ended 31 December
2015
2014
RMB’000
RMB’000
31,834,165
36,077,425
(32,788,268)
(34,839,333)
(954,103)
1,238,092
(1,951,930)
(963,275)
715,009
788,350
(297,378)
898,527
(2,488,402)
1,961,694
(605,787)
(468,294)
193,185
77,915
3,841
6,209
(2,897,163)
1,577,524
(41,972)
(547,530)
(2,939,135)
1,029,994
–
38,756
(2,939,135)
1,068,750
(2,950,234)
1,044,036
11,099
24,714
(2,939,135)
1,068,750
RMB(0.253)
RMB0.089
RMB(0.253)
RMB0.086

The notes are an integral part of these consolidated financial statements.

– VII-170 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

(Loss)/profit for the year
Other comprehensive income/(loss) to be reclassified
to profit or loss in subsequent periods
Cash flow hedges:
Effective portion of changes in fair value of hedging
instruments arising during the year
Share of other comprehensive income/(loss) of
associates and joint venture
Exchange differences on translation of foreign
operations
Net other comprehensive income/(loss) to be
reclassified to profit or loss in subsequent periods
Total comprehensive (loss)/income for the year
Attributable to:
Owners of the parent
Non-controlling interests

Year ended 31 December
2015
2014
RMB’000
RMB’000
(2,939,135)
1,068,750
(5,682)
4,715
39,841
(32,334)
299,935
10,724
334,094
(16,895)
(2,605,041)
1,051,855
(2,618,519)
1,027,451
13,478
24,404
(2,605,041)
1,051,855

The notes are an integral part of these consolidated financial statements.

– VII-171 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Financial Position

As at 31 December 2015

Notes
ASSETS
Non-current assets
Property, plant and equipment
16
Investment properties
Intangible assets
17
Investments in associates
18
Investments in joint ventures
19
Derivative financial instruments
20
Deferred tax assets
32
Total non-current assets
Current assets
Inventories
24
Trade and notes receivables
25
Prepayments and other receivables
Derivative financial instruments
20
Restricted cash
26
Cash and cash equivalents
26
Total current assets
Total assets
EQUITY
Equity attributable to owners of the parent
Share capital
27
Special reserves
28(a)
Other reserves
28(b)
Accumulated losses
28(c)
Non-controlling interests
Total equity

As at 31 December
2015
2014
RMB’000
RMB’000
38,336,163
36,369,808
2,037
2,093
15,572
18,916
3,954,706
3,754,380
56,243
52,402
–
4,026
4,358
10,479
42,369,079
40,212,104
898,955
1,185,498
1,930,882
2,384,511
675,706
401,953
–
697
1,410
500
11,001,051
9,355,888
14,508,004
13,329,047
56,877,083
53,541,151
11,683,125
11,683,125
19,030
20,150
17,206,241
16,873,604
(6,734,162)
(3,784,442)
22,174,234
24,792,437
63,096
85,046
22,237,330
24,877,483

– VII-172 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes LIABILITIES Non-current liabilities Interest-bearing bank and other borrowings 29 Domestic corporate bonds 30 Finance lease obligations 31 Derivative financial instruments 20 Deferred tax liabilities 32 Total non-current liabilities Current liabilities Trade payables 33 Other payables and accruals Interest-bearing bank and other borrowings 29 Derivative financial instruments 20 Finance lease obligations – current portion 31 Tax payable Provisions 34 Total current liabilities Total liabilities Total equity and liabilities Net current (liabilities)/assets Total assets less current liabilities	As at 31 December 2015 2014 RMB’000 RMB’000 17,807,972 13,463,254 1,796,432 1,793,981 7,276 150,281 691 – 94 75 19,612,465 15,407,591 3,532,484 3,825,897 889,433 658,358 10,557,263 8,690,651 147 – 8,550 36,978 14,411 19,193 25,000 25,000 15,027,288 13,256,077 34,639,753 28,663,668 56,877,083 53,541,151 (519,284) 72,970 41,849,795 40,285,074	As at 31 December 2015 2014 RMB’000 RMB’000 17,807,972 13,463,254 1,796,432 1,793,981 7,276 150,281 691 – 94 75 19,612,465 15,407,591 3,532,484 3,825,897 889,433 658,358 10,557,263 8,690,651 147 – 8,550 36,978 14,411 19,193 25,000 25,000 15,027,288 13,256,077 34,639,753 28,663,668 56,877,083 53,541,151 (519,284) 72,970 41,849,795 40,285,074
		15,407,591
		3,825,897 658,358 8,690,651 – 36,978 19,193 25,000
		13,256,077
		28,663,668

		53,541,151

		72,970

		40,285,074

The notes are an integral part of these consolidated financial statements.

– VII-173 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015

Attributable to owners of parent

At 1 January 2014 Profit for the year Other comprehensive income for the year: Share of other comprehensive loss of associates Cash flow hedges, net of tax Exchange differences on translation of foreign operations Total comprehensive income for the year ended 31 December 2014 Transaction with owners Capital injection from non-controlling interests Disposal of subsidiaries Liquidation of a subsidiary Dividends paid to non-controlling interests Accrued special reserve during the year Used special reserve during the year Others At 31 December 2014	Share capital RMB’000 11,683,125 – – – – – – – – – – – – 11,683,125	Special reserves RMB’000 38,278 – – – – – – (883) – – 174,364 (191,609) – 20,150	Other reserve RMB’000 16,895,316 – (32,334) 4,715 11,034 (16,585) 594 (6,395) – – – – 674 16,873,604	Accumulated losses RMB’000 (4,845,260) 1,044,036 – – – 1,044,036 – – – – (174,364) 191,609 (463) (3,784,442)	Total RMB’000 23,771,459 1,044,036 (32,334) 4,715 11,034 1,027,451 594 (7,278) – – – – 211 24,792,437	Non- Controlling interests RMB’000 446,595 24,714 – – (310) 24,404 41,935 (422,270) (946) (4,522) – – (150) 85,046	Total equity RMB’000 24,218,054
							1,068,750 (32,334) 4,715 10,724
							1,051,855
							42,529 (429,548) (946) (4,522) – – 61
							24,877,483

– VII-174 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Attributable to owners of parent

At 1 January 2015 Loss for the year Other comprehensive income for the year: Share of other comprehensive income of associates Cash flow hedges, net of tax Exchange differences on translation of foreign operations Total comprehensive income for the year ended 31 December 2015 Dividends declared to non-controlling interests Accrued special reserve during the year Used special reserve during the year Others At 31 December 2015	Share capital RMB’000 11,683,125 – – – – – – – – – 11,683,125	Special reserves RMB’000 20,150 – – – – – – 214,520 (215,640) – 19,030	Other reserve RMB’000 16,873,604 – 39,841 (5,682) 297,556 331,715 – – – 922 17,206,241	Accumulated losses RMB’000 (3,784,442) (2,950,234) – – – (2,950,234) – (214,520) 215,640 (606) (6,734,162)	Total RMB’000 24,792,437 (2,950,234) 39,841 (5,682) 297,556 (2,618,519) – – – 316 22,174,234	Non- controlling interests RMB’000 85,046 11,099 – – 2,379 13,478 (35,365) – – (63) 63,096	Total equity RMB’000 24,877,483
							(2,939,135) 39,841 (5,682) 299,935
							(2,605,041) (35,365) – – 253
							22,237,330

The notes are an integral part of these consolidated financial statements.

– VII-175 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Statement of Cash Flows

For the year ended 31 December 2015

Notes
Cash flows from operating activities
Cash generated from operations
36(a)
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of items of property, plant and
equipment and intangible assets
Proceeds from disposal of items of property,
plant and equipment and intangible assets
36(b)
Disposal of subsidiaries
Increase in investments in joint ventures and
associates
Increase in investments in available-for-sale
financial investments
Dividends received from associates
Dividends received from joint ventures
Dividends received from available-for-sale
financial assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Capital injection from non-controlling
shareholders
New bank loans
Repayment of bank loans
Capital element of finance lease payments
Interest element of finance lease payments
Liquidation of a subsidiary
Dividends paid to non-controlling interests
Other financing activity
Net cash generated from financing activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning of year
26
Effect of foreign exchange rate changes, net
Cash and cash equivalents at end of year
26

Year ended 31 December
2015
2014
RMB’000
RMB’000
721,536
2,819,487
(40,614)
(106,399)
680,922
2,713,088
(3,787,692)
(5,909,290)
191,575
126,606
–
231,051
–
(7,538)
–
(499,445)
33,622
19,308
–
6,205
–
12,600
237,155
161,178
(3,325,340)
(5,859,325)
(605,746)
(574,690)
–
42,529
13,752,922
11,636,482
(8,980,102)
(8,151,048)
(143,752)
(34,111)
(27,681)
(12,135)
–
(946)
(20,213)
(4,522)
11,000
–
3,986,428
2,901,559
1,342,010
(244,678)
9,355,888
9,602,804
303,153
(2,238)
11,001,051
9,355,888

The notes are an integral part of these consolidated financial statements.

– VII-176 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

The address of the Company’s registered office is Room A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC.

The Company and its subsidiaries are principally engaged in holding, chartering and operating container vessels for the provision of international and domestic container marine transportation services. The information about subsidiaries is included in note 40 to the consolidated financial statements.

On 11 December 2015, the Company has announced that a notification was received from China Shipping (Group) Company, the ultimate holding company of the Group, that the State-owned Assets Supervision and Administration Commission of the State Council of the PRC (the “SASAC”) has granted its approval in principle of the restructuring of China Shipping (Group) Company and its subsidiaries (the “CS Group”) and China Ocean Shipping (Group) Company and its subsidiaries (the “COSCO Group”) in relation to their businesses in container shipping, vessel leasing, oil shipping, bulk shipping and the financial sectors (the “Restructuring”).

As part of the Restructuring, the Company or its relevant subsidiaries entered into a series of agreements with China Shipping (Group) Company, China Ocean Shipping (Group) Company or their relevant subsidiaries (the “Counterparties”) on 11 December 2015, whereby the Company or its relevant subsidiaries have agreed to acquire equity interests in certain companies’ operating container leasing businesses, shipping-related financial service business and other financial business from the Counterparties; and to sell equity interests in certain of its subsidiaries and associates operating port business and container shipping agency business to the Counterparties. As of 31 December 2015, the Restructuring and the relevant acquisition and sales transactions are still subject to the approval by the independent shareholders of the Company and the relevant regulatory authorities. Please refer to the Company’s circular dated on 31 December 2015 for further details of the Restructuring.

2.1 BASIS OF PREPARATION

Going Concern

The Group had net current liabilities of RMB519,284,000 as at 31 December 2015. The Directors are of opinion that based on the available unutilised banking facilities as at 31 December 2015, the Group will have the necessary liquid funds to finance its working capital and to meet its capital expenditure requirements. Accordingly, the Directors are of the opinion that it is appropriate to prepare the financial statements on a going concern basis.

– VII-177 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2015. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the following revised standards for the first time for the current year’s financial statements.

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions

Annual Improvements to HKFRSs 2010-2012 Cycle Annual Improvements to HKFRSs 2011-2013 Cycle

The nature and the impact of each amendment is described below:

(a) Amendments to HKAS 19 apply to contributions from employees or third parties to defined benefit plans. The amendments simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. If the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction of service cost in the period in which the related service is rendered. The amendments have had no impact on the Group as the Group does not have defined benefit plans.

– VII-178 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(b) The Annual Improvements to HKFRSs 2010-2012 Cycle issued in January 2014 sets out amendments to a number of HKFRSs. Details of the amendments that are effective for the current year are as follows:

HKAS 16 Property, Plant and Equipment and HKAS 38 Intangible Assets : Clarifies the treatment of gross carrying amount and accumulated depreciation or amortisation of revalued items of the property, plant and equipment and intangible assets. The amendments have had no impact on the Group as the Group does not apply the revaluation model for the measurement of these assets.

HKAS 24 Related Party Disclosures : Clarifies that a management entity (i.e., an entity that provides key management personnel services) is a related party subject to related party disclosure requirements. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The amendment has had no impact on the Group as the Group does not receive any management services from other entities.

(c) The Annual Improvements to HKFRSs 2011-2013 Cycle issued in January 2014 sets out amendments to a number of HKFRSs. Details of the amendments that are effective for the current year are as follows:

HKFRS 3 Business Combinations : Clarifies that joint arrangements but not joint ventures are outside the scope of HKFRS 3 and the scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is applied prospectively. The amendment has had no impact on the Group as the Company is not a joint arrangement and the Group did not form any joint arrangement during the year.

HKFRS 13 Fair Value Measurement : Clarifies that the portfolio exception in HKFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of HKFRS 9 or HKAS 39 as applicable. The amendment is applied prospectively from the beginning of the annual period in which HKFRS 13 was initially applied. The amendment has had no impact on the Group as the Group does not apply the portfolio exception in HKFRS 13.

HKAS 40 Investment Property : Clarifies that HKFRS 3, instead of the description of ancillary services in HKAS 40 which differentiates between investment property and owner-occupied property, is used to determine if the transaction is a purchase of an asset or a business combination. The amendment is applied prospectively for acquisitions of investment properties. The amendment has had no impact on the Group as there was no acquisition of investment properties during the year.

In addition, the Company has adopted the amendments to the Listing Rules issued by the Hong Kong Stock Exchange relating to the disclosure of financial information with reference to the Hong Kong Companies Ordinance (Cap. 622) during the current financial year. The main impact to the financial statements is on the presentation and disclosure of certain information in the financial statements.

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKFRS 9	Financial Instruments2
Amendments to HKFRS 10 and	Sale or Contribution of Assets between an Investor and its
HKAS 28 (2011)	Associate or Joint Venture4
Amendments to HKFRS 10, HKFRS 12	_Investment Entities: Applying the Consolidation Exception_1
and HKAS 28 (2011)
Amendments to HKFRS 11	_Accounting for Acquisitions of Interests in Joint Operations_1
HKFRS 14	_Regulatory Deferral Accounts_3
HKFRS 15	_Revenue from Contracts with Customers_2

– VII-179 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Amendments to HKAS 1 Disclosure Initiative[1] Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation[1] Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer Plants[1] Amendments to HKAS 27 (2011) Equity Method in Separate Financial Statements[1] Annual Improvements 2012-2014 Cycle Amendments to a number of HKFRSs[1]

1 Effective for annual periods beginning on or after 1 January 2016.
2 Effective for annual periods beginning on or after 1 January 2018.
3 Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group.
4 No mandatory effective date yet determined but is available for adoption.

Further information about those HKFRSs that are expected to be applicable to the Group is as follows:

HKFRS 15 establishes a new five-step model to account for revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in HKFRS 15 provide a more structured approach for measuring and recognising revenue. The standard also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates. The standard will supersede all current revenue recognition requirements under HKFRSs. In September 2015, the HKICPA issued an amendment to HKFRS 15 regarding a one-year deferral of the mandatory effective date of HKFRS 15 to 1 January 2018. The Group expects to adopt HKFRS 15 on 1 January 2018. The Group is currently assessing the impact of the standard.

Amendments to HKAS 1 include narrow-focus improvements in respect of the presentation and disclosure in financial statements. The amendments clarify:

(i) the materiality requirements in HKAS 1;
(ii) that specific line items in the statement of profit or loss and the statement of financial position may be disaggregated;
(iii) that entities have flexibility as to the order in which they present the notes to financial statements; and

– VII-180 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(iv) that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement of profit or loss. The Group expects to adopt the amendments from 1 January 2016. The amendments are not expected to have any significant impact on the Group’s financial statements.

Amendments to HKAS 16 and HKAS 38 clarify the principle in HKAS 16 and HKAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through the use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are to be applied prospectively. The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on 1 January 2016 as the Group has not used a revenue-based method for the calculation of depreciation of its non-current assets.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments in Associates and Joint Ventures

Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The Group’s share of the post-acquisition results and other comprehensive income of associates and joint ventures is included in the consolidated statement of profit or loss and consolidated other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s investments in the associates or joint ventures, except where unrealised losses provide evidence of an impairment of the assets transferred. Goodwill arising from the acquisition of associates or joint ventures is included as part of the Group’s investments in associates or joint ventures.

When an investment in an associate or a joint venture is classified as held for sale, it is accounted for in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations .

Business Combinations and Goodwill

– VII-181 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

Fair Value Measurement

The Group measures derivative financial instruments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

– VII-182 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Level 1 –

based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly

Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Impairment of Non-Financial Assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets, investment properties and non-current assets/a disposal group classified as held for sale), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related Parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group.

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);

– VII-183 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly-controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

Property, Plant and Equipment and Depreciation

Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The estimated useful lives used for this purpose are as follows:

	Estimated useful lives
Container vessels	25 years from the date of first registration
Improvements under operating leases	5 years or the period of the lease, whichever
	is the shorter
Buildings	30 to 40 years
Containers	12 years
Loading machinery	8 to 20 years
Motor vehicles, computer, office equipment and	3 to 8 years
furniture

– VII-184 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Construction in progress mainly represents vessels under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Investment Properties

Investment properties are interests in land and buildings held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at historical cost less accumulated depreciation and provision for any impairment in value. Depreciation is calculated on the straight-line basis over the expected useful life of 20 years.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in profit or loss during the financial period in which they are incurred.

Any gains or losses on the retirement or disposal of an investment property are recognised in the statement of profit or loss in the year of the retirement or disposal.

Non-Current Assets and Disposal Groups Held for Sale

Intangible Assets (Other than Goodwill)

Computer software

it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;

– VII-185 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed eight years.

Leases

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

Investments and other Financial Assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as loans and receivables, or as derivatives designated as hedging instruments in an effective hedge. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss.

– VII-186 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income and gains in the statement of profit or loss. The loss arising from impairment is recognised in the statement of profit or loss in finance costs for loans and in Selling, administrative and general expenses for receivables.

Derecognition of Financial Assets

the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Impairment of Financial Assets

Financial assets carried at amortised cost

– VII-187 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

Financial Liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group’s financial liabilities include trade payables, other payables and accruals, interest-bearing bank and other borrowings, domestic corporate bonds and finance lease obligations, and derivative financial instruments.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Loans and borrowings

Financial guarantee contracts

Derecognition of Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

– VII-188 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Offsetting of Financial Instruments

Derivative Financial Instruments and Hedge Accounting

Initial recognition and subsequent measurement

Any gains or losses arising from changes in fair value of derivatives are taken directly to the statement of profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:

fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment; or
cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction, or a foreign currency risk in an unrecognised firm commitment; or
hedges of a net investment in a foreign operation.

Hedges which meet the strict criteria for hedge accounting are accounted for as follows:

Cash flow hedges

Amounts recognised in other comprehensive income are transferred to the statement of profit or loss when the hedged transaction affects profit or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised in other comprehensive income are transferred to the initial carrying amount of the non-financial asset or non-financial liability.

– VII-189 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Current versus non-current classification

Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item.
Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract.
Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instruments are separated into current portions and non-current portions only if a reliable allocation can be made.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on weighted average basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cost of inventories includes the transfer from equity of gains and losses on qualifying cash flow hedges in respect of the purchases of raw materials.

Cash and Cash Equivalents

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Issued Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Provisions

– VII-190 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Income Tax

Deferred tax liabilities are recognised for all taxable temporary differences, except:

when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

Government Grants

Where the grant relates to an asset, the fair value is credited to deferred income account and is released to the consolidated statement of profit or loss over the expected useful life of the relevant asset by equal annual instalments.

– VII-191 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Revenue Recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) Liner services, freight revenues from the operation of the international and domestic containerised transportation business are recognised on a percentage of completion basis, which is determined on the time proportion method of each individual vessel voyage;
(b) from chartering of vessels under operating leases, over the periods of the respective leases on the straight-line basis;
(c) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset; and
(d) dividend income, when the shareholders’ right to receive payment has been established.

Share-Based Payments

Other Employee Benefits

(a) Pension obligations

The Group also operates a defined contribution Mandatory Provident Fund (“MPF”) scheme for its employees employed in Hong Kong. The Group and the employees both contribute 5% of the employees’ relevant income per month as required by the Hong Kong Mandatory Provident Fund Schemes Ordinance subject to a maximum of HKD1,500 per person.

The Group’s contributions to the above defined contribution schemes are charged to the consolidated statement of profit or loss as incurred.

(b) Housing benefits

– VII-192 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Borrowing Costs

Where funds have been borrowed generally, and used for the purpose of obtaining qualifying assets, a weighted average capitalisation rate of 2.67% has been applied to the expenditure on the individual assets.

Foreign Currencies

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

The functional currencies of certain overseas subsidiaries and associates are currencies other than the RMB. As at the end of the reporting period, the assets and liabilities of these entities are translated into RMB at the exchange rates prevailing at the end of the reporting period and their statements of the statement of profit or loss are translated into RMB at the weighted average exchange rates for the year.

– VII-193 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Judgements

Lease accounting

Estimation Uncertainty

(i) Impairment of container vessels and containers

The Group assesses whether vessels and containers have any impairment indicator, in accordance with the accounting policy stated in note 2.4 to the financial statements for the year ended 31 December 2015. After reviewing the external and internal factors, the directors concluded that there is impairment indicator of vessels and containers as at 31 December 2015 and therefore an assessment of the recoverable amounts of the assets has been conducted. An impairment exists when the carrying value of a cash-generating unit exceeds its recoverable amounts, which is its value in use. When value in use calculations are undertaken, management must estimate the expected future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details are given in note 16 to the financial statements.

(ii) Useful lives and residual values of property, plant and equipment

Were the useful lives to differ by 10% from management’s estimates as at 31 December 2015 with all other variables held constant, the estimated depreciation expense of property, plant and equipment for the year would have been approximately RMB163,957,473 lower or RMB200,392,466 higher for the year ended 31 December 2015.

Were the residual values to differ by 10% from management’s estimates as at 31 December 2015 with all other variables held constant, the estimated depreciation expense of property, plant and equipment for the year would have been approximately RMB51,779,000 lower or higher for the year ended 31 December 2015.

(iii) Income taxes and deferred income tax

– VII-194 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(iv) Provision of cost of services

Costs of services, which comprise container and cargo costs, vessel and voyage costs, and sub-route and other costs, are recognised on a percentage of completion basis as set out in note 2.4. Invoices in relation to these expenses are normally received several months after the expenses have been incurred. Consequently, recognition of costs of services is based on the rendering of services as well as the latest tariff agreed with vendors. If the actual expenses of a voyage differ from the estimated expenses, this will have an impact on costs of services in future periods.

4 FINANCIAL RISK MANAGEMENT

4.1 Financial Risk Factors

(a) Market risk

(i) Foreign exchange risk

As at 31 December 2015, if RMB had strengthened/weakened by 5% against the USD/HKD with all other variables held constant, post-tax loss for the year would have been RMB67,836,000 higher/lower (2014: post-tax profit of RMB15,493,000 lower/higher), mainly as a result of foreign exchange losses/gains on translation of USD/HKD-denominated trade and notes receivables, prepayments and other receivables and cash and cash equivalents, and foreign exchange gains/losses on translation of USD/HKD-denominated bank borrowings, trade payables, finance lease obligations and other payables and accruals.

(ii) Cash flow and fair value interest rate risk

Other than the short-term deposits placed with bank balances and cash at banks, the Group has no significant interest bearing assets. The risk on the Group’s income and operating cash flows from changes in market interest rates is low.

The Group’s interest rate risk arises from borrowings, domestic corporate bonds, and finance lease obligations. Bank borrowings issued at variable rates expose the Group to cash flow interest rate risk; finance lease obligations, domestic corporate bonds and bank borrowings issued at fixed rates expose the Group to fair value interest rate risk. As at 31 December 2015 and 2014, around 9% and 12% of the Group’s borrowings, domestic corporate bonds, and finance lease obligations were at fixed rates, respectively. During 2015 and 2014, the Group’s bank borrowings at variable rates were denominated in USD. The weighted average effective interest rates and terms of repayment of the Group’s borrowings are disclosed in note 29.

– VII-195 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2015, if interest rates had been 100 basis points higher/lower with all other variables held constant, post-tax loss for the year would have been RMB225,380,000 higher/lower (2014: post-tax profit of RMB235,663,000 higher/lower), mainly as a result of higher/lower interest expense on floating rate bank borrowings.

(iii) Price risk

The container transport and logistics activities are sensitive to economic fluctuations. The Group is exposed to freight rate risk. The Group’s revenue will increase/decrease by RMB273,143,000 (2014: increase/decrease RMB315,368,000) for a 1% increase reduction of the average container freight rates with all other variables held constant.

The Group is also exposed to fluctuations in bunker prices. Bunker cost is part of the voyage expenses and is a significant cost item to the Group. Management monitors conditions and bunker price fluctuations and where appropriate, bunker forward contracts are used to lock up the price of part of the Group’s bunker requirements. As at 31 December 2015, the Group did not have bunker forward contracts (2014: Nil).

(b) Credit risk

The Group has no significant concentration of credit risk. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The Group has policies that limit the amount of credit exposure to any financial institutions. The total carrying amounts of trade and notes receivables, prepayments and other receivables and cash and cash equivalents represents the maximum credit exposure of the Group. The Group has also policies in place to ensure that services are rendered to customers with appropriate credit history and the Group performs periodic credit evaluations of its customers.

Maximum credit risk exposure relating to off-balance sheet financial guarantees is related to the Company which provides to subsidiaries loans and other banking facilities amounting to approximately RMB37.8 billion (2014: RMB8.99 billion) as at 31 December 2015, being the face value of the borrowings under guarantee and with a maturity term to year 2017 (2014: to year 2015).

(c) Liquidity risk

Management monitors rolling forecasts of the Group’s liquidity reserve which comprises undrawn borrowing facilities (note 29) and cash and cash equivalents (note 26) on the basis of expected cash flows. This is generally carried out at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location and take into account the liquidity of the market in which the entity operates. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary; monitoring liquidity ratios against internal and external regulatory requirements; and maintaining debt financing plans.

For the year ended 31 December 2015, the Group’s operating loss and loss for the year amounted to RMB2,488,402,000 and RMB2,939,135,000, respectively. The net operating cash inflow amounted to RMB680,922,000.

The directors of the Company believe that based on the Group’s available unused banking facilities in excess of RMB26,633,768,000 and its cash and cash equivalents of RMB11,001,051,000, the Group has sufficient financial resources to satisfy its working capital requirements and payments of liabilities and its forthcoming future capital commitments as and when they fall due.

– VII-196 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest calculated based on the interest rate at the end of the reporting period).

At 31 December 2015 Interest-bearing bank and other borrowings Domestic corporate bonds Interest payables in relation to the borrowings and domestic corporate bonds Finance lease obligations Trade payables Other payables and accruals At 31 December 2014 Interest-bearing bank and other borrowings Domestic corporate bonds Interest payables in relation to the borrowings and domestic corporate bonds Finance lease obligations Trade payables Other payables and accruals	Less than 1 year RMB’000 10,557,263 – 442,949 9,306 3,487,545 684,163 8,690,651 – 480,065 47,128 3,825,897 503,860	Between 1 and 2 years RMB’000 6,278,509 1,800,000 465,157 7,284 44,939 – 2,734,020 – 351,036 47,147 – –	Between 2 and 5 years RMB’000 7,345,871 – 506,907 224 – – 7,371,352 1,800,000 508,396 121,585 – –	Over 5 years RMB’000 4,183,592 – 412,573 – – –
				3,357,882 – 261,630 – – –

4.2 Capital Risk Management

The Group’s objectives for managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the dividends payment to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The gearing ratios of the Group at 31 December 2015 and 2014 were as follows:

Interest-bearing bank and other borrowings Domestic corporate bonds Finance lease obligations Less: Cash and cash equivalents Net debt Total equity Gearing ratio (net debt/total equity)	2015 RMB’000 28,365,235 1,796,432 15,826 (11,001,051) 19,176,442 22,237,330 86.2%	2014 RMB’000 22,153,905 1,793,981 187,259 (9,355,888)
		14,779,257 24,877,483

		59.4%

Note:

The increase of the gearing ratio is mainly due to the increase in borrowings and decrease of total equity of the Group as a result of operating loss.

– VII-197 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

5 REVENUE AND SEGMENT INFORMATION

The chief operating decision-maker assesses the performance of the operating segments based on a measure of operating profit/(loss), which is reconciled to profit/(loss) before income tax.

For the years ended 31 December 2015 and 2014, all the (losses)/profits from continuing operations are generated through container shipping and related business.

Revenue from the major trade districts and shipping lanes is set out below:

Pacific Europe/Mediterranean Asia Pacific China Domestic Other Lanes Logistic Services and Others Revenue	Year ended 31 December 2015 2014 RMB’000 RMB’000 9,075,983 9,366,710 7,161,068 8,921,941 6,011,170 6,777,882 4,706,247 5,772,195 1,689,539 1,064,590 3,190,158 4,174,107 31,834,165 36,077,425	Year ended 31 December 2015 2014 RMB’000 RMB’000 9,075,983 9,366,710 7,161,068 8,921,941 6,011,170 6,777,882 4,706,247 5,772,195 1,689,539 1,064,590 3,190,158 4,174,107 31,834,165 36,077,425
		36,077,425

No revenue derived from a single customer or a group of customers under common control amounted to 10% or more of the Group’s revenue for the years ended 31 December 2015 and 2014.

6 COSTS AND EXPENSES BY NATURE

Costs of services, and selling, administrative and general expenses of continuing operations are analysed as follows:

Costs of services Container repositioning and management Bunkers consumed or sold Operating lease rentals Port charges Depreciation (note 16) Employee benefit expenses Sub-route costs and others	2015 RMB’000 10,530,909 5,872,398 4,405,750 2,152,374 1,784,202 1,347,252 6,695,383 32,788,268	2014 RMB’000 10,473,533 9,315,693 2,958,644 2,024,404 1,531,369 1,289,719 7,245,971
		34,839,333

– VII-198 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Selling, administrative and general expenses Employee benefit expenses Rental expenses Telecommunication and utilities expenses Depreciation (note 16) Repair and maintenance expenses Auditors’ remuneration Provision for impairment of fixed assets (note 16) Amortisation (note 17) Reversal for impairment of trade receivables and other receivables Office expenses and others	2015 RMB’000 540,953 85,884 74,929 39,704 2,569 14,723 821,982 7,669 (9,466) 372,983 1,951,930 34,740,198	2014 RMB’000 554,912 95,325 67,008 25,217 5,925 12,800 – 6,194 (210) 196,104
		963,275
		35,802,608

7 OTHER INCOME

Interest income Government grant related to income Refund of value-added tax (“VAT”) (Note a) Information technology services fees and others	2015 RMB’000 173,547 257,720 255,044 28,698 715,009	2014 RMB’000 199,594 279,784 295,002 13,970
		788,350

Note:

(a) Starting from 1 January 2012, the Company, Shanghai Puhai Shipping Lines Co., Ltd. and Yangshan International Container Storage & Transportation Co., Ltd., subsidiaries of the Group, are entitled to a refund of VAT, in accordance with “Circular of the Ministry of Finance and the State Administration of Taxation on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries”(“the Circular”).

8 OTHER (LOSS)/GAINS, NET

Losses on disposal of items of property, plant and equipment Gains on disposal of subsidiaries (note 35) Net foreign exchange losses Others	2015 RMB’000 (253,337) – (51,606) 7,565 (297,378)	2014 RMB’000 (18,399) 947,456 (30,530) –
		898,527

– VII-199 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

9 EMPLOYEE BENEFIT EXPENSES

An analysis of staff costs, including directors’ and supervisors’ emoluments, is set out below:

Staff salaries and hiring of crews Social welfare benefits Reversal of share-based compensation liabilities upon expiration Change in fair value of share-based compensation liabilities	2015 RMB’000 1,157,366 755,064 (24,225) – 1,888,205	2014 RMB’000 1,098,753 745,141 – 737
		1,844,631

Movements in the number of share appreciation rights outstanding and their related weighted average exercise prices during the year are as follows:

At 1 January Expired At 31 December	2015 Average exercise price Unit of Rights (HKD per share) (thousands) 2.84 79,875 2.84 (79,875) – –	2014 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 85,052 2.68 (5,177) 2.84 79,875	2014 Average exercise price Unit of Rights (HKD per share) (thousands) 2.83 85,052 2.68 (5,177) 2.84 79,875
			79,875

Up to 31 December 2015, no Rights granted have been exercised (2014: Nil). As at Rights have expired.

The fair value of the liability relating to the Rights is estimated at the end of each reporting period by using a binomial option valuation model based on an expected volatility of 60%, the exercise price shown above, expected dividend yield of 2% and a risk-free interest rate of 0.1%. The volatility compared with the valuation report measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices of the Company and other comparable companies.

During the year ended 31 December 2015, the Group recognised a gain of approximately RMB24,225,000 as a result of the expiry of the compensation program.

– VII-200 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

10 EMOLUMENTS OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(A) Directors’ and Supervisors’ Emoluments

The remuneration of every director and supervisor is set out below:

Name of director and supervisor For the year ended 31 December 2015 Directors Mr. Zhang Guofa Mr. Huang Xiaowen Ms. Su Min (a) Mr. Ding Nong Mr. Liu Xihan (b) Mr. Yu Zenggang Mr. Chen Jihong Mr. Zhao Hongzhou Ms. Zhang Nan Mr. Zhang Songshen (c) Mr. Chen Lishen (d) Mr. Guan Yimin Mr. Shi Xin Mr. Yang Jigui (e) Mr. Han Jun (f) Mr. Graeme Jack (g) Ms. Xi Zhiyue (h) Supervisors Mr. Xu Wenrong Mr. Ye Hongjun Mr. Tu Shiming (i) Mr. Shen Zhongying Mr. Shen Kangchen Mr. Zhu Donglin Mr. Zhong Lu (j) Senior management Mr. Qian Weizhong Mr. Feng Xingguo Mr. Sui Jun Mr. Gu Zhongdong Mr. Chen Wei Mr. Chen Shuai Mr. Zhang Mingwen Mr. Yu Zhen	Salary RMB’000 – – – – – – – 1,500 150 182 – 150 150 – – 79 119 – – 890 150 – 821 623 1,350 1,305 1,350 1,305 1,260 1,350 1,290 640 14,664	Pension and other social welfare RMB’000 – – – – – – – 198 – – – – – – – – – – – 79 – – 118 113 185 188 182 182 182 182 182 111 1,902	Total RMB’000 – – – – – – – 1,698 150 182 – 150 150 – – 79 119 – – 969 150 – 939 736 1,535 1,493 1,532 1,487 1,442 1,532 1,472 751
			16,566

Notes:

(a) Resigned on 22 December 2015
(b) Resigned on 22 December 2015
(c) Resigned on 8 May 2015
(d) Resigned on 26 June 2015

– VII-201 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(e) Appointed on 22 December 2015
(f) Appointed on 22 December 2015
(g) Appointed on 26 June 2015
(h) Appointed on 8 May 2015
(i) Resigned on 20 April 2015
(j) Appointed on 20 April 2015

Name of director and supervisor For the year ended 31 December 2014 Directors Mr. Zhang Guofa Mr. Huang Xiaowen Ms. Su Min Mr. Ding Nong Mr. Liu Xihan (a) Mr. Yu Zenggang (a) Mr. Chen Jihong Mr. Zhao Hongzhou Mr. Wang Daxiong (b) Mr. Zhang Rongbiao (b) Ms. Zhang Nan Mr. Zhang Songshen Mr. Chen Lishen Mr. Guan Yimin Mr. Shi Xin Supervisors Mr. Xu Wenrong Mr. Ye Hongjun Mr. Tu Shiming Mr. Shen Zhongying Mr. Shen Kangchen Mr. Wang Xiuping (j) Mr. Zhu Donglin (c) Senior management Mr. Huang Xinming (d) Mr. Qian Weizhong (e) Mr. Li Zhigang (f) Mr. Feng Xingguo Mr. Sui Jun Mr. Gu Zhongdong (g) Mr. Chen Wei (g) Mr. Chen Shuai (g) Mr. Zhang Mingwen Mr. Yu Zhen (h) Mr. Ye Yumang (i)	Fees RMB’000 – – – – – – – – – – 138 300 75 138 138 – – – 138 – 180 – – – – – – – – – – – – 1,107	Salary RMB’000 – – – – – – – 799 – – – – – – – – – 631 – – – 658 349 500 – 643 638 480 480 663 663 399 67 6,970	Pension and other social welfare RMB’000 – – – – – – – 128 – – – – – – – – – 120 – – – 60 62 63 – 119 122 58 76 59 59 52 – 978	Total RMB’000 – – – – – – – 927 – – 138 300 75 138 138 – – 751 138 – 180 718 411 563 – 762 760 538 556 722 722 451 67 9,055	Unit of the Rights granted (note 9) 2,218,050 3,334,050 – – – – – 2,604,000 1,240,000 – – – – – – – – 246,450 – – – – 2,604,000 – 1,399,650 1,240,000 1,395,000 – – 1,395,000 – – 1,240,000
					18,916,200

– VII-202 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes:

(a) Appointed on 26 June 2014
(b) Resigned on 26 June 2014
(c) Appointed on 27 January 2014
(d) Resigned on 4 March 2014
(e) Appointed on 4 March 2014
(f) Resigned on 10 January 2014
(g) Appointed on 7 January 2014
(h) Appointed on 29 April 2014
(i) Resigned on 29 April 2014
(j) Resigned on 27 January 2014

No directors or supervisors of the Company waived any emoluments during the year ended 31 December 2015 (2014: Nil). No discretionary bonus was paid to any of the directors or supervisors of the Company during the year ended 31 December 2015 (2014: Nil).

In year 2015, fair value of the Rights granted to the directors and supervisors of the Company decreased by RMB24,225,000 due to the expiration of the Rights (2014: increased by approximately RMB115,000).

(B) Five Highest Paid Individuals

The five highest paid employees during the year included one director and four senior managers (2014: one director, one supervisor and three senior managers), details of whose remuneration are set out in note 10(a) above.

(C) During the year ended 31 December 2015, no Emoluments were paid by the Group to any of the Directors, Supervisors or the Five Highest Paid Individuals as an Inducement to Join or upon Joining the Group or as Compensation for loss of Office (2014: Nil).

11 FINANCE COSTS

Interest expenses: – Borrowings and domestic corporate bonds – Finance lease obligations Total interest expenses Less: Amount capitalised in vessels under construction	2015 RMB’000 608,409 7,608 616,017 (10,230) 605,787	2014 RMB’000 499,845 12,230 512,075 (43,781) 468,294

The capitalisation rate applied to funds borrowed and bonds issued generally and utilised for the vessels under construction was 2.67% per annum for the year ended 31 December 2015 (2014: 2.19%).

– VII-203 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

12 INCOME TAX EXPENSE

Current income tax – PRC corporate income tax (Note (a)) – Hong Kong profits tax (Note (b)) – Others Deferred income tax (note 32)	2015 RMB’000 32,445 537 2,850 6,140 41,972	2014 RMB’000 57,205 1,597 2,625 486,103
		547,530

Notes:

(a) PRC corporate income tax (“CIT”)

According to the Corporate Income Tax Law of the People’s Republic of China, which was effective from 1 January 2008, the CIT rate applicable of the Company and its subsidiaries incorporated in PRC was 25% for the years ended 31 December 2015 and 2014.

Pursuant to relevant CIT regulations, the dividends received by the Company from its overseas subsidiaries are subject to CIT at a rate of 25%.

(b) Hong Kong profits tax

Hong Kong profits tax was provided at the rate of 16.5% (2014: 16.5%) on the estimated assessable profits of the Group’s companies operating in Hong Kong for the year ended 31 December 2015.

(c) The taxation on the Group’s profit/(loss) before income tax differs from the theoretical amount that would arise using the taxation rate applicable to the Company as follows:

(Loss)/profit before income tax from continuing operations Tax calculated at an income tax rate of 25% (2014: 25%) Tax losses for which no deferred income tax asset was recognised Impairment of fixed assets for which no deferred income tax asset was recognised Derecognition of tax losses previously recognised Profit and losses attributable to joint ventures and associates Loss/(income) not subject to tax Effect of different tax rate or tax base of subsidiaries and others	2015 RMB’000 (2,897,163) (724,291) 500,962 229,680 – (49,256) 66,368 18,509 41,972	2014 RMB’000 1,577,524
		394,381 17,511 – 316,850 (21,031) (189,402) 29,221
		547,530

– VII-204 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

13 DISCONTINUED OPERATION

The results of CSTD for the year ended 31 December 2014 are presented below:

Revenue Costs of services Selling, administrative and general expenses Other income Other losses, net Finance costs Share of profits and losses of: Associates Joint ventures Profit of the discontinued operation Loss recognised on the remeasurement to fair value Profit before tax from the discontinued operation Income tax: Related to pre-tax profit Profit for the year from the discontinued operation	Year ended 31 December 2014 RMB’000 132,876 (79,620) (25,745) 22,945 (7,023) (21,786) 1,289 25,617
	48,553 –
	48,553 (9,797)
	38,756

The net cash flows incurred by CSTD for year ended 31 December 2014 are presented below:

Operating activities Investing activities Financing activities Exchange gain/(loss) on cash and cash equivalents Net cash inflow Earnings per share: Basic, from the discontinued operation Diluted, from the discontinued operation	Year ended 31 December 2014 RMB’000 19,112 (483,783) 313,926 2,901
	(147,844)

	RMB0.31 cents RMB0.31 cents

The calculation of basic earnings per share from the discontinued operation is based on:

	2014
	RMB
Profit attributable to ordinary equity holders of the parent from the
discontinued operation	36,046,000
Weighted average number of ordinary shares in issue during the year (note 15)	11,683,125,000

The diluted earnings per share amount is the same as the basic earnings per share amount.

– VII-205 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

14 DIVIDENDS

The directors do not recommend a dividend in respect of the year ended 31 December 2015 (2014: Nil).

15 EARNINGS/(LOSS) PER SHARE

The basic earnings/(loss) per share amount is calculated by dividing the (loss)/profit attributable to owners of parent by the weighted average number of ordinary shares in issue during the year.

	2015	2014
Earnings/(Loss)
(Loss)/profit attributable to ordinary equity holders of
the parent, used in the basic earnings
per share calculation (RMB’000)
From continuing operations	(2,950,234)	1,007,990
From a discontinued operation	–	36,046
Shares
Weighted average number of ordinary shares in issue
(thousands)	11,683,125	11,683,125

The diluted (loss)/earnings per share amount is the same as the basic (loss)/earnings per share, as the Company did not have any potential dilutive ordinary shares during the years ended 31 December 2015 and 2014.

16 PROPERTY, PLANT AND EQUIPMENT

At 1 January 2014 Year ended 31 December 2014 Opening net book amount Exchange difference Additions Transfers Disposals Disposal of subsidiaries Depreciation (note 6) Closing net book amount At 31 December 2014 Cost Accumulated depreciation and impairment losses Net book amount	Container vessels RMB’000 27,488,053 46,924 56,179 6,539,672 (129,531) – (1,370,025) 32,631,272 41,365,275 (8,734,003) 32,631,272	Vessels under construction RMB’000 2,343,830 5,677 4,981,236 (6,539,672) – – – 791,071 791,071 – 791,071	Improvements under operating leases RMB’000 5,121 7 26,246 56,983 – – (11,112) 77,245 178,890 (101,645) 77,245	The Group Buildings Construction in progress RMB’000 RMB’000 223,666 18,543 – – – 46,298 – (57,358) (176) – (175,906) – (1,331) – 46,253 7,483 52,978 7,483 (6,725) – 46,253 7,483	Containers RMB’000 2,065,730 8,413 838,928 – (10,332) (12) (134,347) 2,768,380 3,891,517 (1,123,137) 2,768,380	Motor vehicles, computer, office equipment and furniture RMB’000 145,351 112 21,957 375 (1,473) (78,447) (39,771) 48,104 358,808 (310,704) 48,104	Total RMB’000 32,290,294 61,133 5,970,844 – (141,512) (254,365) (1,556,586)
							36,369,808
							46,646,022 (10,276,214)
							36,369,808

– VII-206 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group

Year ended 31 December 2015 Opening net book amount Exchange difference Additions Transfers Disposals Impairment of fixed assets Depreciation (note 6) Closing net book amount At 31 December 2015 Cost Accumulated depreciation and impairment losses Net book amount	Container vessels RMB’000 32,631,272 1,041,680 45,059 2,661,232 (379,939) (729,849) (1,565,926) 33,703,529 44,354,412 (10,650,883) 33,703,529	Vessels under construction RMB’000 791,071 41,848 2,441,206 (2,661,232) – (12,770) – 600,123 612,893 (12,770) 600,123	Improvements under operating leases RMB’000 77,245 – 3,301 – – – (20,374) 60,172 182,191 (122,019) 60,172	Buildings RMB’000 46,253 – 8,003 – (1,320) – (1,609) 51,327 57,370 (6,043) 51,327	Construction in progress RMB’000 7,483 – 710,589 (717,862) – – – 210 210 – 210	Containers RMB’000 2,768,380 181,296 569,170 717,862 (62,299) (79,363) (218,276) 3,876,770 5,283,537 (1,406,767) 3,876,770	Motor vehicles, computer, office equipment and furniture RMB’000 48,104 2,714 12,228 – (1,293) – (17,721) 44,032 260,320 (216,288) 44,032	Total RMB’000 36,369,808 1,267,538 3,789,556 – (444,851) (821,982) (1,823,906)
								38,336,163
								50,750,933 (12,414,770)
								38,336,163

(a) As at 31 December 2015, the net book value of the Group’s containers and motor vehicles held under finance leases amounted to approximately RMB35,772,000 (2014: RMB240,991,000).
(b) As at 31 December 2015, the net book value of container vessels and containers of the Group pledged as security for the bank borrowings amounted to approximately RMB11,497,768,000 (2014: RMB8,344,784,000) (note 29).
(c) As at 31 December 2015, the net book value of the assets leased out under operating leases, where the Group are the lessors, comprised vessels under chartering arrangements amounting to RMB5,811,706,000 (2014: RMB3,206,648,000).
(d) During the year ended 31 December 2015, the capitalised borrowing costs of the Group and included in vessels under construction and construction in progress amounting to approximately RMB10,230,000 (2014: RMB43,781,000).
(e) As at 31 December 2015, the accumulated impairment losses of the container vessels, vessels under construction and containers of the Group included under “accumulated depreciation and impairment losses” amounted to RMB838,000,000 (2014: RMB17,886,000).
(f) As described in Note 3, management concluded there are impairment indicators for container vessels, vessels under construction and containers as at 31 December 2015. Therefore, an impairment assessment is performed and an aggregate amount of RMB821,982,000 is recognized for the year ended 31 December 2015. The recoverable amounts of container vessels, vessels under construction and containers are RMB33,703,529,000, RMB600,123,000 and RMB3,876,770,000, respectively, which are based the value in use estimated as at 31 December 2015. The discount rate used to determine the recoverable amount is 7.7%
(g) Depreciation expense of RMB1,784,202,000 has been charged to consolidated statement of profit or loss within costs of services and RMB39,704,000 has been charged to consolidated statement of profit or loss within selling, administrative and general expenses (note 6) (2014: RMB1,531,369,000 has been charged to consolidated statement of profit or loss within costs of services; RMB25,217,000 has been charged to consolidated statement of profit or loss within selling, administrative and general expenses).

– VII-207 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

17 INTANGIBLE ASSETS

Year ended 31 December 2014 Opening net book value Exchange difference Additions Disposal of subsidiaries Amortisation charge for the year (note 6) Closing net book amount At 31 December 2014 Cost Accumulated amortisation Net book amount Year ended 31 December 2015 Opening net book value Exchange difference Additions Disposal Amortisation charge for the year (note 6) Closing net book amount At 31 December 2015 Cost Accumulated amortisation Net book amount	Computer software RMB’000 20,406 9 4,886 (191) (6,194)
	18,916
	47,455 (28,539)
	18,916

	18,916 (7) 4,393 (61) (7,669)
	15,572
	51,780 (36,208)
	15,572

The amortisation of intangible assets of RMB7,669,000 (2014: RMB6,194,000) has been charged to “selling, administrative and general expenses”.

18 INVESTMENTS IN ASSOCIATES

Share of net assets Goodwill on acquisition	2015 RMB’000 3,913,403 41,303 3,954,706	2014 RMB’000 3,713,077 41,303
		3,754,380

The Group’s transactions and balances with the associates are disclosed in note 39 to the consolidated financial statements.

– VII-208 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Particulars of the material associate are as follows:

	Date of	Type of	Place of		Attributable	Principal
Name	establishment	legal entity	operation	Registered capital	equity interest	activities
China Shipping Ports	30 July 2001	Limited liability	Hong Kong	HKD8,620,135,795	49%	Operation of
Development Co.,		company				ports
Ltd.

China Shipping Ports Development Co., Ltd which is considered a material associate of the Group, is a strategic partner of the Group engaged in the operation of ports and is accounted for using the equity method.

The following table illustrates the summarized financial information in respect of China Shipping Ports Development Co., Ltd. adjusted for any differences in accounting policies and reconciled to the carrying amount in the consolidated financial statements:

Revenue Net profit Other comprehensive income/(loss) Total comprehensive income for the year Dividend received Current assets Non-current assets, excluding goodwill Current liabilities Non-current liabilities Non-controlling interests Net assets, excluding goodwill and non-controlling interests Reconciliation to the Group’s interest in the associate: Proportion of the Group’s ownership Group’s share of net assets of the associate, excluding goodwill Goodwill on acquisition (less cumulative impairment) Carrying amount of the investment	2015 RMB’000 401,661 282,628 84,895 367,523 – 404,746 7,940,687 (361,419) (256,049) (441,665) 7,286,300 49% 3,570,287 25,452 3,595,739	2014 RMB’000 372,517 136,282 (108,019 28,263 –
		740,686 7,752,241 (816,497 (341,963 (416,064
		6,918,403
		49% 3,390,017 25,452
		3,415,469

The following table illustrates the aggregate financial information of the Group’s associates that are not individually material:

	2015	2014
	RMB’000	RMB’000
Share of the associates’ profit for the year	54,697	56,374
Share of the associates’ other comprehensive income	(1,758)	4,613
Share of the associates’ total comprehensive income	52,939	60,987
Aggregate carrying amount of the Group’s investments in the
associates	358,967	338,911

19 INVESTMENTS IN JOINT VENTURES

				2015	2014
				RMB’000	RMB’000
Share	of	net	assets	56,243	52,402

– VII-209 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The following table illustrates the aggregate financial information of the Group’s joint ventures that are not individually material:

Share of the joint ventures’ profit for the year Share of the joint ventures’ total comprehensive income Aggregate carrying amount of the Group’s investments in the joint ventures DERIVATIVE FINANCIAL INSTRUMENTS Interest rate swaps Portion classified as non-current: Interest rate swaps Current portion Interest rate swaps Portion classified as non-current: Interest rate swaps Current portion	2015 RMB’000 3,841 3,841 56,243 2015 Assets RMB’000 – – – 2015 Liabilities RMB’000 838 691 147	2014 RMB’000 6,209 6,209 52,402
		2014 Assets RMB’000 4,723
		4,026
		697
		2014 Liabilities RMB’000 –
		–
		–

20 DERIVATIVE FINANCIAL INSTRUMENTS

Cash Flow Hedges

At 31 December 2015, the Group had interest rate swap agreements in place with a total notional amount of US$380,755,200 whereby they receive interests at variable rates equal to the 3-month London Interbank Offered Rate (“LIBOR”) on the notional amounts and pay interests at fixed rates of 1.37% to 1.58%. The swaps are used to hedge the exposure to changes in the cash flow of its secured loans with variable rates. The secured loans and the interest rate swap agreements have the same critical terms. The hedge of the interest rate swaps was assessed to be effective.

21 FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

Financial assets: Loans and receivables – Trade and notes receivables (note 25) – Financial assets included in prepayments and other receivables – Restrict cash (note 26) – Cash and cash equivalents (note 26)	2015 RMB’000 1,930,882 405,789 1,410 11,001,051 13,339,132	2014 RMB’000 2,384,511 245,418 500 9,355,888
		11,986,317

– VII-210 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Financial liabilities: Financial liabilities at amortised cost – Trade payables (note 33) – Financial liabilities included in other payables and accruals – Interest-bearing bank and other borrowings (note 29) – Domestic corporate bonds (note 30) – Finance lease obligations (note 31) Derivative financial instruments (liabilities)/assets (note 20)	2015 RMB’000 3,532,484 835,359 28,365,235 1,796,432 15,826 34,545,336 (838)	2014 RMB’000 3,825,897 503,860 22,153,905 1,793,981 187,259
		28,464,902

		4,723

22 FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

Financial assets Derivative financial instruments Financial liabilities Long term borrowings Domestic corporate bonds Derivative financial instruments Finance lease obligations	Carrying amounts 2015 2014 RMB’000 RMB’000 – 4,723 17,807,972 13,463,254 1,796,432 1,793,981 838 – 7,276 150,281 19,612,518 15,407,516	Fair values 2015 2014 RMB’000 RMB’000 – 4,723 17,628,806 13,451,171 1,794,540 1,784,964 838 – 7,276 150,281 19,431,460 15,386,416	Fair values 2015 2014 RMB’000 RMB’000 – 4,723 17,628,806 13,451,171 1,794,540 1,784,964 838 – 7,276 150,281 19,431,460 15,386,416
			13,451,171 1,784,964 – 150,281
			15,386,416

Management has assessed that the fair values of cash and cash equivalents, restricted cash, trade and notes receivables, trade payables, financial assets included in prepayments and other receivables, financial liabilities included in other payables and accruals, finance lease obligation-current potion, and short term borrowing approximate to their carrying amounts largely due to the short term maturities of these instruments.

The fair values of the non-current portion of long term borrowing, domestic corporate bonds, and finance lease obligations have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The Group’s own non-performance risk for finance lease obligations, and interest-bearing bank loans as at 31 December 2015 was assessed to be insignificant.

– VII-211 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with AAA credit ratings. Derivative financial instruments, including interest rate swaps, are measured using valuation techniques similar to swap models, using present value calculations. The models incorporate various market observable inputs including the credit quality of counter parties and interest rate curves. The carrying amounts of interest rate swaps are the same as their fair values.

As at 31 December 2015, the marked to market value of the derivative asset position was net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments recognised at fair value.

Fair Value Hierarchy

The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:

As at 31 December 2015

Liabilities measured at fair value: Derivative financial instruments Liabilities for which fair values are disclosed: Long term borrowing Domestic corporate bonds Finance lease obligations *As at 31 December 2014* Assets measured at fair value: Derivative financial instruments Liabilities for which fair values are disclosed: Long term borrowings Domestic corporate bonds Finance lease obligations	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) RMB’000 RMB’000 (838) – – 17,628,806 – 1,794,540 – 7,276 – 19,430,622 4,723 – – 13,451,171 – 1,784,964 – 150,281 – 15,386,416	Total RMB’000 (838) 17,628,806 1,794,540 7,276 19,430,622 4,723 13,451,171 1,784,964 150,281 15,386,416

– VII-212 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

23 CREDIT QUALITY OF FINANCIAL ASSETS

(A) Trade and Notes Receivables

As at 31 December 2015, the Group’s trade and notes receivables of RMB1,816,116,000 (2014: RMB2,344,821,000) were due within three months. Trade and notes receivables that were due within three months mainly represent those due from customers with good credit history and a low default rate. Trade and notes receivables that were either past due or impaired are disclosed in note 25.

None of the financial assets that are fully performing has been renegotiated in the last year.

(B) Cash and Cash Equivalents

The Group categorises its cash in banks into the following:

Group 1 – Major international banks (Citibank, ABN AMRO Bank, etc.)
• Group 2 – Top four banks in the PRC (China Construction Bank, Bank of China, Agricultural Bank of China and Industrial, Commercial Bank of China) and China Merchants Bank
Group 3 – Other reputable PRC banks

Management considered the credit risk in respect of cash and bank deposits with financial institutions is relatively small as each counterparty either bears a high credit rating or is a large PRC bank. Management believes the state is able to support the PRC banks in the event of a crisis.

Group 1* Group 2 Group 3	2015 RMB’000 1,559,315 4,343,744 5,097,992 11,001,051	2014 RMB’000 945,942 3,435,441 4,974,505
		9,355,888

Included cash on hand held by companies of the Group

24 INVENTORIES

Bunkers Others	2015 RMB’000 550,247 348,708 898,955	2014 RMB’000 899,160 286,338
		1,185,498

– VII-213 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

25 TRADE AND NOTES RECEIVABLES

The aging analysis of the trade and notes receivables, based on the invoice date is as follows:

The carrying amounts of trade and notes receivables approximated their fair values as at the end of reporting periods.

Trade receivables – Fellow subsidiaries (note 39(c)) – Third parties Notes receivable	2015 RMB’000 247,526 1,481,062 1,728,588 202,294 1,930,882	2014 RMB’000 333,418 1,858,108
		2,191,526 192,985
		2,384,511

An aging analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of provision, is as follows:

Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months Over 1 year Less: Provision for impairment of receivables	2015 RMB’000 1,816,116 166,337 815 326 819 1,984,413 (53,531) 1,930,882	2014 RMB’000 2,344,821 56,954 49,410 222 952
		2,452,359 (67,848)
		2,384,511

The carrying amounts of the trade and notes receivables are denominated in the following currencies:

RMB USD HKD Other currencies	2015 RMB’000 1,120,284 676,060 14,049 120,489 1,930,882	2014 RMB’000 1,396,135 887,172 46,155 55,049
		2,384,511

The maximum exposure to credit risk at the reporting date is the total carrying value of the receivables mentioned above. The Group does not hold any collateral as security.

Credit Policy

– VII-214 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2015, based on the invoice date, trade receivables of the Group that were aged over three months amounted to RMB168,297,000 (2014: RMB107,539,000). They are regarded as over-due and partially impaired, and the related amounts of provisions, estimated by management based on historic experiences of credit losses amounted to RMB53,531,000 (2014: RMB67,848,000).

The movements in the provision for impairment of trade and notes receivables are as follows:

At 1 January Disposal of subsidiaries Reversal for impairment of trade receivables (note 6) At 31 December	2015 RMB’000 67,848 – (14,317) 53,531	2014 RMB’000 68,355 (297) (210)
		67,848

26 CASH AND CASH EQUIVALENTS

Cash at banks and in hand Short-term bank deposits Less: Restricted cash	2015 RMB’000 6,026,996 4,975,465 11,002,461 (1,410) 11,001,051	2014 RMB’000 4,358,371 4,998,017
		9,356,388 (500)
		9,355,888

Cash and cash equivalents are denominated in the following currencies:

RMB HKD USD Other currencies	2015 RMB’000 4,770,204 68,980 5,841,954 319,913 11,001,051	2014 RMB’000 4,476,370 56,153 4,607,985 215,380
		9,355,888

As at 31 December 2015, certain of the Group’s current time deposits of RMB1,410,000 (2014: RMB500,000) were pledged to the Customs guarantees for import.

27 SHARE CAPITAL

	Number of
	shares	A Shares	H Shares	Total
	’000	’000	’000	’000
Issued and fully paid:
At 1 January 2014,
31 December 2014 and 2015	11,683,125	7,932,125	3,751,000	11,683,125

– VII-215 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

As at 31 December 2015, all issued shares are registered, fully paid and divided into 11,683,125,000 shares (2014: 11,683,125,000 shares) of RMB1.00 each, comprising 7,932,125,000 A Shares and 3,751,000,000 H Shares (2014: 7,932,125,000 A Shares and 3,751,000,000 H Shares).

28 OTHER RESERVES AND RETAINED EARNINGS

(A) Special Reserve

According to “Circular on Printing and Distributing the Administrative Measures for the Withdrawal and Use of Expenses for Safety Production of Enterprises” issued by the Ministry of Finance and the Safety Production General Bureau on 14 February 2012, the Group is required to accrue a “Safety Fund” to improve the production safety. The Group should accrue the Safety Fund from 1 January 2012. The accrual standard rate is 1% of the revenue from transportation services of the PRC entities of the Group. The fund is accrued monthly according to revenue and in a progressive way.

(B) Other Reserves

Balance at 1 January 2014 Share of other comprehensive loss of associates Cash flow hedges, net of tax Capital injection from non- controlling interests Disposal of subsidiaries Currency translation difference Others Balance at 31 December 2014 Balance at 1 January 2015 Share of other comprehensive income of associates Cash flow hedges, net of tax Currency translation difference Others Balance at 31 December 2015	Capital surplus RMB’000 17,025,432 (32,334) 4,715 594 (6,395) – 674 16,992,686 16,992,686 39,841 (5,682) – 922 17,027,767	The Group Statutory surplus reserve Translation RMB’000 RMB’000 1,355,763 (1,485,879) – – – – – – – – – 11,034 – – 1,355,763 (1,474,845) 1,355,763 (1,474,845) – – – – – 297,556 – – 1,355,763 (1,177,289)	Total RMB’000 16,895,316 (32,334) 4,715 594 (6,395) 11,034 674 16,873,604 16,873,604 39,841 (5,682) 297,556 922 17,206,241

Capital surplus mainly represents share premium and reserves arising from business combinations under common control.

(C) Accumulated Losses

– VII-216 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

29 INTEREST-BEARING BANK AND OTHER BORROWINGS

Non-current Long-term bank borrowings Borrowing from parent and ultimate holding company (note 39(c)) Current Short-term bank borrowings Commercial paper notes Long-term bank borrowings – current portion Representing: Borrowing from a related party – unsecured Bank borrowings – unsecured – secured The maturity periods of the borrowings are as follows: Within one year In the second year In the third to fifth year After fifth year	2015 RMB’000 16,558,612 1,249,360 17,807,972 2,697,433 4,870,200 2,989,630 10,557,263 28,365,235 1,249,360 18,317,115 8,798,760 28,365,235 2015 RMB’000 10,557,263 6,278,509 7,345,871 4,183,592 28,365,235	2014 RMB’000 12,251,354 1,211,900
		13,463,254

		1,407,370 2,447,600 4,835,681
		8,690,651
		22,153,905
		1,211,900 13,281,412 7,660,593
		22,153,905

		2014 RMB’000 8,690,651 2,734,020 7,371,352 3,357,882
		22,153,905

As at 31 December 2015, the secured long-term bank borrowings of the Group were secured by the following collateral:

(i) Legal mortgage over certain container vessels and containers of the Group with a net book value of approximately RMB11,497,768,000 (2014: RMB8,344,784,000) (note 16(b)), and
(ii) Charges over shares of certain vessels-owning subsidiaries of the Group.

– VII-217 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

An analysis of the carrying amounts of the Group’s borrowings by type and currency is as follows:

RMB – at fixed rates USD – at fixed rates – at floating rates	2015 RMB’000 1,200,000 254,246 26,910,989 28,365,235	2014 RMB’000 600,000 613,980 20,939,925
		22,153,905

The weighted average effective interest rates at the end the of reporting period are as follows:

Bank borrowings – RMB – USD Borrowing from a related party – RMB – USD	2015 RMB’000 3.48% 2.48% 2.85% 3.35%	2014 RMB’000 – 2.16%
		3.60% 2.86%

The carrying amounts of the current bank borrowings approximated to their fair values as at the end of the reporting period as the impact of discounting is not significant.

The carrying amounts and the fair values of the non-current borrowings, which are based on cash flows discounted using a rate of 4.75% (2014: 6.00%), are as follows:

Carrying amounts Fair values	2015 RMB’000 17,807,972 17,628,806	2014 RMB’000 13,463,254
		13,451,171

The Group had the following undrawn borrowing facilities as at 31 December 2015:

Floating rate: – Expiring within one year – Expiring beyond one year	2015 RMB’000 25,615,110 1,018,658 26,633,768	2014 RMB’000 305,950 1,755,168
		2,061,118

– VII-218 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

30 DOMESTIC CORPORATE BONDS

				2015	2014
				RMB’000	RMB’000
Non-current	domestic	corporate	bonds	1,796,432	1,793,981

On 12 June 2007, the Company issued domestic corporate bonds in the PRC with a face value of RMB1,800,000,000, pursuant to the approval obtained from the National Development and Reform Commission of the PRC. The bonds are denominated in RMB and for a ten-year period fully repayable by 12 June 2017, and bear interest at a fixed rate of 4.51% per annum. The bonds are guaranteed by the Bank of China, Shanghai branch, and have been listed on the interbank bond market in the PRC.

The bonds were initially recognised at their fair value of RMB1,800,000,000, after deducting the transaction costs that are directly attributable to the bonds amounting to approximately RMB24,512,000. As at 31 December 2015, the estimated fair value of the bonds was approximately RMB1,794,540,341 (2014: RMB1,784,964,000). The fair value is calculated based on the discounted cash flows using applicable discount rates from the prevailing market interest rates offered to the Group for debts with substantially the same characteristics and maturity dates. The discount rate used was approximately 4.75% (2014: 6.00%) per annum.

31 FINANCE LEASE OBLIGATIONS

Finance lease obligations Within one year In the second year In the third to fifth year Less: Within one year (current portion)	Minimum lease payment RMB’000 9,306 7,284 224 16,814 (9,306) 7,508	2015 Finance charges RMB’000 756 228 4 988 (756) 232	Net present value of minimum lease payment RMB’000 8,550 7,056 220 15,826 (8,550) 7,276	Minimum lease payment RMB’000 47,128 47,147 121,585 215,860 (47,128) 168,732	2014 Finance charges RMB’000 10,150 7,939 10,512 28,601 (10,150) 18,451	Net present value of minimum lease payment RMB’000 36,978 39,208 111,073
						187,259 (36,978)
						150,281

The average effective interest rate of finance lease obligations of the Group is 5.75% (2014: 5.78%) per annum.

The carrying amounts of finance lease obligations approximated to their fair value as at the end of the reporting period. The fair values were determined based on discounted cash flows using a rate of approximately 4.75% (2014: 6.00%) per annum.

All finance lease obligations are denominated in USD.

– VII-219 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

32 DEFERRED INCOME TAX

Deferred income tax assets: – Deferred income tax assets to be settled after more than 12 months Deferred income tax liabilities: – Deferred income tax liabilities to be settled after more than 12 months	2015 RMB’000 4,358 (94) 4,264	2014 RMB’000 10,479 (75) 10,404

The movements in the deferred income tax assets/(liabilities) are as follows:

Beginning of year Charged to consolidated statement of profit or loss (note 12) End of year	2015 RMB’000 10,404 (6,140) 4,264	2014 RMB’000 496,507 (486,103) 10,404

The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:

Deferred income tax assets:

At 1 January 2014 Charged to consolidated statement of profit or loss At 31 December 2014 Charged to consolidated statement of profit or loss At 31 December 2015	Tax losses RMB’000 485,639 (485,639) – – –	Others RMB’000 10,895 (416) 10,479 (6,121) 4,358	Total RMB’000 496,534 (486,055) 10,479 (6,121) 4,358

– VII-220 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Deferred income tax liabilities:

At 1 January 2014 Charged to consolidated statement of profit or loss At 31 December 2014 Charged to consolidated statement of profit or loss At 31 December 2015	Others RMB’000 (27) (48)
	(75) (19)
	(94)

No deferred tax assets have been recognised by the Group on cumulative tax losses amounting to approximately RMB5,264,378,000 (2014: RMB3,260,530,000), because it is uncertain that the temporary differences can be reversed in the foreseeable future. Tax losses amounting to approximately RMB5,049,905,000 (2014: RMB3,478,916,000) of the Group will expire within five years from 1 January 2016. Tax losses amounting to approximately RMB5,049,905,000 and RMB214,473,000 respectively (2014: RMB141,614,000) of the Group are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose.

33 TRADE PAYABLES

Trade payables – Fellow subsidiaries (note 39(c)) – Third parties	2015 RMB’000 772,974 2,759,510 3,532,484	2014 RMB’000 873,069 2,952,828
		3,825,897

The aging analysis of the trade payables, based on the invoice date is as follows:

Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months 1 to 2 years	2015 RMB’000 3,393,596 27,586 45,308 21,055 44,939 3,532,484	2014 RMB’000 3,782,579 8,961 11,196 14,847 8,314
		3,825,897

The carrying amounts of the trade payables are denominated in the following currencies:

RMB HKD USD Other currencies	2015 RMB’000 1,985,913 52,830 1,266,061 227,680 3,532,484	2014 RMB’000 1,910,611 71,067 1,734,502 109,717
		3,825,897

The carrying amounts of the trade payables approximated their fair values as at the end of the reporting period.

– VII-221 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

34 PROVISION

	Legal claims
	RMB’000
The Group and the Company
At 1 January 2014, 31 December 2014 and 2015	25,000

35 DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Leasehold land and land use rights Intangible assets Available-for-sale financial assets Investments in associates Investments in joint ventures Inventories Trade and notes receivables Prepayments and other receivables Cash and bank balances Interest-bearing bank and other borrowings – non-current Trade payables Other payables and accruals Interest-bearing bank and other borrowings – current Tax payable Non-controlling interests Special reserves Other reserves Gain on disposal of subsidiaries Satisfied by: Cash Interests in associates	2014 RMB’000 1,689,362 90,306 3,431 1,145,642 44,151 1,238,676 10,867 117,756 78,741 492,648 (372,000) (29,436) (220,066) (707,000) 208 (422,270)
	3,161,016

	(883) (6,395)
	947,456
	4,101,194

	678,134 3,423,060
	4,101,194

On 22 November 2013, the Company, put up its 100% equity interest in its subsidiary, Shanghai China Shipping Yangshan International Container Storage and Transportation Co., Ltd. (“CS Yangshan”) on the Shanghai United Assets and Equity Exchange (“SUAEE”) for open bidding by public bidders in compliance with the relevant laws and regulations on transfer of state-owned equity interests in the PRC. On 3 January 2014, China Shipping Logistics Co., Ltd. bid the equity interest at a consideration of RMB305,411,000 and entered into the equity transfer agreement with the Company. The equity transaction certificate by SUAEE with respect to the disposal has been issued and the agreement has become effective on 6 January 2014.

– VII-222 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

On 22 November 2013, the Company, put up its 100% equity interest in its subsidiary, Shanghai Zhengjin Industrials Co., Ltd. (“Zhengjin”) on SUAEE for open bidding by public bidders in compliance with the relevant laws and regulations on transfer of state-owned equity interests in the PRC. On 3 January 2014, China Shipping Investment Co., Ltd. bid the equity interest at a consideration of RMB372,723,000 and entered into the equity transfer agreement with the Company. The equity transaction certificate by SUAEE with respect to the disposal has been issued and the agreement has become effective on 6 January 2014.

On 20 June 2014, the Company disposed of its 100% equity interest in its subsidiary, China Shipping Terminal Development Co., Ltd. (“CSTD”) to China Shipping Terminal Development (H.K.) Co., Ltd. (“CSTD HK”) after approval by State-owned Assets Supervision and Administration Commission of the State Council of the PRC which was settled through the issuance of 2,782,975,935 new shares which is equal to 49% equity interest in CSTD HK to the Company. The consideration of the subscription which equals to the valuation result was RMB3,423,060,000. The net assets attributable to the Group disposed amounted to RMB2,770,845,000. The Group had a gain on disposal of RMB652,215,000.

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash consideration Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2014 RMB’000 678,134 (447,083) 231,051

36 NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOW

(A) Reconciliation of the Profit/(Loss) Before Income Tax to Net Cash Generated from/(Used in) Operations:

Loss/(profit) before income tax:
From continuing operations
From a discontinued operation
Impairment of fixed assets (note 16)
Exchange loss
Depreciation (note 16)
Amortisation (notes 17)
Dividend income from available-for-sale financial assets
Share of results of associates
Share of results of joint ventures
Interest expense
Finance charge of finance lease obligations (note 11)
Interest income
Change in fair value of share-based compensation liability
(note 9)
Change in fair value of share-based compensation
Liability due to expiry of the compensation program
Provision for impairment of trade receivables and other
receivables
Losses on disposal of items of property, plant and equipment
Gain on disposal of subsidiaries (note 35)
Operating profit before working capital changes
Decrease in inventories
Decrease in trade and notes receivables
Increase in prepayments and other receivables
(Increase)/decrease in restricted cash
Decrease in trade payables
Increase/(decrease) in accruals and other payables
Net cash generated from operations

Year ended 31 December
2015
2014
RMB’000
RMB’000
(2,897,163)
1,577,524
–
48,553
821,982
–
51,606
–
1,823,906
1,596,318
7,669
6,718
–
(19,201)
(193,185)
(79,204)
(3,841)
(31,826)
598,138
477,755
7,608
12,230
(173,547)
(201,610)
–
737
24,225
–
(9,466)
(566)
253,337
28,403
–
(947,456)
311,269
2,468,375
286,543
360,689
576,012
81,793
(342,213)
(13,157)
(910)
1,600
(293,413)
(52,640)
184,248
(27,173)
721,536
2,819,487

– VII-223 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(B) Proceeds from Disposal of Items of Property, Plant and Equipment and Intangible Assets Comprise:

Net book amount Loss on disposal of items of property, plant and equipment and intangible assets Proceeds from disposal of items of property, plant and equipment and intangible assets from discontinued operations Proceeds from disposal of items of property, plant and equipment and intangible assets	2015 RMB’000 444,912 (253,337) – 191,575	2014 RMB’000 141,512 (18,399) 3,493
		126,606

37 COMMITMENTS

(A) Capital Commitments

As at 31 December 2015 and 2014, the Group had the following significant capital commitments which were not provided for in the statement of financial position:

	2015	2014
	RMB’000	RMB’000
Contracted but not provided for:
– Vessel under construction	5,460,858	1,755,168

(B) Lease Commitments – the Group are the Lessees

As at 31 December 2015 and 2014, the Group had future aggregate minimum lease payments under non-cancelable operating leases as follows:

Land and buildings: – Within one year – In the second to fifth year – After fifth year Vessels chartered in and containers under operating leases: – Within one year – In the second to fifth year – After fifth year	2015 RMB’000 131,479 190,439 80,145 402,063 3,332,396 4,195,901 506,129 8,034,426 8,436,489	2014 RMB’000 82,526 177,947 44,971
		305,444

		2,724,802 5,091,447 1,039,428
		8,855,677

		9,161,121

– VII-224 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(C) Future Operating Lease Arrangements – the Group are the Lessors

As at 31 December 2015 and 2014, the Group had future aggregate minimum lease receivables under non-cancellable operating leases as follows:

Vessels chartered-out under operating leases: – Within one year – In the second to fifth year – After fifth year	2015 RMB’000 1,019,888 171,841 – 1,191,729	2014 RMB’000 488,492 429,016 3,300
		920,808

38 CONTINGENT LIABILITIES

As at 31 December 2015, the Group had no significant contingent liabilities.

39 SIGNIFICANT RELATED PARTY TRANSACTIONS

The Group is part of a larger group of companies under the China Shipping Group and has extensive transactions and relationships with members of the China Shipping Group incorporated in the PRC. The China Shipping Group itself is a state-owned enterprise and is controlled by the PRC government. Neither of them produces financial statements for public use.

As the Group is controlled by China Shipping Group, it is considered to be indirectly controlled by the PRC government, which controls a substantial number of entities in the PRC. As the Group has early adopted the revised standard of HKAS 24 Related Party Disclosures since 1 January 2010, the Group and the Company are not required to disclose details of transactions with the government and other government-related entities.

(A) For the years ended 31 December 2015 and 2014, the Directors are of the view that the following Companies are Significant Related Parties that had Transactions with the Group:

Name	Relationship with the Group
China Shipping (Group) Company	Parent and ultimate holding company
China Shipping (Turkey) Agency Co., Ltd.	Fellow subsidiary
China Shipping (Group) Africa Rep. Office	Fellow subsidiary
China Shipping Development Co., Ltd.	Fellow subsidiary
China Shipping Logistics Co., Ltd.	Fellow subsidiary
China Shipping Agency Co., Ltd.	Fellow subsidiary
China Shipping Air Cargo Co., Ltd.	Fellow subsidiary
China Shipping Industry Co., Ltd.	Fellow subsidiary
China Shipping Investment Co., Ltd.	Fellow subsidiary
China Shipping International Trading Co., Ltd.	Fellow subsidiary
China Shipping Telecommunications Co., Ltd.	Fellow subsidiary
Dong Fang International Investment Co., Ltd.	Fellow subsidiary
China Shipping Agency (Australia) Holdings Pte Ltd.	Fellow subsidiary
China Shipping Japan Co., Ltd.	Fellow subsidiary
China Shipping Agency (Korea) Co., Ltd.	Fellow subsidiary
China Shipping (Europe) Holding GmbH	Fellow subsidiary
China Shipping (Hong Kong) Holdings Co., Ltd.	Fellow subsidiary
China Shipping (North America) Holding Co., Ltd.	Fellow subsidiary
China Shipping (Western Asia) Holdings Co., Ltd.	Fellow subsidiary
China Shipping (South Eastern Asia) Holding Co., Ltd.	Fellow subsidiary
Shanghai Universal Logistics Equipment Co., Ltd.	Fellow subsidiary
China Shipping International Ship Management Co., Ltd.	Fellow subsidiary
China Shipping & Sinopec Suppliers Co., Ltd.	Fellow subsidiary
Shanghai Ship and Shipping research institute	Fellow subsidiary
China Shipping Finance Co., Ltd.	Fellow subsidiary and associate
Dalian Vanguard International Logistics Co., Ltd.	Joint venture
Jinzhou Port Container-Railway Logistic Co., Ltd.	Joint venture
China International Ship Management Co., Ltd.	Joint venture

– VII-225 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

In addition to the related party information shown elsewhere in these consolidated financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of business between the Group and its related parties during the years of 2015 and 2014 and balances arising from the related party transactions for the years ended 31 December 2015 and 2014.

(B) Significant Transactions with Related Parties

Transactions with parent and ultimate holding company Non-current borrowing Interest expense from non-current borrowing Transactions with fellow subsidiaries Revenue: Liner services Fuel supply Port services Agency services Information technology services Expenditure: Lease of containers Lease of vessels Lease of chassis Lease of properties Cargo and liner agency services Container management services Ship repair services Supply of fresh water, vessel fuel, lubricants, spare parts and other materials Depot services Information technology services Provision of crew members Loading and unloading services Purchase of containers Container ground transport costs Transactions with China Shipping Finance Co., Ltd. (“CS Finance”, a fellow subsidiary and associate) Borrowings Interest expense from borrowings Interest income from deposits	2015 RMB’000 600,000 40,016 156,736 1,321,407 – 793 25,268 154,981 – 9,296 81,392 612,240 186,771 46,325 1,160,813 26,067 48,723 677,901 1,431,690 1,038,759 5,810 – 83 65,515	2014 RMB’000 611,900 46,754
		113,616 2,325,178 23,108 92,467 13,970
		154,107 3,300 17,912 82,658 574,328 178,912 47,432 1,462,340 14,573 29,955 506,001 1,211,294 682,779 2,939
		500,000 6,899 46,020

– VII-226 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(C) Balances with Related Parties

Balances with parent and ultimate holding company Borrowings Interest payables Balances with fellow subsidiaries Trade receivables Provisions Trade payables Balances with CS Finance Interest receivables Deposits	2015 RMB’000 1,249,360 1,081 2015 RMB’000 272,666 (8,180) 264,486 772,974 2015 RMB’000 25,724 3,873,318	2014 RMB’000 1,211,900 1,132
		2014 RMB’000 343,746 (10,328)
		333,418
		873,069
		2014 RMB’000 5,421 2,964,893

The balances are unsecured and interest-free.

(D) Transactions with other State-Owned Enterprises

The Group has transactions with other state-controlled entities including but not limited to the following:

Purchases of services, bunker and spare parts
Purchases of assets
Bank deposits and borrowings
Interest income and expense

These transactions are conducted in the ordinary course of business of the Group.

(E) Key Management Compensation

Basic salaries and allowances Pension and other welfare Expiration of the Rights Fair value of the Rights	2015 RMB’000 14,664 1,902 (37) – 16,529	2014 RMB’000 4,882 670 – 37
		5,589

– VII-227 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

40 PARTICULARS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

(A) Subsidiaries

As at 31 December 2015, the Company had direct and indirect interests in the following subsidiaries:

			Issued/	Attributable	Attributable
	Date of		registered and	equity	interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
Established and operating	in the PRC
China Shipping Container	5 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Dalian Co., Ltd.	2003	company				agency
China Shipping Container	26 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Guangzhou	2003	company				agency
Co., Ltd.
China Shipping Container	14 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Hainan Company	2003	company				agency
Limited
China Shipping Container	13 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Qingdao	2003	company				agency
Company Limited
China Shipping Container	13 January	Limited liability	RMB71,140,000	100%	–	Cargo and liner
Lines Shanghai Co.,	2003	company				agency
Ltd.
China Shipping Container	15 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Shenzhen	2003	company				agency
Co., Ltd.
China Shipping Container	3 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Tianjin Company	2003	company				agency
Limited
China Shipping Container	6 January	Limited liability	RMB10,000,000	100%	–	Cargo and liner
Lines Xiamen Co., Ltd.	2003	company				agency
Shanghai Puhai Shipping	19 November	Limited liability	RMB682,911,111	98.2%	1.8%	International
Lines Co., Ltd.	1992	company				container
						shipping
China Shipping Container	20 May 2003	Limited liability	RMB5,000,000	10%	90%	Cargo and liner
Lines (Fuzhou) Co.,		company				agency
Ltd.
China Shipping Container	5 November	Limited liability	RMB3,000,000	–	100%	Cargo and liner
Lines (Haikou) Co.,	2003	company				agency
Ltd.
China Shipping Container	19 September	Limited liability	RMB6,500,000	45%	55%	Transportation
Lines (Jiangsu) Co.,	2003	company
Ltd.

– VII-228 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/	Attributable	Attributable
	Date of		registered and	equity	interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
China Shipping Container	12 March	Limited liability	RMB5,000,000	10%	90%	Cargo and liner
Lines Lianyungang	2003	company				agency
Co., Ltd.
China Shipping Container	6 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Lines (Qinhuangdao)		company				agency
Co., Ltd.
China Shipping Container	18 July 2003	Limited liability	RMB500,000	–	100%	Cargo and liner
Lines (Rizhao) Co.,		company				agency
Ltd.
Nanning China Shipping	18 September	Limited liability	RMB1,000,000	–	100%	Cargo and liner
Container Lines	2008	company				agency
Co., Ltd.
China Shipping Container	17 April 2009	Limited liability	RMB2,000,000	100%	–	Provision of
Lines (Dalian)		company				information
Information Processing						processing
Co., Ltd.						services
China Shipping Container	18 June 2003	Limited liability	RMB7,000,000	45%	55%	Cargo and liner
Lines (Zhejiang)		company				agency
Co., Ltd.
Dandong China Shipping	18 April 2003	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Dongguan China Shipping	14 May 2004	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Fangchenggang China	6 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Shipping Container		company				agency
Lines Co., Ltd.
Jiangmen China Shipping	21 August	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines	2003	company				agency
Co., Ltd.
China Shipping Container	18 March	Limited liability	RMB1,500,000	–	100%	Cargo and liner
Lines Jinzhou Co., Ltd.	2003	company				agency
Quanzhou China Shipping	2 September	Limited liability	RMB1,550,000	10%	90%	Cargo and liner
Container Lines	2003	company				agency
Co., Ltd.
Shantou China Shipping	18 April 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines		company				agency
Co., Ltd.

– VII-229 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/	Attributable	Attributable
	Date of		registered and	equity	interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
China Shipping Container	9 January	Limited liability	RMB1,000,000	10%	90%	Cargo and liner
Lines Yingkou Co.,	2003	company				agency
Ltd.
Zhanjiang China Shipping	23 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Zhongshan China	15 May 2003	Limited liability	RMB500,000	10%	90%	Cargo and liner
Shipping Container		company				agency
Lines
Co., Ltd.
Weihai China Shipping	8 September	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines	2004	company				agency
Co., Ltd.
Yantai China Shipping	21 December	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines	2006	company				agency
Co., Ltd.
Longkou China Shipping	23 February	Limited liability	RMB500,000	10%	90%	Cargo and liner
Container Lines	2006	company				agency
Co., Ltd.
China Shipping Container	25 April 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Lines Chongqing		company				agency
Co., Ltd.
China Shipping Container	13 April 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Lines Hunan Co., Ltd.		company				agency
China Shipping Container	26 March	Limited liability	RMB1,500,000	–	100%	Cargo and liner
Lines Qinzhou Co.,	2010	company				agency
Ltd.
Zhangzhou China	11 June 2010	Limited liability	RMB1,550,000	–	100%	Cargo and liner
Shipping Container		company				agency
Lines
Co., Ltd.
Tangshan China Shipping	27 August	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Lines	2010	company				agency
Co., Ltd.
China Shipping Container	29 March	Limited liability	RMB1,500,000	–	100%	Cargo and liner
Lines Anhui Co., Ltd.	2005	company				agency
Nantong China Shipping	21 June 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
China Shipping Container	26 May 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Lines Hubei Co., Ltd.		company				agency

– VII-230 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/	Attributable	Attributable
	Date of		registered and	equity	interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
Jiangxi China Shipping	27 April 2005	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
Zhangjiagang China	15 March	Limited liability	RMB5,500,000	–	100%	Cargo and liner
Shipping Container	2005	company				agency
Lines Co., Ltd.
China Shipping (Yangpu)	13 December	Limited liability	RMB6,000,000	100%	–	Transportation,
Refrigeration Storage &	2001	company				storage and
Transportation Co., Ltd.						other
						services
Shanghai Inchon	4 July 1998	Limited liability	USD2,000,000	–	75.5%	Transportation
International Ferry		company
Co., Ltd.
China Shipping Container	15 June 2006	Limited liability	RMB8,000,000	–	100%	Cargo and liner
Lines (Shenzhen)		company				agency
Agency Co., Ltd.
Universal Logistic	25 July 2006	Limited liability	RMB5,000,000	–	100%	Provision of
(Shenzhen) Co., Ltd.		company				shipping
						services
Shenzhen China Shipping	27 October	Limited liability	RMB2,000,000	–	100%	Provision of
Refrigeration Storage &	2006	company				shipping
Transportation Co., Ltd.						services
SuZhou China Shipping	15 February	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines	2012	company				agency
Co., Ltd.
JiaXing China Shipping	28 December	Limited liability	RMB5,000,000	–	100%	Cargo and liner
Container Lines	2011	company				agency
Co., Ltd.
Duanzhou China Shipping	13 January	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Line,	2012	company				agency
Co., Ltd.
Cangzhou China Shipping	6 April 2012	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Lines		company				agency
Co., Ltd.
CSCL Wuhan Real Estate	19 September	Limited liability	RMB11,100,000	–	100%	Real estate
Investment Consulting	2012	company				management
Co., Ltd.
CSCL (Changsha) Real	11 February	Limited liability	RMB8,500,000	–	100%	Real estate
Estate Investment	2014	company				management
Consulting Co., Ltd.

– VII-231 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/	Attributable	Attributable
	Date of		registered and	equity interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
Ningde China Shipping	25 November	Limited liability	RMB500,000	–	100%	Cargo and liner
Container Lines	2014	company				agency
Co., Ltd.
E-shipping Global Supply	21 July 2014	Limited liability	RMB20,000,000	25%*	–	Logistics
Chain Management		company
Co., Ltd.
Universal Shipping	6 February	Limited liability	RMB10,000,000	100%	–	International
(Shenzhen) Co., Ltd	2015	company				Shipping and
						liner agency

* Though the Group only has 25% equity interest in this subsidiary, it has more than half of the voting rights as agreed by all investors of this subsidiary.

			Issued/	Attributable	Attributable
	Date of		registered and	equity	interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
China Shipping Container	3 July 2002	Limited liability	HKD1,000,000	100%	–	International
Lines (Hong Kong)		company	and			container
Co., Ltd.			USD1,627,558,800			shipping and
						liner agency
China Shipping Container	11 June 1999	Limited liability	HKD10,000,000	–	100%	Cargo and liner
Lines (Hong Kong)		company				agency
Agency Co., Ltd.
Universal Shipping (Asia)	11 June 1999	Limited liability	HKD66,000,000	–	100%	Provision of
Co., Ltd.		company				shipping
						services
Shanghai Puhai Shipping	4 July 2007	Limited liability	HKD1,000,000	–	100%	International
(Hong Kong) Co., Ltd.		company	and			container
			USD52,550,000			shipping and
						liner agency
CSCL Mercury Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Mars Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Neptune Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Venus Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Star Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Uranus Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel

– VII-232 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			Issued/	Attributable	Attributable
	Date of		registered and	equity	interest
	incorporation/	Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment	legal entity	share capital	held	held	activities
CSCL Saturn Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Jupiter Shipping	5 August 2010	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Spring Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Summer Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Autumn Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Winter Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Bohai Sea Shipping	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Yellow Sea	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL East China Sea	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL South China Sea	5 June 2013	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL Globe Shipping	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Co., Ltd.		company				vessel
CSCL Pacific Ocean	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL Arctic Ocean	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL Atlantic Ocean	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
CSCL Indian Ocean	30 May 2014	Limited liability	HKD10,000	–	100%	Ownership of
Shipping Co., Ltd.		company				vessel
Incorporated in the British	Virgin Islands
China Shipping Container	28 October	Limited liability	USD514,465,000	–	100%	Sales, purchase
Lines (Asia) Co., Ltd.	2002	company				and lease
						of vessels
						and
						containers

– VII-233 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

				Issued/	Attributable	Attributable
	Date of			registered and	equity	interest
	incorporation/		Type of	fully paid up	Directly	Indirectly	Principal
Name	establishment		legal entity	share capital	held	held	activities
Yangshan A Shipping	23 December		Limited liability	USD50,000	–	100%	Ownership of
Company Limited		2003	company				vessel
Yangshan B Shipping	23 December		Limited liability	USD50,000	–	100%	Ownership of
Company Limited		2003	company				vessel
Yangshan C Shipping	23 April 2004		Limited liability	USD50,000	–	100%	Ownership of
Company Limited			company				vessel
Yangshan D Shipping	23 April 2004		Limited liability	USD50,000	–	100%	Ownership of
Company Limited			company				vessel
Incorporated in the Marshall		Islands
Yangshan E Shipping	11	September	Limited liability	USD50,000	–	100%	Ownership of
Company Limited		2007	company				vessel
Incorporated in the Republic		of Cyprus
Arisa Navigation	18 June 2002		Limited liability	CYP1,000	–	100%	Ownership of
Company Limited			company				vessel
Incorporated in South Africa
China Shipping (Africa)	11	September	Private company	USD2,000,000	100%	–	No restriction
Holdings (PTY) Ltd.		2012
China Shipping	29 October		Private company	ZAR1,700,000	–	100%	No restriction
(South Africa) Agency		2013
(PTY) Ltd.
Incorporated in Brazil
China Shipping	27 May 2013		Private company	BRL5,852,000	95%	5%	No restriction
(South America)
Holdings Ltda
Incorporated in Singapore
Golden Sea Shipping	13 August		Limited liability	SGD1,000,000	60%	–	Shipping lines
Pte. Ltd.		2012	company	and
				USD10,000,000
China Shipping	29 August		Limited liability	USD5,000,000	–	91%	Provision of
(Singapore) Petroleum		2012	company				bunker
Pte. Ltd.
Incorporated in Nigeria
China Shipping (Nigeria)	21 May 2009		Private company	NGN50,000,000	–	60%	No restriction
Agency Ltd.

– VII-234 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(B) Associates

As at 31 December 2015, the Group and the Company had equity interests in the following associates:

	Date of	Type of	Place of		Attributable	Principal
Name	establishment	legal entity	operation	Registered capital	equity interest	activities
Established in the PRC
China Shipping	30 December	Limited liability	PRC	RMB600,000,000	25%	Provision of
Finance Co.,	2009	company				finance services
Ltd.
Angang Vehicle	12 October	Limited liability	PRC	RMB136,600,000	20.07%	Provision of vehicle
Transportation	1989	company				transportation
Co., Ltd.						services
Incorporated in Hong Kong
China Shipping	30 July 2001	Limited liability	Hong Kong	HKD8,620,135,795	49%	Operation of ports
Ports		company
Development
Co., Ltd.

(C) Joint Ventures

As at 31 December 2015, the Group had direct equity interests in the following joint ventures:

	Date of	Type of	Place of		Attributable	Principal
Name	establishment	legal entity	operation	Registered capital	equity interest	activities
Established in the PRC
Dalian Vanguard	8 October	Limited liability	PRC	RMB74,000,000	50%	Logistics
International	2008	company
Logistics
Co., Ltd.
Jinzhou Port	31 October	Limited liability	PRC	RMB10,000,000	45%	Operation of
Container-	2011	company				container
Railway						terminal
Logistic Co.,
Ltd.
Incorporated in Hong Kong
China	18 January	Limited liability	Hong Kong	HKD100,000	50%	Provision of
International	2006	company				monitoring,
Ship						maintenance and
Management						management
Co., Ltd.						services for
						vessels

Dalian Vanguard International Logistics Co., Ltd. and Jinzhou Port Container-Railway Logistic Co., Ltd. are joint ventures directly held by the Company.

– VII-235 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

41 STATEMENT OF FINANCIAL POSITION OF THE COMPANY

ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments in subsidiaries
Investments in associates
Investments in joint ventures
Total non-current assets
Current assets
Inventories
Trade and notes receivables
Prepayments and other receivables
Cash and cash equivalents
Restricted cash
Total current assets
Total assets
EQUITY
Share capital
Special reserves (note)
Other reserves (note)
Accumulated losses (note)
Total equity
LIABILITIES
Non-current liabilities
Interest-bearing bank and other borrowings
Domestic corporate bonds
Total non-current liabilities
Current liabilities
Trade payables
Other payables and accruals
Interest-bearing bank and other borrowings
Provision
Total current liabilities
Total liabilities
Total equity and liabilities
Net current liabilities
Total assets less current liabilities

As at 31 December
2015
2014
RMB’000
RMB’000
15,155,948
16,487,795
10,032
12,011
–
6,250
12,104,329
12,146,838
3,644,569
3,644,569
41,500
41,500
30,956,378
32,338,963
573,141
652,209
942,689
1,069,273
255,964
237,268
5,610,905
5,394,887
100
–
7,382,799
7,353,637
38,339,177
39,692,600
11,683,125
11,683,125
–
14,902
19,012,889
19,012,889
(3,025,718)
(1,437,547)
27,670,296
29,273,369
600,000
600,000
1,796,432
1,793,981
2,396,432
2,393,981
3,574,368
4,948,341
4,673,081
2,054,512
–
997,397
25,000
25,000
8,272,449
8,025,250
10,668,881
10,419,231
38,339,177
39,692,600
(889,650)
(671,613)
30,066,728
31,667,350

– VII-236 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Note:

A summary of the Company’s reserves is as follows:

At 1 January 2014 Profit and total comprehensive income for the year ended 31 December 2014 Accrued special reserve during the year Used special reserve during the year At 31 December 2014 At 1 January 2015 Loss and total comprehensive loss for the year ended 31 December 2015 Accrued special reserve during the year Used special reserve during the year At 31 December 2015	Attributable to o Special reserves Other reserve RMB’000 RMB’000 34,832 19,012,889 – – 160,531 – (180,461) – 14,902 19,012,889 14,902 19,012,889 – – 193,520 – (208,422) – – 19,012,889	wners of parent Accumulated losses RMB’000 (2,134,094) 676,617 (160,531) 180,461 (1,437,547) (1,437,547) (1,603,073) (193,520) 208,422 (3,025,718)	Total RMB’000 16,913,627 676,617 – – 17,590,244 17,590,244 (1,603,073) – – 15,987,171

42 SUBSEQUENT EVENT

On 1 February 2016, the relevant resolution with respect to the Restructuring as mentioned in note 1 was approved by the shareholders at the first 2016 Extraordinary General Meeting of the Company.

Pursuant to the Notice on Gratuitous Transfer of State-owned Shares in China Shipping Container Lines Company Limited by China Shipping (Group) Company, China Shipping(Group) Company proposed to gratuitously transfer 388,674,125 A shares (representing 3.33% of the Company’s total share capital) and 467,325,000 A shares (representing 4.00% of the Company’s total share capital) of the Company to State Development & Investment Corporation (“SDIC”) and Guoxin Investment Co., Ltd. (“Guoxin”), respectively. The above gratuitous transfer was approved by SASAC on 12 January 2016. The Company has recently received the Confirmation of Transfer Registration issued by China Securities Depository and Clearing Corporation Limited Shanghai Branch, confirming that the share transfer registration formalities for the above gratuitous transfer have been completed. After the above gratuitous transfer, China Shipping will hold 4,458,195,175 A shares and 100,944,000 H shares of the Company, representing 39.02% of the Company’s total share capital and will remain as the controlling shareholder of the Company.

43 APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 30 March 2016.

– VII-237 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

FIVE YEARS FINANCIAL SUMMARY

Consolidated Results

	2011	2012	2013	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Revenue	27,908,895	32,997,924	33,917,357	36,077,425	31,834,165
Operating (loss)/profit	(2,663,225)	436,096	(2,418,070)	1,961,694	(2,488,402)
Finance costs	(140,523)	(506,357)	(457,618)	(468,294)	(605,787)
(Loss)/profit before income
tax from continuing
operations	(2,800,054)	(26,447)	(2,828,387)	1,577,524	(2,897,163)
Income tax (expense)/credit	(42,381)	460,547	(36,290)	(547,530)	(41,972)
(Loss)/profit for the year
from continuing operations	(2,842,435)	434,100	(2,864,677)	1,029,994	(2,939,135)
Profit for the year from a
discontinued operation	141,962	139,510	280,632	38,756	–
Profit for the year attributable
to non-controlling interests	(42,996)	(48,689)	(26,053)	(24,714)	(11,099)
(Loss)/profit for the year
attributable to equity
holders of the Company	(2,743,469)	524,921	(2,610,098)	1,044,036	(2,950,234)
Dividends	–	–	–	–	–

Consolidated Assets and Liabilities

	2011	2012	2013	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Non-current assets	39,094,542	38,281,157	33,233,743	40,212,104	42,369,079
Current assets	10,317,948	12,924,106	17,583,145	13,329,047	14,508,004
Current liabilities	9,791,948	6,350,317	13,703,549	13,256,077	15,027,288
Non-current liabilities	12,719,853	17,381,285	12,895,285	15,407,591	19,612,465
Net assets	26,900,689	27,473,661	24,218,054	24,877,483	22,237,330

– VII-238 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

3. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the relevant extract of the unaudited financial statements of the Group for the six months ended 30 June 2016:

Interim Condensed Consolidated Statement of Profit or Loss

For the six months ended 30 June 2016

Notes
CONTINUING OPERATIONS
REVENUE
3
Cost of sales
Gross profit
Selling, administrative and general expenses
Other income
4
Other gains, net
5
Operating profit
Finance costs
6
Share of (losses)/profits of:
Associates
Joint ventures
(Loss)/profit before income tax from
continuing operations
Income tax expense
7
(Loss)/profit for the period from
continuing operations
DISCONTINUED OPERATION
Profit for the period from discontinued operation
8
(LOSS)/PROFIT FOR THE PERIOD
Attributable to:
Owner of the parent
Non-controlling interests
(LOSS)/EARNINGS PER SHARE
ATTRIBUTABLE TO ORDINARY EQUITY
HOLDERS OF THE PARENT
(express in RMB per share)
9
Basic and diluted
– For (loss)/profit for the period
– For (loss)/profit for the period from
continuing operations

For the six months
ended 30 June
2016
2015
RMB’000
RMB’000
(Unaudited)
(Unaudited)
(Restated)
8,375,935
16,654,023
(7,866,192)
(15,318,713)
509,743
1,335,310
(631,923)
(641,619)
73,235
220,240
130,251
76,760
81,306
990,691
(686,916)
(425,782)
(135,784)
434,235
5,488
1,457
(735,906)
1,000,601
(80,806)
(121,335)
(816,712)
879,266
9,772
9,419
(806,940)
888,685
(834,572)
831,116
27,632
57,569
(806,940)
888,685
(0.07)
0.07
(0.07)
0.07

– VII-239 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Interim Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2016

(LOSS)/PROFIT FOR THE PERIOD
OTHER COMPREHENSIVE INCOME
Other comprehensive (loss)/income to be reclassified to
profit or loss in subsequent periods:
Change in fair value of available-for-sale investments,
net of tax
Cash flow hedges:
Effective portion of changes in fair value of hedging
instruments arising during the period
Exchange differences on translation of foreign
operations
Share of other comprehensive income of associates
OTHER COMPREHENSIVE (LOSS)/INCOME
FOR THE PERIOD, NET OF TAX
TOTAL COMPREHENSIVE (LOSS)/INCOME
FOR THE PERIOD
Attributable to:
Owner of the parent
Non-controlling interests

For the six months
ended 30 June
2016
2015
RMB’000
RMB’000
(Unaudited)
(Unaudited)
(Restated)
(806,940)
888,685
(95,567)
66,473
(32,196)
(521)
(239,616)
(10,190)
34,242
(1,927)
(333,137)
53,835
(1,140,077)
942,520
(1,158,892)
883,826
18,815
58,694
(1,140,077)
942,520

– VII-240 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Interim Condensed Consolidated Statement of Financial Position

30 June 2016

Notes NON-CURRENT ASSETS Property, plant and equipment 11 Investment properties Prepaid land lease payments Intangible assets Investments in associates 12 Investments in joint ventures Available-for-sale investments 13 Finance lease receivables 14 Loans and receivables 15 Deferred tax assets Other long term prepayments Total non-current assets CURRENT ASSETS Inventories Trade and notes receivables 16 Prepayments and other receivables Prepaid land lease payments Finance lease receivables 14 Loans and receivables 15 Held-for-trading investments Restricted cash 17 Cash and cash equivalents 17 Assets of a disposal group classified as held for sale 8 Total current assets Total assets	30 June 2016 RMB’000 (Unaudited) 58,116,231 8,005 214,412 23,440 8,710,052 134,305 1,557,118 9,023,724 207,413 85,631 28,050 78,108,381 590,211 1,720,328 2,034,622 3,904 2,142,961 1,830,739 21,668 864,547 13,965,281 23,174,261 11,036 23,185,297 101,293,678	31 December 2015 RMB’000 (Unaudited) (Restated) 56,642,656 10,087 214,396 30,738 12,002,322 56,243 1,349,915 5,680,658 368,467 56,340 34,721
		76,446,543
		1,238,768 2,688,106 1,865,156 3,897 1,682,327 3,133,055 200,349 922,268 15,860,939
		27,594,865 –
		27,594,865
		104,041,408

– VII-241 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Notes EQUITY Equity attributable to owners of the parent Share capital Special reserves General reserves 18 Other reserves Retained profits Non-controlling interests Total equity NON-CURRENT LIABILITIES Bank and other borrowings 19 Corporate bonds 20 Deposits from customers 21 Derivative financial instruments Deferred tax liabilities Other long term payables 22 Total non-current liabilities CURRENT LIABILITIES Trade and notes payables Other payables and accruals Bank and other borrowings 19 Corporate bonds 20 Finance lease obligations Deposits from customers 21 Derivative financial instruments Tax payable Provisions Liabilities directly associated with assets classified as held for sale 8 Total current liabilities Total liabilities Total equity and liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES	30 June 2016 RMB’000 (Unaudited) 11,683,125 4,817 93,356 (97,032) 2,133,734 13,818,000 328,925 14,146,925 41,779,529 1,506,225 8,951 27,044 248,178 701,370 44,271,297 2,291,539 1,176,093 29,344,629 2,042,810 – 7,821,837 6,345 100,268 25,000 42,808,521 66,935 42,875,456 87,146,753 101,293,678 (19,690,159) 58,418,222	31 December 2015 RMB’000 (Unaudited) (Restated) 11,683,125 21,090 65,504 21,606,867 3,207,032 36,583,618 497,549 37,081,167 25,349,767 3,449,494 8,900 691 280,968 405,129 29,494,949 4,041,654 1,723,336 26,818,843 245,617 141 4,482,658 147 127,896 25,000 37,465,292 – 37,465,292 66,960,241 104,041,408 (9,870,427) 66,576,116

– VII-242 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Interim Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2016

Share capital RMB’000 11,683,125 –	Attributable to o Special reserves General reserves RMB’000 RMB’000 (note 19) 19,030 – 2,060 65,504 21,090 65,504 – – – – – – – – – – – – – – (22,548) – – – – – – 27,852 77,897 – (71,622) – – – 4,817 93,356	Attributable to o Special reserves General reserves RMB’000 RMB’000 (note 19) 19,030 – 2,060 65,504 21,090 65,504 – – – – – – – – – – – – – – (22,548) – – – – – – 27,852 77,897 – (71,622) – – – 4,817 93,356	wners of the parent Other reserves (Accumulated losses)/ retained profits RMB’000 RMB’000 17,206,241 (6,734,162) 4,400,626 9,941,194 21,606,867 3,207,032 – (834,572) (91,111) – (32,196) – (235,255) – 34,242 – (324,320) (834,572) (21,381,010) – 1,431 22,548 – (227,055) – – – (27,852) – (77,897) – 71,622 – (92) (97,032) 2,133,734	wners of the parent Other reserves (Accumulated losses)/ retained profits RMB’000 RMB’000 17,206,241 (6,734,162) 4,400,626 9,941,194 21,606,867 3,207,032 – (834,572) (91,111) – (32,196) – (235,255) – 34,242 – (324,320) (834,572) (21,381,010) – 1,431 22,548 – (227,055) – – – (27,852) – (77,897) – 71,622 – (92) (97,032) 2,133,734	Total RMB’000 22,174,234 14,409,384	Non- controlling interests RMB’000 63,096 434,453	Total equity RMB’000 22,237,330 14,843,837
11,683,125 – – – – –	21,090 – – – – –	65,504 – – – – –	21,606,867 – (91,111) (32,196) (235,255) 34,242	3,207,032 (834,572) – – – –	36,583,618 (834,572) (91,111) (32,196) (235,255) 34,242	497,549 27,632 (4,456) – (4,361) –	37,081,167 (806,940) (95,567) (32,196) (239,616) 34,242
– – – – – – – – –	– – (22,548) – – – 77,897 (71,622) –	– – – – – 27,852 – – –	(324,320) (21,381,010) 1,431 – – – – – –	(834,572) – 22,548 (227,055) – (27,852) (77,897) 71,622 (92)	(1,158,892) (21,381,010) 1,431 (227,055) – – – – (92)	18,815 – (65,180) – (122,190) – – – (69)	(1,140,077) (21,381,010) (63,749) (227,055) (122,190) – – – (161)
11,683,125	4,817	93,356	(97,032)	2,133,734	13,818,000	328,925	14,146,925

– VII-243 –

APPENDIX VII

FINANCIAL INFORMATION OF THE GROUP

Share capital RMB’000 11,683,125 –	Attributable to o Special reserves General reserves RMB’000 RMB’000 (note 19) 20,150 – 1,130 52,339 21,280 52,339 – – – – – – – – – – – – – – – – – – – – 91,447 – (94,019) – – – 18,708 52,339	Attributable to o Special reserves General reserves RMB’000 RMB’000 (note 19) 20,150 – 1,130 52,339 21,280 52,339 – – – – – – – – – – – – – – – – – – – – 91,447 – (94,019) – – – 18,708 52,339	wners of the parent Other reserves (Accumulated losses)/ retained profits RMB’000 RMB’000 16,873,604 (3,784,442) 3,019,035 9,486,528 19,892,639 5,702,086 – 831,116 65,337 – (521) – (10,179) – (1,927) – 52,710 831,116 (58,272) (397,216) 320,000 – – (67,050) – – – (91,447) – 94,019 – (511) 20,207,077 6,070,997	wners of the parent Other reserves (Accumulated losses)/ retained profits RMB’000 RMB’000 16,873,604 (3,784,442) 3,019,035 9,486,528 19,892,639 5,702,086 – 831,116 65,337 – (521) – (10,179) – (1,927) – 52,710 831,116 (58,272) (397,216) 320,000 – – (67,050) – – – (91,447) – 94,019 – (511) 20,207,077 6,070,997	Total RMB’000 24,792,437 12,559,032	Non- controlling interests RMB’000 85,046 417,629	Total equity RMB’000 24,877,483 12,976,661
11,683,125 – – – – –	21,280 – – – – –	52,339 – – – – –	19,892,639 – 65,337 (521) (10,179) (1,927)	5,702,086 831,116 – – – –	37,351,469 831,116 65,337 (521) (10,179) (1,927)	502,675 57,569 1,136 – (11) –	37,854,144 888,685 66,473 (521) (10,190) (1,927)
– – – – – – – –	– – – – – 91,447 (94,019) –	– – – – – – – –	52,710 (58,272) 320,000 – – – – –	831,116 (397,216) – (67,050) – (91,447) 94,019 (511)	883,826 (455,488) 320,000 (67,050) – – – (511)	58,694 – – – (54,850) – – 228	942,520 (455,488) 320,000 (67,050) (54,850) – – (283)
11,683,125	18,708	52,339	20,207,077	6,070,997	38,032,246	506,747	38,538,993

– VII-244 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Interim Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2016

Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Income tax paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Dividends received from associates
Dividends received from joint ventures
Dividends received from available-for-sale investments
Dividends received from held-for-trading investments
Purchase of items of property, plant and equipment
Proceeds from disposal of items of property, plant and
equipment and intangible assets
Purchase of equity in an associate
Purchase of equity in a joint venture
Purchase of available-for-sale investments
Purchase of held-for-trading investments
Prepayment for an investment
Disposal of subsidiaries
23
Disposal of associates
Disposal of joint ventures
Disposal of available-for-sale investments
Disposal of held-for-trading investments
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid
Capital injection from previous shareholders of
acquired subsidiaries under common control
Acquisition of subsidiaries under common control
New bank and other borrowings
Repayment of bank and other borrowings
Repayment of corporate bonds
Decrease in finance lease obligations
Dividends paid to previous shareholders of acquired
subsidiaries under common control
Dividends paid to non-controlling shareholders
Net cash (used in)/generated from financing activities
NET DECREASE IN CASH AND CASH
EQUIVALENTS
NET DECREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes, net
Cash and cash equivalents at end of period
17

For the six months
ended 30 June
2016
2015
RMB’000
RMB’000
(Unaudited)
(Unaudited)
(Restated)
5,167,994
1,136,164
(6,185)
(84,673)
5,161,809
1,051,491
44,392
79,658
15,356
64,030
312
–
954
44,252
58,581
961
(5,879,447)
(5,816,165)
745,064
107,739
–
(320,000)
(125,000)
–
(700,329)
(624,374)
–
(110,215)
(225,000)
–
(349,884)
(8,005)
3,954,920
–
54,602
–
216,345
406,253
200,008
290,218
(1,989,126)
(5,885,648)
(759,141)
(489,958)
–
320,000
(21,350,801)
–
95,046,616
43,567,815
(77,598,733)
(41,673,316)
(188,815)
(175,243)
(141)
(166,470)
(227,138)
(67,050)
(137,492)
(46,935)
(5,215,645)
1,268,843
(2,042,962)
(3,565,314)
(2,042,962)
(3,565,314)
15,860,939
14,314,872
147,304
11,010
13,965,281
10,760,568

– VII-245 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2016

1 CORPORATE INFORMATION

China Shipping Container Lines Company Limited (the “Company”) was established in the People’s Republic of China (the “PRC”). The address of the Company’s registered office is Room A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC.

On 11 December 2015, the Company announced that a notification was received from China Shipping (Group) Company, the former ultimate holding company and current immediate holding company of the Company, that the State-owned Assets Supervision and Administration Commission of the State Council of the PRC (the “SASAC”) has granted its approval in principle of the restructuring of China Shipping (Group) Company and its subsidiaries (the “CS Group”) and China Ocean Shipping (Group) Company and its subsidiaries (the “COSCO Group”) in relation to their businesses in container shipping, vessel leasing, oil shipping, bulk shipping and the financial sectors (the “Restructuring”). As part of the Restructuring, the Company and its relevant subsidiaries entered into a series of agreements with China Shipping (Group) Company, China Ocean Shipping (Group) Company and their relevant subsidiaries (the “Counterparties”) on 11 December 2015, whereby the Company and its relevant subsidiaries have agreed to acquire equity interests in certain companies’ operating container leasing businesses, shipping-related financial service business and other financial business from the Counterparties; and to sell equity interests in certain of its subsidiaries and associates operating port business and container shipping agency business to the Counterparties. As of 30 June 2016, the Company and its relevant subsidiary completed the following transactions within the Restructuring:

Acquisition of Subsidiaries

Acquisition of 100% equity interests in Dong Fang International Investment Limited and its subsidiaries;
Acquisition of 100% equity interests in Florens Container Holdings Limited and its subsidiaries;
Acquisition of 100% equity interests in China Shipping Nauticgreen Holdings Co., Ltd. and its subsidiaries;
Acquisition of 100% equity interests in Helen Insurance Brokers Limited;
Acquisition of 100% equity interests in Long Honour Investments Limited and its subsidiary;
Acquisition of 100% equity interests in China Shipping Investment Co., Ltd. and its subsidiaries;
Acquisition of 100% equity interests in China Shipping Leasing Co., Ltd. and its subsidiary; and
Acquisition of 40% equity interests in China Shipping Finance Co., Ltd. (“CS Finance”) (a former associate changed to a subsidiary with a total of 65% equity interests held subsequent to the acquisition).

(together as the “Acquired Subsidiaries” or “Acquirees”)

Disposal of Subsidiaries

Disposal of 100% equity interests in China Shipping Container Lines Dalian Co., Ltd. and its subsidiaries, China Shipping Container Lines Tianjin Co., Ltd. and its subsidiaries, China Shipping Container Lines Qingdao Co., Ltd. and its subsidiaries, China Shipping Container Lines Shanghai Co., Ltd. and its subsidiaries, China Shipping Container Lines Xiamen Co., Ltd. and its subsidiaries, China Shipping Container Lines Guangzhou Co., Ltd. and its subsidiaries, China Shipping Container Lines Hainan Co., Ltd. and its subsidiary and China Shipping Container Lines Shenzhen Co., Ltd.;
Disposal of 100% equity interests in China Shipping Container Lines(Dalian) Data Processing Co., Ltd.;
Disposal of 100% equity interests in Shanghai Puhai Shipping Liners Co., Ltd. and its subsidiaries (“Puhai Group”);

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APPENDIX VII

Disposal of 100% equity interests in China Shipping (Yangpu) Refrigeration Storage & Transportation;
Disposal of 100% equity interests in China Shipping Container Lines Agency (Hong Kong) Co., Ltd.;
Disposal of 100% equity interests in Universal Shipping (Asia) Co., Ltd. (“Universal Shipping”);
Disposal of 60% equity interests in Golden Sea Shipping Pte. Ltd. (“Golden Sea”); and
Disposal of 91% equity interests in China Shipping (Singapore) Petroleum Pte. Ltd. (“CS Singapore Petroleum”).

(together as the “Disposed Subsidiaries”)

Disposal of Interest in Joint Ventures and Associates

Disposal of 50% equity interests in Dalian Vanguard International Logistics Co., Ltd., a former joint venture;
Disposal of 49% equity interests in China Shipping Ports Development Co., Ltd. (“CSPD”) and its subsidiaries, a former associate;
Disposal of 45% equity interests in Jinzhou Port Container and Railway Logistics Limited, a former joint venture; and
Disposal of 20.07% equity interests in Angang Vehicle Transportation Co., Ltd. and its subsidiary, a former associate.

(together as the “disposed interest in joint ventures and associates”)

This interim condensed consolidated financial information is presented in Renminbi (“RMB”), unless otherwise stated. This interim condensed consolidated financial information has been approved for issue by the board of directors of the Company on 30 August 2016.

This condensed consolidated interim financial information has not been audited.

2.1 BASIS OF PREPARATION

The unaudited interim condensed consolidated financial statements, which comprise the interim condensed consolidated statement of financial position of the Group as at 30 June 2016 and the related interim condensed consolidated statement of profit or loss, the interim condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six months ended 30 June 2016, have been prepared in accordance with HKAS 34 Interim Financial Reporting and Accounting Guideline 5 Merger Accounting for Common Control Combinations (“AG 5”) issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

Going Concern

The Group had net current liabilities of RMB19,690,159,000 as at 30 June 2016. The Directors are of opinion that based on the available unutilised banking facilities as at 30 June 2016, the Group will have the necessary liquid funds to finance its working capital and to meet its capital expenditure requirements. Accordingly, the Directors are of the opinion that it is appropriate to prepare the interim condensed consolidated financial statements on a going concern basis.

The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2015.

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APPENDIX VII

2.2 MERGER ACCOUNTING FOR COMMON CONTROL COMBINATIONS

The Group and all those acquirees in note 1 were under common control of SASAC before and after those acquisitions. Therefore, the Restructuring was accounted for as business combination involving entities under common control.

HKFRS 3 Business Combinations applies to all business combinations except where a combination is specifically excluded from its scope. For those business combinations outside the scope of HKFRS 3, for example, business combinations involving entities or businesses under common control, there is no specific accounting standard addressing the appropriate accounting treatment.

HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors contains requirements for the selection of accounting policies in the absence of a Standard or an Interpretation that specifically applies to an issue. Business combinations involving entities or business under common control fall outside the scope of HKFRS 3. Accordingly, the Group selects an appropriate accounting policy in accordance with the requirements set out in HKAS 8 and it is considered that merger accounting for common control combinations, as introduced by AG5, is an appropriate accounting policy for the above acquisitions of subsidiaries.

By applying AG 5, the acquisition of the subsidiaries in note 1 have been accounted for as if the acquisitions had occurred on the date when the combining entities first came under the control of the ultimate shareholder. Accordingly, the assets and liabilities acquired in the common control combinations are stated at their carrying amounts from the controlling parties’ perspective as if they had been held or incurred by the Group from the later of the date on which the combining entities first came under the control of the ultimate shareholder or the relevant transactions giving rise to the assets or liabilities arose.

By adopting with AG 5, the comparative amounts of the interim condensed financial statements of the Group have been restated to include the financial statement items of the acquired subsidiaries.

As of 30 June 2016, the Group has paid a total consideration of RMB21,350,801,000 to complete those acquisition of subsidiaries referred in note 1, which was treated as a deemed distribution.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As a result of merger accounting, the Group adopted the following additional significant accounting policies to those used in the annual financial statements for the year ended 31 December 2015 in the preparation of the interim condensed consolidated financial statements:

Revenue Recognition

Sales of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer, and the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold.

Finance lease income

Finance lease income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts through the expected life of the net investment of a finance lease or a shorter period, when appropriate, to the net carrying amount of the net investment of the finance lease.

Investments and other Financial Assets

Initial recognition and measurement

When financial assets at fair value through profit or loss are recognised initially, they are measured at fair value and transaction costs that are attributable to the acquisition of the financial assets are charged to the statement of profit or loss. When available-for-sale financial investments are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets.

Subsequent measurement

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term.

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APPENDIX VII

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value presented as other gains, net in the statement of profit or loss. These net fair value changes do not include any dividends or interest earned on these financial assets, which are recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in the statement of profit or loss in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the available-for-sale investment revaluation reserve to the statement of profit or loss in other gains or losses. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income and dividend income, respectively and are recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant of that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses.

The Group evaluates whether the ability and intention to sell its available-for-sale financial investments in the near term are still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity.

Impairment of Financial Assets

Assets carried at cost

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APPENDIX VII

Available-for-sale financial investments

For available-for-sale financial investments, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. The determination of what is “significant” or “prolonged” requires judgement. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss – is removed from other comprehensive income and recognised in the statement of profit or loss. Impairment losses on equity instruments classified as available for sale are not reversed through the statement of profit or loss. Increases in their fair value after impairment are recognised directly in other comprehensive income.

In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. Impairment losses on debt instruments are reversed through the statement of profit or loss if the subsequent increase in fair value of the instruments can be objectively related to an event occurring after the impairment loss was recognised in the statement of profit or loss.

2.4 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the following revised Hong Kong Financial Reporting Standards (“HKFRSs”) for the first time in these interim condensed consolidated financial statements:

Amendments to HKFRS 10, Investment Entities: Applying the Consolidation Exception HKFRS 12 and HKAS 28 (2011) Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations Amendments to HKAS 1 Disclosure Initiative Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer Plants Amendments to HKAS 27 (2011) Equity Method in Separate Financial Statements Annual Improvements 2012-2014 Cycle Amendments to a number of HKFRSs

The adoption of these new and revised HKFRSs has had no significant financial effect on the Group’s interim condensed consolidated financial statements.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Except for the additional significant accounting policies as a result of merger accounting and the changes in accounting policies noted above, the accounting policies and basis of preparation adopted in the preparation of the interim condensed consolidated financial statements are the same as those used in the annual financial statements for the year ended 31 December 2015.

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APPENDIX VII

2.5 A CHANGE IN ACCOUNTING ESTIMATES

With effect from 1 January 2016, the Group made a change in depreciation estimates as follows:

Estimated residual value of vessels changed from US$420 to US$280 per ton
Estimated useful life of certain containers changed from 12 years to 15 years
Estimated residual value of certain containers changed from US$830-US$1,344 to US$560-US$896 per container

This constitutes a change in accounting estimates. In the opinion of the directors, based on the current business condition, the estimated residual value and useful lives of these containers are more appropriately reflected by the change.

The change has been applied prospectively and has resulted in an increase in depreciation of approximately RMB76,500,000 for the six months ended 30 June 2016.

3 OPERATING SEGMENT INFORMATION AND REVENUE

For management purposes, the Group is organised into business units based on their products and services and has seven reportable operating segments as follows:

(a) Container shipping segment, which renders the container marine transportation services and related businesses;
(b) Vessel chartering and container leasing segment, which specifically leases vessels and containers;
(c) Non-shipping related leasing segment, other than leases vessels and containers;
(d) Container segment, which is a supplier of containers;
(e) Financial services segment, which renders corporate banking and insurance agency services;
(f) Equity investment segment, which focuses on equity investments, such as investments in associates, investments in joint ventures and available-for-sale equity investments; and
(g) The “others” segment comprises, principally, logistic services and other miscellaneous services.

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/(loss), which is a measure of adjusted profit/(loss) before tax from continuing operations. The adjusted profit/(loss) before tax from continuing operations is measured consistently with the Group’s profit before tax from continuing operations except that head office and corporate expenses are excluded from such measurement.

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APPENDIX VII

					Others Total	RMB’000 RMB’000	(Unaudited) (Unaudited)	(Restated) (Restated)		26,735 16,654,023	– 3,164,860	26,735 19,818,883	1,311 1,435,289		(181,798)		(252,890)	1,000,601				(9) (1,431,468)						– (10,706)	– (425,782)	– 64,541			– 434,235	– 1,457	59,303 111,310,648		(7,269,240)	104,041,408	(27,397) (72,607,033)		5,646,792	(66,960,241)
For the six months ended 30 June 2015		Non-	shipping	related Financial Equity	leasing Container services investment	RMB’000 RMB’000 RMB’000 RMB’000	(Unaudited) (Unaudited) (Unaudited) (Unaudited)	(Restated) (Restated) (Restated) (Restated)		67,243 848,195 214,644 –	– 1,016,788 4,622 –	67,243 1,864,983 219,266 –	45,678 45,899 120,997 495,883									(42) (34,127) (1,850) –						(7,028) (1,345) 4,487 –	– (25,693) – –	– – – 64,541			– – – 434,235	– – – 1,457	5,034,998 4,702,115 10,395,887 9,774,953				(3,589,440) (3,636,083) (9,785,930) (8,573,518)
	Vessel	chartering	and	Container container	Total Shipping leasing	RMB’000 RMB’000 RMB’000	(Unaudited) (Unaudited) (Unaudited)	(Restated) (Restated)		8,375,935 13,598,797 1,898,409	2,146,816 – 2,143,450	10,522,751 13,598,797 4,041,859	(627,944) 251,366 474,155		87,836		(195,798)	(735,906)				(1,560,551) (703,117) (692,323)						36,079 (5,930) (890)	(686,916) (280,370) (119,719)	12,076 – –			(135,784) – –	5,488 – –	165,264,167 50,890,055 30,453,337		(63,970,489)	101,293,678	(114,726,430) (32,498,330) (14,496,335)		27,579,677	(87,146,753)
					Others	RMB’000	(Unaudited)			15,766	–	15,766	(6,623)									(868)						–	–	–			–	–	45,101				(18,874)
For the six months ended 30 June 2016		Non	shipping	related Financial Equity	leasing Container services investment	RMB’000 RMB’000 RMB’000 RMB’000	(Unaudited) (Unaudited) (Unaudited) (Unaudited)			349,055 475,663 148,941 –	– 195,666 27,120 –	349,055 671,329 176,061 –	213,099 (17,728) 94,763 (91,544)									(401) (30,213) (1,143) –						(21,059) 2,269 37,523 –	– (44,847) – –	– – – 12,076			– – – (135,784)	– – – 5,488	9,049,886 5,309,392 14,034,889 10,633,385				(7,439,390) (3,244,150) (13,501,419) (8,724,473)
	Vessel	chartering	and	Container container	Shipping leasing	RMB’000 RMB’000	(Unaudited) (Unaudited)			3,235,222 4,151,288	– 1,924,030	3,235,222 6,075,318	(940,341) 120,430									(318,001) (1,209,925)						3,382 13,964	(74,218) (567,851)	– –			– –	– –	2,416,355 123,775,159				(3,503,996) (78,294,128)
									Segment revenue:	Sales to external customers	Intersegment sales	Total revenue	Segment results	Elimination of	intersegment results	Unallocated administrative	and general expenses	(Loss)/profit before tax	Supplementary segment	result information:	Depreciation and	amortisation	Reversal/(provision) of	impairment on trade	receivables and notes	receivables, loans and	receivables and finance	lease receivables	Finance costs	Dividend income	Share of profits/	(losses) of:	Associates	Joint ventures	Segment assets	Elimination of	intersegment assets	Total assets	Segment liabilities	Elimination of	intersegment liabilities	Total liabilities

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APPENDIX VII

4 OTHER INCOME

Interest income generated from operations other than financial services Government grant related to income Refund of value-added tax (“VAT”) Dividend income from available-for-sale financial investments Dividend income from held-for-trading investments Others	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 34,823 65,622 21,790 1,974 112 79,219 11,962 64,326 114 215 4,434 8,884 73,235 220,240	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 34,823 65,622 21,790 1,974 112 79,219 11,962 64,326 114 215 4,434 8,884 73,235 220,240
		220,240

5 OTHER GAINS, NET

Gain on disposal of subsidiaries Gain on disposal of interests in associates Gain on disposal of interests in joint ventures Gain on disposal of items of property, plant and equipment Gains on dilution of investment in an associate Gain on disposal of available-for-sale investments Fair value gain on held-for-trading investments Net foreign exchange (loss)/gain Others	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 10,915 – 99,052 – 17,571 – 42,613 38,391 – 30,887 1,302 3,388 745 515 (49,945) 4,712 7,998 (1,133) 130,251 76,760	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 10,915 – 99,052 – 17,571 – 42,613 38,391 – 30,887 1,302 3,388 745 515 (49,945) 4,712 7,998 (1,133) 130,251 76,760
		76,760

6 FINANCE COSTS

Interest on borrowings and corporate bonds Interest on finance lease Total interest expense Less: interest capitalised	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 693,946 428,298 – 1,632 693,946 429,930 (7,030) (4,148) 686,916 425,782	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 693,946 428,298 – 1,632 693,946 429,930 (7,030) (4,148) 686,916 425,782
		429,930 (4,148)
		425,782

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APPENDIX VII

7 INCOME TAX

According to the Corporate Income Tax (“CIT”) Law of PRC, which was effective from 1 January 2008, the CIT rate applicable to the Company and its subsidiaries incorporated in PRC was 25% for the six months ended 30 June 2016 and 2015.

Pursuant to the PRC CIT Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in Mainland China. The requirement is effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between Mainland China and the jurisdiction of the foreign investors. Some overseas subsidiaries are therefore liable for withholding taxes on dividends distributed by those subsidiaries, associates and joint ventures established in Mainland China in respect of earnings generated from 1 January 2008. Certain overseas subsidiaries of the Company are subject to preferential tax rate of 5%.

Hong Kong profits tax was provided at the rate of 16.5% on the estimated assessable profits of the Group’s companies operating in Hong Kong for the six months ended 30 June 2016 (for the six months ended 30 June 2015: 16.5%).

The major components of income tax expense of the Group are as follows:

Current income tax – PRC Current income tax – Hong Kong Current income tax – elsewhere Withholding tax on the distribution of dividends from PRC associates Deferred tax	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 94,087 76,285 1,974 2,357 2,222 9,440 14,916 19,761 (32,393) 13,492 80,806 121,335	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 94,087 76,285 1,974 2,357 2,222 9,440 14,916 19,761 (32,393) 13,492 80,806 121,335
		121,335

8 DISCONTINUED OPERATION

During February 2016, the Restructuring referred in note 1 was approved by the independent shareholders of the Company as well as the relevant regulatory authorities.

Among the disposed subsidiaries in note 1, Puhai Group, Universal Shipping, Golden Sea and CS Singapore Petroleum constituted a major line of business of provision of container marine transportation services and related business, which was classified as a discontinued operation. These disposals were completed before 30 June 2016, the assets and liabilities are no longer included in the interim condensed consolidated statement of financial position as at 30 June 2016.

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APPENDIX VII

The results of the discontinued operation for the period are presented below:

Revenue Cost Expenses Other income Other gains/(loss) Finance costs Profit before tax from the discontinued operation Income tax expense Profit for the period from the discontinued operation	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 411,138 1,726,664 (395,364) (1,685,037) (12,399) (39,644) 1,303 18,864 6,489 (7,337) (3) (161) 11,164 13,349 (1,392) (3,930) 9,772 9,419

The net cash flows incurred by the discontinued operation are as follows:

Operating activities Investing activities Financing activities Effect of foreign exchange rate changes, net Net cash flows Earnings per share (expressed in RMB per share): Basic and diluted, from the discontinued operation	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 208,887 52,758 – 6,627 (38,072) (28,821) 3,030 564 173,845 31,128 0.0006 0.0001

Apart from the disposed subsidiaries in note 1, approved disposal of China Shipping Container Lines Agency (Shenzhen) Co., Ltd. and Universal Logistics (Shenzhen) Co., Ltd. are yet to complete by 30 June 2016. The major classes of assets and liabilities of those subsidiaries are classified as held for sale as at 30 June 2016 as follows:

Assets Property, plant and equipment Intangible assets Prepayments and other receivables Assets of a disposal group classified as held for sale Liabilities Trade payables Income tax payable Liabilities directly associated with assets classified as held for sale Net liabilities directly associated with the disposal group	30 June 2016 RMB’000 (Unaudited) 1,485 94 9,457 11,036 (61,504) (5,431) (66,935) (55,899)

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APPENDIX VII

9 (LOSS)/EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the period.

(Loss)/earnings (Loss)/profit attributable to ordinary equity holders of the parent, used in the basic earnings per share calculation: From continuing operations From a discontinued operation Shares Weighted average number of ordinary shares in issue during the period used in the basic earnings per share calculation (thousands)	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) (841,489) 830,460 6,917 656 (834,572) 831,116 Number of shares for the six months ended 30 June 2016 30 June 2015 11,683,125 11,683,125

There was no dilution effect for the period (six months ended 30 June 2015: None).

10 DIVIDEND

The directors did not recommend any interim dividend for the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

11 PROPERTY, PLANT AND EQUIPMENT

Notes At 1 January as previously reported Effect of merger accounting 2.2 At 1 January (Restated) Additions Disposals Disposal of subsidiaries 23 Depreciation provided during the period Impairment Transfer to inventories Exchange realignment At 30 June	2016 RMB’000 (Unaudited) 38,336,165 18,306,491
	56,642,656 2,651,171 (318,820) (165,061) (1,559,611) (6,183) (36,735) 908,814
	58,116,231

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APPENDIX VII

Notes At 1 January as previously reported Effect of merger accounting 2.2 At 1 January (Restated) Additions Disposals Disposal of subsidiaries 23 Depreciation provided during the period Exchange realignment At 30 June	2015 RMB’000 (Unaudited) (Restated) 36,369,808 15,032,093
	51,401,901 4,760,221 (81,203) (3,307) (1,418,954) (38,147)
	54,620,511

12 INVESTMENTS IN ASSOCIATES

Share of net assets Goodwill on acquisition	30 June 2016 RMB’000 (Unaudited) 8,488,321 221,731 8,710,052	31 December 2015 RMB’000 (Unaudited) (Restated) 11,739,288 263,034
		12,002,322

As of 30 June 2016, particulars of the material associates are as follows:

			Percentage of
	Particulars of	Place of	ownership
Name	issued shares held	registration	interest	Principal activities
China International Marine	Registered capital	PRC	22.77	Manufacture and
Containers (Group)	of RMB1 each			sale of containers
Co., Ltd. (“CIMC”)
Bank of Kunlun Co., Ltd.	Registered capital	PRC	3.98	Banking
(“BOK”)	of RMB1 each
Shanghai Life Insurance	Registered capital	PRC	16	Insurance
Co., Ltd.	of RMB1 each
(“Shanghai Life”)
China Shipping Ports	Ordinary shares	Hong Kong	49	Operation of container
Development Co., Ltd.				terminal
(“CSPD”)

Though the Group has less than 20% of the equity interest in BOK and Shanghai Life, it has representation on the board of directors has cast significant influence over these companies.

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APPENDIX VII

The following tables illustrate the summarised financial information in respect of each of the Group’s material associates adjusted for any differences in accounting policies and reconciled to the carrying amount in the financial statements:

CIMC 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 44,976,531 43,530,325 69,823,386 63,232,846 80,446,229 71,268,295 25,644,350 26,508,276 1,981,143 2,033,043 6,728,195 6,953,557 34,353,688 35,494,876 22.77% 22.77% 5,837,855 6,035,618 810,583 810,661 – – 6,648,438 6,846,279	CIMC 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 44,976,531 43,530,325 69,823,386 63,232,846 80,446,229 71,268,295 25,644,350 26,508,276 1,981,143 2,033,043 6,728,195 6,953,557 34,353,688 35,494,876 22.77% 22.77% 5,837,855 6,035,618 810,583 810,661 – – 6,648,438 6,846,279	BOK 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 109,819,069 134,160,910 182,753,538 156,016,861 268,793,922 267,237,005 23,719,934 22,884,525 – – 58,751 56,241 23,778,685 22,940,766 3.975% 3.975% 942,867 909,660 – – 221,731 221,731 1,164,598 1,131,391	BOK 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 109,819,069 134,160,910 182,753,538 156,016,861 268,793,922 267,237,005 23,719,934 22,884,525 – – 58,751 56,241 23,778,685 22,940,766 3.975% 3.975% 942,867 909,660 – – 221,731 221,731 1,164,598 1,131,391	Shanghai Life 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 11,370,091 5,319,500 26,643,446 12,995,896 33,084,557 16,760,961 4,928,980 1,554,435 – – – – 4,928,980 1,554,435 16% 16% 788,637 248,710 – – – – 788,637 248,710	Shanghai Life 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 11,370,091 5,319,500 26,643,446 12,995,896 33,084,557 16,760,961 4,928,980 1,554,435 – – – – 4,928,980 1,554,435 16% 16% 788,637 248,710 – – – – 788,637 248,710	CSPD 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) – 404,746 – 7,940,687 – 617,468 – 7,286,300 – – – 441,665 – 7,727,965 – 49% – 3,570,287 – – – 25,452 – 3,595,739	CSPD 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) – 404,746 – 7,940,687 – 617,468 – 7,286,300 – – – 441,665 – 7,727,965 – 49% – 3,570,287 – – – 25,452 – 3,595,739
69,823,386	63,232,846	182,753,538	156,016,861	26,643,446	12,995,896	–	7,940,687
80,446,229	71,268,295	268,793,922	267,237,005	33,084,557	16,760,961	–	617,468
25,644,350 1,981,143 6,728,195	26,508,276 2,033,043 6,953,557	23,719,934 – 58,751	22,884,525 – 56,241	4,928,980 – –	1,554,435 – –	– – –	7,286,300 – 441,665
34,353,688	35,494,876	23,778,685	22,940,766	4,928,980	1,554,435	–	7,727,965

22.77% 5,837,855 810,583 – 6,648,438	22.77% 6,035,618 810,661 – 6,846,279	3.975% 942,867 – 221,731 1,164,598	3.975% 909,660 – 221,731 1,131,391	16% 788,637 – – 788,637	16% 248,710 – – 248,710	– – – – –	49% 3,570,287 – 25,452 3,595,739

– VII-258 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

			For	the six months	the six months	ended 30 June	ended 30 June
	CIMC		BOK			Shanghai	Life	CSPD
	2016	2015	2016	2015		2016	2015	2016	2015
	RMB’000	RMB’000	RMB’000	RMB’000		RMB’000	RMB’000	RMB’000	RMB’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)
		(Restated)		(Restated)			(Restated)
Revenue	23,542,843	32,637,289	4,894,081	6,034,584		11,132,437	130,320	88,609	193,831
Attributable to
owners of parent:
(Loss)/profit for
the period	(378,034)	1,518,195	1,622,761	1,770,291		(726,228)	(31,804)	17,229	135,596
Other
comprehensive
income/(loss) for
the period	274,766	(51,516)	(12,486)	29,287		(139,227)	(47,495)	(10,046)	33,453
Total
comprehensive
income/(loss) for
the period	(103,268)	1,466,679	1,610,275	1,799,578		(865,455)	(79,299)	7,183	169,049
Dividends declared	654,822	833,030	774,866	767,487		–	–	–	–

The following table illustrates the aggregate financial information of the Group’s associates that are not individually material:

Share of the associates’ profit for the period Share of the associates’ other comprehensive income Share of the associates’ total comprehensive income Aggregate carrying amount of the Group’s investments in the associates 13 AVAILABLE-FOR-SALE INVESTMENTS Open-ended funds, at fair value Wealth management products, at cost Listed equity investments, at fair value Unlisted equity investments, at cost	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 13,840 8,836 639 371 14,479 9,207 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 108,379 180,203 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 607,311 686,666 650,000 295,000 137,026 205,468 162,781 162,781 1,557,118 1,349,915	For the six months ended 30 June 2016 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 13,840 8,836 639 371 14,479 9,207 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 108,379 180,203 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 607,311 686,666 650,000 295,000 137,026 205,468 162,781 162,781 1,557,118 1,349,915
		9,207

		31 December 2015 RMB’000 (Unaudited) (Restated) 180,203

		31 December 2015 RMB’000 (Unaudited) (Restated) 686,666 295,000 205,468 162,781
		1,349,915

– VII-259 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

During the six months ended 30 June 2016 and 2015, a net loss after tax of RMB95,567,000 and a net gain after tax of RMB66,473,000 in respect of the Group’s available-for-sale investments were recognised in other comprehensive income, respectively,

The unlisted available-for-sale investments are stated at cost because the range of reasonable fair value estimates is so significant that the directors are of the opinion that the fair value cannot be measured reliably.

14 FINANCE LEASE RECEIVABLES

			30	June 2016		31	December 2015	December 2015
			Effective		Effective
		interest rate		Maturity RMB’000	interest	rate	Maturity		RMB’000
				(Unaudited)					(Unaudited)
									(Restated)
Current portion	2.6363%-23.1%			2016-2017 2,167,891	3.21% to 23.1%		2016		1,687,513
Non-current
portion	2.6363%-23.1%			2017-2026 9,082,783	3.21% to 23.1%		2017	to 2026	5,730,373
				11,250,674					7,417,886
Less:
impairment				(83,989)					(54,901)
				11,166,685					7,362,985

						Present value of			minimum
				Minimum lease receivables			lease receivables
				31 December				31 December
				30 June 2016	2015	30 June		2016	2015
				RMB’000	RMB’000		RMB’000		RMB’000
				(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
					(Restated)				(Restated)
Amounts receivables:
Within one year				2,807,317	2,157,114		2,167,891		1,687,513
In the second to	fifth years,
inclusive				8,596,497	5,755,729		7,224,478		4,856,576
After five years				2,153,980	1,042,080		1,858,305		873,797
Total minimum finance lease
receivables				13,557,794	8,954,923		11,250,674		7,417,886

Less: unearned finance income				(2,307,120)	(1,537,037)
Less: impairment				(83,989)	(54,901)
Total net finance lease			receivables	11,166,685	7,362,985
Portion classified as current assets				(2,142,961)	(1,682,327)
Non-current portion				9,023,724	5,680,658

– VII-260 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The tables below summarise the movement of impairment losses on finance lease receivables:

Note At 1 January as previously reported Effect of merger accounting 2.2 At 1 January (Restated) Impairment allowances charged Exchange realignment At 30 June	2016 RMB’000 (Unaudited) – 54,901 54,901 29,087 1 83,989	2015 RMB’000 (Unaudited) (Restated) – 24,111
		24,111 7,730 66
		31,907

15 LOANS AND RECEIVABLES

Current portion Non-current portion The tables below summarise loans and receivables by natures: Corporate loans Impairment losses on loans and receivables	30 June 2016 RMB’000 (Unaudited) 1,830,739 207,413 2,038,152 30 June 2016 RMB’000 (Unaudited) 2,090,412 (52,260) 2,038,152	31 December 2015 RMB’000 (Unaudited) (Restated) 3,133,055 368,467
		3,501,522

		31 December 2015 RMB’000 (Unaudited) (Restated) 3,591,305 (89,783)
		3,501,522

The tables below summarise the movement of impairment losses on loans and receivables:

Note At 1 January as previously reported Effect of merger accounting 2.2 At 1 January (Restated) Impairment allowances charged Reversal of impairment allowances At 30 June	2016 RMB’000 (Unaudited) – 89,783 89,783 18,694 (56,217) 52,260	2015 RMB’000 (Unaudited) (Restated) – 115,861
		115,861 17,550 (22,037)
		111,374

– VII-261 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

16 TRADE AND NOTES RECEIVABLES

Trade receivables Notes receivables Impairment of trade receivables	30 June 2016 RMB’000 (Unaudited) 1,719,099 66,093 1,785,192 (64,864) 1,720,328	31 December 2015 RMB’000 (Unaudited) (Restated) 2,583,188 202,293 2,785,481 (97,375) 2,688,106

The tables below summarise the movement of impairment of trade receivables:

2016
Note
RMB’000
(Unaudited)
At 1 January as previously reported
53,531
Effect of merger accounting
2.2
43,844
At 1 January (Restated)
97,375
Impairment losses recognised
18,877
Impairment losses reversed
(46,520)
Write-off
(54)
Disposal of subsidiaries
(5,852)
Exchange realignment
1,038
At 30 June
64,864
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
30 June 2016
Note
RMB’000
(Unaudited)
Cash and bank balances
14,829,828
Mandatory reserves with the central bank
a
(670,985)
Pledged time deposits for corporate bonds and
general banking facilities
(120,020)
Pledged time deposits for bank acceptance bills
(16,920)
Time deposits with original maturity of more
than three months
–
Pledged to customs as guarantees for import
–
Restricted insurance premium received
(56,622)
Restricted cash
(864,547)
Cash and cash equivalents
13,965,281

2015
RMB’000
(Unaudited)
(Restated)
67,848
25,627
93,475
10,511
(3,048)
(2,084)
–
(751)
98,103
31 December 2015
RMB’000
(Unaudited)
(Restated)
16,783,207
(624,391)
(182,066)
–
(60,000)
(1,410)
(54,401)
(922,268)
15,860,939

17 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Note:

(a) CS Finance is required to place mandatory reserve deposits with the People’s Bank of China (“PBOC”), the PRC central bank. Mandatory reserve deposits with the central bank are not available for use in CS Finance’s daily operations.

– VII-262 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

18 GENERAL RESERVES

Pursuant to Caijin [2012] No. 20 Requirements on Impairment Allowance for Financial Institutions (“Requirement”), issued by Ministry of Finance, in addition to the impairment allowance, CS Finance establishes a general reserve within the equity holders’ equity through the appropriation of profit to address unidentified potential impairment losses. The general reserve should not be less than 1.5% of the aggregate amount of risk assets as defined by the Requirement, and the minimum threshold can be accumulated over a period of no more than five years.

19 BANK AND OTHER BORROWINGS

Current Bank loans Commercial paper notes Borrowing from fellow subsidiary Borrowing from immediate holding company Non-current Bank loans Borrowing from fellow subsidiary Borrowing from the immediate holding company CORPORATE BONDS Current portion Non-current portion	30 June 2016 RMB’000 (Unaudited) 11,913,789 2,320,920 10,609,920 4,500,000 29,344,629 29,996,913 9,482,616 2,300,000 41,779,529 71,124,158 30 June 2016 RMB’000 (Unaudited) 2,042,810 1,506,225 3,549,035	31 December 2015 RMB’000 (Unaudited) (Restated) 7,144,984 4,870,200 10,533,659 4,270,000
		26,818,843
		23,775,727 324,680 1,249,360
		25,349,767
		52,168,610

		31 December 2015 RMB’000 (Unaudited) (Restated) 245,617 3,449,494 3,695,111

20 CORPORATE BONDS

On 12 June 2007, the Company issued corporate bonds in the PRC with a face value of RMB1,800,000,000 (“Bond A”), pursuant to the approval obtained from the National Development and Reform Commission of the PRC. The bonds are denominated in RMB and for a ten-year period fully repayable by 12 June 2017, and bear interest at a rate of 4.51% per annum. The bonds are guaranteed by the Bank of China, Shanghai branch, and have been listed on the interbank bond market in the PRC. As of 30 June 2016, the carrying amount of Bond A was RMB1,797,658,000 (31 December 2015: RMB1,796,432,000).

On 25 September 2013, Dong Fang Container Finance (SPV) Limited (“DFCF(SPV)”), a subsidiary of the Company, issued a note with an aggregate principal amount of US$200,000,000 (“Note 2013”). The note carried an interest yield of 3.96% per annum and was issued at a price of 99.1001049% of its principal amount. The note bears interest from 25 September 2013, payable monthly in arrears. Unless previously prepaid by DFCF(SPV), the note is repayable monthly in accordance with the repayment schedule in the note offering memorandum commencing from October 2013. The note is subject to repayment in whole or in part, at a price equal to 102% of the aggregate principal amount if repayment made during 25 October 2015 to 24 October 2018 or 100% of the aggregate principal amount if repayment made on or after 25 October 2018, together with accrued interest, at the discretion of DFCF(SPV) at any time after 25 October 2015. As of 30 June 2016, the carrying amount of Note 2013 was RMB840,949,000 (31 December 2015: RMB1,012,753,000).

– VII-263 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

On 4 December 2014, the Dong Fang Container Finance II (SPV) Limited (“DFCFII(SPV)”), a subsidiary of the Company, issued notes with 2 classes (together refer to as “Note 2014”). The notes are set out as follows:

(a) principal amount of US$35,000,000 class A-1 notes (the “Class A-1 Notes”), and
(b) principal amount of US$124,000,000 class A-2 notes (the “Class A-2 Notes”).

Class A-1 Notes carried an interest yield of 1.95% per annum and were issued at a price of 99.99017% of its principal amount.

Class A-2 Notes carried an interest yield of 3.55% per annum and were issued at a price of 99.89347% of its principal amount.

The notes bear interest from 4 December 2014, payable monthly in arrears. Unless previously repaid by DFCFII(SPV), Class A-1 Notes and Class A-2 Notes are repayable monthly in accordance with the repayment schedule in the note offering memorandum commencing from December 2014. The notes are subject to prepayment in whole or in part at their principal amount, together with accrued interest, at the discretion of DFCFII(SPV) at any time after 4 December 2016. As of 30 June 2016, the carrying amount of Note 2014 was RMB910,428,000 (31 December 2015: RMB885,926,000).

21 DEPOSITS FROM CUSTOMERS

Current Demand deposits Time deposits Non-current Time deposits	30 June 2016 RMB’000 (Unaudited) 7,132,076 689,761 7,821,837 8,951 7,830,788	31 December 2015 RMB’000 (Unaudited) (Restated) 4,482,658 –
		4,482,658
		8,900
		4,491,558

22 OTHER LONG TERM PAYABLES

Long term payables represent deposits for finance lease contract received from customers due after one year.

– VII-264 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

23 DISPOSAL OF SUBSIDIARIES

(a) During the six months ended 30 June 2016, the Group disposed of a series of subsidiaries, particulars of which can be referred to note 1.

Details of the net assets disposed of and gain on disposal are as follows:

Net assets disposed of:
Property, plant and equipment
Investment properties
Intangible assets
Deferred tax assets
Inventories
Trade and notes receivables
Prepayments and other receivables
Cash and cash equivalents
Bank and other borrowings
Deferred tax liabilities
Other long term payables
Trade payables
Other payables and accruals
Tax payable
Non-controlling interests
Reclassification adjustments on exchange differences on translation of
foreign operations to gain included in the interim condensed consolidated
statement of profit or loss
Gain on disposal of subsidiaries
Satisfied by:
Cash
Other receivables

RMB’000
(Unaudited)
164,594
2,028
4,145
1,018
18,087
2,726,445
585,237
1,130,988
(416,954)
(64)
(335)
(2,555,611)
(776,900)
(8,208)
(63,341)
811,129
1,431
10,064
822,624
800,481
22,143
822,624

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash and cash equivalents disposed of Cash received Net outflow of cash and cash equivalents in respect of the disposal of subsidiaries	RMB’000 (Unaudited) (1,131,574) 801,067 (330,507)

– VII-265 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(b) The Group had 25% equity interests in E-shipping Global Supply Chain Management Co.,Ltd. (“E-shipping”) and controlled E-shipping with dominant voting rights from contractual arrangement with the other vote holders of E-shipping as at 31 December 2015. During the six months ended 30 June 2016, such contractual arrangement ceased. Accordingly, the Group lost control over E-shipping, which was transferred from a subsidiary of the Group to an associate of the Group.

Details of the net assets disposed of and gain on disposal are as follows:

Net assets disposed of: Property, plant and equipment Inventories Trade and notes receivables Prepayments and other receivables Cash and cash equivalents Trade payables Other payables and accruals Non-controlling interests Gain on disposal of subsidiary Satisfied by: Investment in an associate	RMB’000 (Unaudited) 467 331 3,464 911 19,377 (1,209) (16,569) (1,839) 4,933 1,851 6,784 6,784

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiary is as follows:

					RMB’000
					(Unaudited)
Cash	and	cash	equivalents	disposed of and net outflow of
cash	and	cash	equivalents	in respect of the disposal of subsidiary	(19,377)

(c) On 1 January 2015, the Group transferred 100% equity interests in four subsidiaries, Shanghai Zhenjing Industrial Co.,Ltd., Shanghai Chutai Industrial Co.,Ltd., Shanghai Chaokun Industrial Co.,Ltd., and Shanghai Yuekun Industrial Co.,Ltd. to China Shipping Property Co.,Ltd., a fellow subsidiary, for nil consideration. These four subsidiaries were engaged in property investment.

Details of the net assets disposed of and equity charged on disposal are as follows:

Net assets disposed of: Property, plant and equipment Investment properties Prepayments and other receivables Cash and cash equivalents Other payables and accruals Charge other reserves Charge retained profits	RMB’000 (Unaudited) (Restated) 3,307 429,686 18,812 8,005 (4,322) 455,488 (58,272) (397,216)

–

– VII-266 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiary is as follows:

	RMB’000
	(Unaudited)
	(Restated)
Cash and cash equivalents disposed of and net outflow of cash
and cash equivalents in respect of the disposal of subsidiary	(8,005)

24 COMMITMENTS

The Group had the following capital commitments at the end of the reporting period:

Contracted, but not provided for: Equity investment Containers Vessel under construction Others	30 June 2016 RMB’000 (Unaudited) 1,575,000 24,802 10,654,848 69,325 12,323,975	31 December 2015 RMB’000 (Unaudited) (Restated) – 19,954 10,528,286 69,325
		10,617,565

25 SIGNIFICANT RELATED PARTY TRANSACTIONS

	For the six months ended 30 June	For the six months ended 30 June
	2016	2015
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
		(Restated)
Interest income from immediate holding company	16,791	–
Interest expenses to immediate holding company	133,657	35,437
Income from fellow subsidiaries:
Liner service income	11,908	55,820
Finance lease income	10,677	13,904
Container rental income	766,425	543,197
Chassis rental income	276	–
Vessels rental income	2,073,633	–
House rental income	–	1,601
Fuel supply	200,662	684,453
Nomination fee income	5,481	2,695
Interest income	36,059	51,340
Commission income	1,768	804
Insurance income	3,837	4,184
Expenses to fellow subsidiaries:
Vessel construction	71,251	–
Lease of containers	29,370	2,677
Lease of chassis	–	2,287
Lease of properties	9,788	33,270
Cargo and liner agency services	66,007	292,420
Container management services	16,696	49,852
Vessel repair services	17,403	10,463
Handling, storage and maintenance expenses	3,135	1,216

– VII-267 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

	For the six months ended 30 June	For the six months ended 30 June
	2016	2015
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
		(Restated)
Supply of fresh water, vessel fuel, lubricants, spare parts
and other materials	161,647	650,772
Depot services	3,877	9,036
Information technology service charges	8,021	18,847
Provision of crew members	360,884	367,711
Loading and unloading services	143	522,997
Purchase of containers	36,566	823,476
Ground container transport costs	3,732	3,248
Interest expenses	11,330	18,006
Key management compensation:
Basic salaries and allowances	3,670	9,235

26 FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

Financial assets – held-for-trading financial assets

Held-for-trading investments Financial assets – loans and receivables Cash and cash equivalents Restricted cash Trade and notes receivables Financial assets included in prepayments and other receivables Finance lease receivables Loans and receivables Financial assets – available-for-sale financial assets Available-for-sale investments	30 June 2016 RMB’000 (Unaudited) 21,668 30 June 2016 RMB’000 (Unaudited) 13,965,281 864,547 1,720,328 724,192 11,166,685 2,038,152 30,479,185 30 June 2016 RMB’000 (Unaudited) 1,557,118	31 December 2015 RMB’000 (Unaudited) (Restated) 200,349

		31 December 2015 RMB’000 (Unaudited) (Restated) 15,860,939 922,268 2,688,106 1,521,211 7,362,985 3,501,522
		31,857,031

		31 December 2015 RMB’000 (Unaudited) (Restated) 1,349,915

– VII-268 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Financial liabilities – held-for-trading financial liabilities

Derivative financial instruments Financial liabilities – other liabilities at amortised cost Trade and notes payables Financial liabilities included in other payables and accruals Bank and other borrowings Corporate bonds Finance lease obligations Deposits from customers Other long term payables	30 June 2016 RMB’000 (Unaudited) 33,389 30 June 2016 RMB’000 (Unaudited) 2,291,539 940,029 71,124,158 3,549,035 – 7,830,788 701,370 86,436,919	31 December 2015 RMB’000 (Unaudited) (Restated) 838

		31 December 2015 RMB’000 (Unaudited) (Restated) 4,041,654 1,351,986 52,168,610 3,695,111 141 4,491,558 405,129
		66,154,189

27 FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

Finance lease receivables Bank and other borrowings Corporate bonds Other long term payables	Carrying amounts 30 June 2016 31 December 2015 RMB’000 RMB’000 (Unaudited) (Unaudited) (Restated) 9,023,724 5,680,658 41,779,529 25,349,767 1,506,225 3,449,494 701,370 405,129 53,010,848 34,885,048	Fair 30 June 2016 RMB’000 (Unaudited) 9,110,646 41,693,197 1,428,359 686,788 52,918,990	values 31 December 2015 RMB’000 (Unaudited) (Restated) 5,766,412 25,144,797 3,336,457 395,494
			34,643,160

Management has assessed that the fair values of cash and cash equivalents, restricted cash, trade and notes receivables, financial assets included in prepayments and other receivables, current portion of financial lease receivables and loans and receivables, trade and notes payables, financial liabilities included in other payables and accruals, current portion of corporate bonds and finance lease obligations, deposits from customers and current portion of bank and other borrowings approximate to their carrying amounts largely due to the short term maturities of these instruments.

Management has assessed that the fair values of the non-current portion of loans and receivables and non-current portion of deposits from customers of the Group approximates to their fair value due to their floating interest rates.

– VII-269 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The Group’s finance department headed by the finance manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The finance department reports directly to the chief financial officer. At each reporting date, the finance department analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer.

The fair value of the non-current portion of financial lease receivables, non-current portion of bank and other borrowings, non-current portion of corporate bonds and other long term payables has been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities.

Financial assets measured at fair value

30 June 2016 Held-for-trading investments Available-for-sale investments 31 December 2015 Held-for-trading investments Available-for-sale investments	Fair Level 1 RMB’000 21,668 744,337 766,005 200,349 892,134 1,092,483	value measurement categorised into Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 – – 21,668 – – 744,337 – – 766,005 – – 200,349 – – 892,134 – – 1,092,483	value measurement categorised into Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 – – 21,668 – – 744,337 – – 766,005 – – 200,349 – – 892,134 – – 1,092,483
			766,005

			200,349 892,134
			1,092,483

Financial liabilities measured at fair value

30 June 2016 Derivative financial instruments 31 December 2015 Derivative financial instruments	Fair Level 1 RMB’000 – –	value measurement categorised into Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 33,389 – 33,389 838 – 838	value measurement categorised into Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 33,389 – 33,389 838 – 838

			838

During the period, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 (six months ended 30 June 2015: Nil).

28 EVENT AFTER THE REPORTING PERIOD

There is no material subsequent event undertaken by the Group after 30 June 2016.

29 COMPARATIVE AMOUNTS

As further explained in note 2.2, due to the application of merger accounting, certain comparative amounts have been restated.

In addition, the comparative interim condensed consolidated statement of profit or loss has been re-presented as if the operation discontinued during the period had been discontinued at the beginning of the comparative period.

– VII-270 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

The following is an extract of the unaudited financial statements of the Group for the nine months ended 30 September 2016 prepared in accordance with the PRC GAAP:

Consolidated Balance Sheet

30 September 2016

Prepared by: China Shipping Container Lines Company Limited

Item	Unit: Yuan Currency: RMB Closing balance	Audit type: Unaudited Opening balance (Restated)
Current assets:
Cash and bank balances	19,497,221,530.49	16,783,206,949.31
Balances with clearing companies Placements with banks and other
financial institutions
Financial assets at fair value through
profit and loss Derivative financial assets	268,220.25	200,349,058.93
Bills receivable	39,584,192.81	202,294,563.09
Accounts receivable	1,589,491,871.60	2,475,811,768.48
Funds paid in advance Premiums receivable	1,386,841,283.14	217,590,211.99
Reinsurance accounts receivable	15,714,611.46	9,999,388.57
Deposits receivable from reinsurance treaty Interests receivable	10,674,479.89	27,308,407.65
Dividends receivable
Other receivables	647,137,969.95	534,212,733.08
Purchases of resold financial assets
Inventories	695,485,598.72	1,238,767,706.63
Assets classified as held-for-sale
Non-current assets due within one year Other current assets	2,908,158,913.16 96,439,124.45	2,632,068,490.45 126,457,531.94
Total current assets	26,887,017,795.92	24,448,066,810.12

Non-current assets:
Loans and advances granted Available-for-sale financial assets	2,485,866,142.50 2,091,147,017.98	3,501,522,687.00 1,349,914,856.02
Held-to-maturity investments Long-term receivables Long-term equity investment Investment property Fixed assets	12,767,869,754.10 8,972,664,697.28 7,985,395.38 56,260,988,179.53	5,680,657,829.41 12,058,564,887.71 10,087,334.41 54,940,787,093.39
Construction in progress Construction materials	1,482,285,895.63	1,638,069,223.44
Disposals of fixed assets Biological assets for production Fuel assets
Intangible assets Development expenditure Goodwill	246,164,819.73	249,031,066.55
Long-term deferred expenses Deferred income tax assets	39,161,744.23 81,464,427.98	63,799,550.67 56,339,947.77
Other non-current assets	24,644,070.92	34,720,900.36
Total non-current assets	84,460,242,145.26	79,583,495,376.73
Total assets	111,347,259,941.18	104,031,562,186.85

– VII-271 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Item	Unit: Yuan Currency: RMB Closing balance	Audit type: Unaudited Opening balance (Restated)
Current liabilities:
Short term borrowings Borrowings from central bank Deposit taking and deposit in inter-bank market Placements funds	18,401,381,991.79 7,976,035,649.10	12,217,557,864.00 4,491,557,906.32
Financial liabilities at fair value through
profit and loss Derivative financial liabilities
Bills payable Accounts payable Funds received in advance	50,500,000.00 2,012,777,557.57 137,347,462.72	1,701,000.00 4,025,902,562.97 144,254,895.39
Funds from disposal of repurchased
financial assets
Handling charges and commissions payable Staff remuneration payable Taxes payable Interests payable Dividends payable Other payables Reinsurance accounts payable Deposits for insurance contracts Customer deposits for trading in securities Customer deposits for securities underwriting Liabilities classified as held-for-sale	82,473,559.38 128,787,761.22 210,961,153.51 156,787,850.84 818,505,283.74 23,778,949.29	101,777,958.53 253,212,553.03 188,553,808.08 15,151,733.31 1,500,725,031.65 14,050,893.77
Non-current liabilities due within one year Other current liabilities	8,110,530,873.61 23,665,448.94	14,479,830,463.42 837,974.60
Total current liabilities	38,133,533,541.71	37,435,114,645.07

Non-current liabilities:
Long term borrowings Bonds payable Including: Preferred shares Perpetual bonds Long term payables Long-term staff remuneration payable Specific payables Projected liabilities Deferred income	55,988,206,677.06 1,448,983,654.37 1,241,263,917.33 25,000,000.00	25,025,086,991.64 3,449,493,720.03 729,533,855.04 25,000,000.00 5,200,000.00
Deferred income tax liabilities	250,608,332.02	280,967,896.03
Other non-current liabilities
Total non-current liabilities	58,954,062,580.78	29,515,282,462.74
Total liabilities	97,087,596,122.49	66,950,397,107.81

Owners’ equity Share capital Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve Less: treasury shares Other comprehensive income Special reserve Surplus reserve General risk provision Retained earnings Total equity attributable to the owner of	11,683,125,000.00 1,306,687,584.85 (2,483,860,023.83) 6,290,570.94 1,355,762,889.20 82,279,883.12 1,974,252,763.43	11,683,125,000.00 22,721,743,656.18 (2,291,754,040.85) 21,089,656.31 1,362,073,031.79 65,503,696.05 3,021,834,693.00
the parent company Minority interests Total owners’ equity	13,924,538,667.71 335,125,150.98 14,259,663,818.69	36,583,615,692.48 497,549,386.56 37,081,165,079.04
Total liabilities and owners’ equity	111,347,259,941.18	104,031,562,186.85

– VII-272 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Balance Sheet of the Parent Company

30 September 2016

Prepared by: China Shipping Container Lines Company Limited

Unit: Yuan Currency: RMB Item Closing balance Current assets: Cash and bank balances 5,086,706,292.03 Financial assets at fair value through profit and loss Derivative financial assets Bills receivable 39,584,192.81 Accounts receivable 2,034,706,807.20 Funds paid in advance 375,145,879.51 Interests receivable 1,541,245.19 Dividends receivable 260.43 Other receivables 371,183,038.47 Inventories 305,526,085.63 Assets classified as held-for-sale Non-current assets due within one year Other current assets 41,907,839.51 Total current assets 8,256,301,640.78 Non-current assets: Available-for-sale financial assets 340,000,000.00 Held-to-maturity investments 2,003,340,000.00 Long-term receivables Long-term equity investment 18,177,668,705.92 Investment property Fixed assets 14,478,144,586.17 Construction in progress 210,000.00 Construction materials Disposals of fixed assets Biological assets for production Fuel assets Intangible assets 8,816,649.73 Development expenditure Goodwill Long-term deferred expenses 31,205,182.68 Deferred income tax assets Other non-current assets Total non-current assets 35,039,385,124.50 Total assets 43,295,686,765.28	Audit type: Unaudited Opening balance 5,611,005,082.75 180,245,695.57 762,443,692.10 46,164,936.00 38,495,846.42 33,087,853.25 138,214,919.79 573,141,466.61
	7,382,799,492.49

	16,089,211,176.16 15,116,277,795.73 210,000.00 10,031,873.60 39,459,721.93 31,255,190,567.42
	38,637,990,059.91

– VII-273 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Unit: Yuan Currency: RMB Audit type: Unaudited Item Closing balance Opening balance Current liabilities: Short term borrowings 1,707,866,197.79 Financial liabilities at fair value through profit and loss Derivative financial liabilities Bills payable Accounts payable 961,732,794.04 3,574,367,511.18 Funds received in advance 28,403,440.97 Staff remuneration payable 35,228,624.21 33,149,002.76 Taxes payable 2,391,969.72 65,631,923.10 Interests payable 41,098,673.50 47,106,000.00 Dividends payable Other payables 4,590,350,079.35 4,527,195,113.38 Liabilities classified as held-for-sale Non-current liabilities due within one year 1,953,270,521.06 Other current liabilities Total current liabilities 9,320,342,300.64 8,247,449,550.42 Non-current liabilities: Long-term borrowings 7,427,600,000.00 600,000,000.00 Bonds payable 1,796,432,098.56 Including: Preferred shares Perpetual bonds Long term payables Long-term staff remuneration payable Specific payables Projected liabilities 25,000,000.00 25,000,000.00 Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities 7,452,600,000.00 2,421,432,098.56 Total liabilities 16,772,942,300.64 10,668,881,648.98 Owners’ equity Share capital 11,683,125,000.00 11,683,125,000.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 16,352,436,385.85 17,296,763,101.95 Less: Treasury shares Other comprehensive income 15,097.55 7,506,475.30 Special reserve Surplus reserve 1,355,762,889.20 1,355,762,889.20 Retained earnings (2,868,594,907.96) (2,374,049,055.52) Total owners’ equity 26,522,744,464.64 27,969,108,410.93 Total liabilities and owners’ equity 43,295,686,765.28 38,637,990,059.91

Item

Current liabilities:

Non-current liabilities:

– VII-274 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Income Statement

January to September 2016

Prepared by: China Shipping Container Lines Company Limited

			_Unit: Yuan _	Currency: RMB Audit type: Unaudited	Currency: RMB Audit type: Unaudited
					Amount from
				Amount from	the beginning
				the beginning	of last year to
				of the year to	the end of
		Amount for	Amount for the	the end of the	the reporting
		the Reporting	same period	Reporting	period
		Period	last year	Period	last year
		(July to	(July to	(January to	(January to
Item		September)	September)	September)	September)
			(Restated)		(Restated)
I.	Total operating revenue	3,479,952,271.66	9,068,475,135.50	12,297,782,363.64 27,484,491,246.07
	Including: Revenue from operations	3,396,352,638.65	8,986,780,671.69	12,065,241,826.83 27,188,153,244.10
	Interest income	75,999,697.36	71,345,030.10	205,320,956.87	268,124,536.79
	Premiums earned
	Handling charges and
	commission income	7,599,935.65	10,349,433.71	27,219,579.94	28,213,465.18
II.	Total cost of sales	3,541,859,890.92	10,236,695,818.47	13,169,805,026.64 28,293,097,240.87
	Including: Operating cost	2,779,491,340.30	9,647,764,234.15	11,024,847,188.00 26,612,902,154.54
	Interest expenses	19,693,039.47	11,414,458.47	39,819,778.78	42,219,836.53
	Handling charges and
	commission expenses	159,263.02	41,892.56	285,215.40	130,213.50
	Surrender payment
	Net expenditure for
	compensation payments
	Net provision for insurance
	deposits
	Policyholder dividend
	expenses
	Reinsurance costs
	Business tax and surcharges	758,263.79	12,954,900.93	11,155,309.35	34,210,964.90
	Selling expenses	678,089.55	4,706,070.41	9,460,510.71	11,469,950.22
	Administrative expenses	161,293,592.72	243,575,259.95	665,159,761.77	906,728,981.49
	Finance costs	442,970,107.68	247,382,895.72	1,209,856,181.25	643,718,061.33
	Asset impairments loss	136,816,194.39	68,856,106.28	209,221,081.38	41,717,078.36
	Add: Gains from changes in fair value
	(loss is represented by “-”)	6,451.08	11,256.85	(88,016.98)	(219,762.85)
	Investment income (loss is
	represented by “-”)	51,171,526.90	105,773,081.44	62,631,903.17	641,025,005.90
	Including: Gains from investment in
	associates and joint
	ventures	33,760,529.25	(73,491,286.60)	(96,536,093.37)	393,086,839.40
	Gains from foreign
	currency exchange (loss
	is represented by “-”)

– VII-275 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

				_Unit: Yuan _	_Currency: RMB Audit _	type: Unaudited
						Amount from
					Amount from	the beginning
					the beginning	of last year to
					of the year to	the end of
			Amount for	Amount for the	the end of the	the reporting
			the Reporting	same period	Reporting	period
			Period	last year	Period	last year
			(July to	(July to	(January to	(January to
Item			September)	September)	September)	September)
				(Restated)		(Restated)
III.	Profit from operations (loss is
	represented by “-”)		(10,729,641.28)	(1,062,436,344.68)	(809,478,776.81)	(167,800,751.75)
	Add:	Non-operating income	277,950,338.15	307,473,947.70	357,635,380.95	456,227,392.38
		Including: Gain from disposal of
		non-current assets	1,089,190.71	122,018,558.46	49,643,676.16	171,907,875.70
	Less:	Non-operating expense	(1,413,193.26)	239,598,685.00	10,539,511.78	266,465,123.30
		Including: Loss from disposal of
		non-current assets	(1,646,983.09)	238,169,806.34	4,304,370.59	263,446,553.54
IV.	Total	profit (total loss is represented
	by “-”)		268,633,890.13	(994,561,081.98)	(462,382,907.64)	21,961,517.33
	Less:	Income tax expenses	53,783,842.44	73,717,130.05	135,982,261.89	198,982,105.41
V.	Net profit (net loss is represented by
	“-”)		214,850,047.69	(1,068,278,212.03)	(598,365,169.53)	(177,020,588.08)
	Net profit attributable to the owner of the
	parent company		205,929,085.54	(1,089,084,397.54)	(634,917,959.88)	(255,396,481.04)
	Minority interests		8,920,962.15	20,806,185.51	36,552,790.35	78,375,892.96
VI.	Net other comprehensive income after
	taxes		129,492,703.12	712,043,688.10	(203,655,380.63)	766,566,568.86
	Net other comprehensive income
	attributable to owners of the parent
	company after taxes		132,213,860.32	725,450,142.49	(192,105,982.98)	778,810,835.00
	(I)	Items that may not be reclassified
		subsequently to profit or loss
		1. Changes in net liabilities
		or net assets arising from
		the re-measurement of
		defined benefit plans
		2. Shares of other
		comprehensive income of
		investees that may not be
		reclassified to profit or
		loss under the equity
		method
	(II)	Items that may be subsequently
		reclassified to profit or loss	132,213,860.32	725,450,142.49	(192,105,982.98)	778,810,835.00
		1. Shares of other
		comprehensive income of
		investees that may be
		reclassified to profit or
		loss under the equity
		method subsequently	91,307,556.46	(40,293,371.27)	125,549,862.71	(42,220,404.39)

– VII-276 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

					_Unit: Yuan _	_Currency: RMB Audit _	type: Unaudited
							Amount from
						Amount from	the beginning
						the beginning	of last year to
						of the year to	the end of
				Amount for	Amount for the	the end of the	the reporting
				the Reporting	same period	Reporting	period
				Period	last year	Period	last year
				(July to	(July to	(January to	(January to
Item				September)	September)	September)	September)
					(Restated)		(Restated)
		2.	Gains or losses from
			changes in fair value of
			available-for-sale financial
			assets	32,076,693.08	22,043,197.24	(59,034,653.17)	87,380,322.89
		3.	Gains or losses from
			reclassifying held-to-
			maturity investments to
			available-for-sale financial
			assets
		4.	Effective portion of cash
			flow adjusted for hedging
			gains or losses	9,706,555.12	(20,747,902.20)	(22,489,196.08)	(25,983,735.46)
		5.	Exchange differences from
			retranslation of financial
			statements	(876,944.34)	764,448,218.72	(236,131,996.44)	759,634,651.96
		6.	Others
	Net other comprehensive income
	attributable to minority interests after
	taxes			(2,721,157.20)	(13,406,454.39)	(11,549,397.65)	(12,244,266.14)
VII.	Total	comprehensive income		344,342,750.81	(356,234,523.93)	(802,020,550.16)	589,545,980.78
	Total	comprehensive income attributable
	to owners		of the parent company	338,142,945.86	(363,634,255.05)	(827,023,942.86)	523,414,353.96
	Total	comprehensive income attributable
	to minority shareholders			6,199,804.95	7,399,731.12	25,003,392.70	66,131,626.82
VIII.	Earnings per share:
	(1)	Basic earnings per share (RMB
		per	share)	0.0176	(0.0932)	(0.0543)	(0.0219)
	(2)	Diluted earnings per share (RMB
		per	share)	0.0176	(0.0932)	(0.0543)	(0.0219)

For the business combination under common control effected in the current period, the net profit recognized by the merged party before the combination was RMB239,160,194.9, and the net profit recognized by the merged party in the previous period was RMB860,784,524.04.

– VII-277 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Income Statement of the Parent Company

January to September 2016

Prepared by: China Shipping Container Lines Company Limited

			_Unit: Yuan _	Currency: RMB Audit type: Unaudited	Currency: RMB Audit type: Unaudited
					Amount from
				Amount from	the beginning
				the beginning	of last year to
				of the year to	the end of the
		Amount for	Amount for the	the end of the	reporting
		the Reporting	same period	Reporting	period last
		Period	last year	Period	year
		(July to	(July to	(January to	(January to
Item		September)	September)	September)	September)
I.	Revenue from operations	608,010,568.97	3,402,662,382.68	3,118,763,786.84 10,319,231,268.24
	Less: Operating cost	820,435,523.87	3,875,502,524.04	3,423,908,117.99 10,928,233,174.14
	Business tax and surcharges		3,509,426.42	1,056,301.78	10,086,555.24
	Selling expenses
	Administrative expenses	41,810,017.47	45,354,535.43	219,163,420.49	298,244,677.14
	Finance costs	100,684,158.34	8,343,670.37	276,323,921.45	9,390,264.88
	Asset impairments loss	(4,005,188.94)	169,694.41	(11,429,973.99)	52,729.58
	Add: Gains from changes in fair value
	(loss is represented by “-”)
	Investment income (loss is
	represented by “-”)	2,871,506.21	40,911,852.61	40,782,853.02	183,799,469.93
	Including: Gains from investment in
	associates and joint
	ventures	(1,253,315.71)	68,261,852.61	13,196,735.57	162,014,969.93
II.	Profit from operations (loss is
	represented by “-”)	(348,042,435.56)	(489,305,615.38)	(749,475,147.86)	(742,976,662.81)
	Add: Non-operating income	243,933,382.56	170,659,047.38	255,805,867.05	252,255,081.98
	Including: Gain from disposal of
	non-current assets			167,025.64	1,934.59
	Less: Non-operating expense	334,800.39	209,064,714.22	876,571.63	211,112,065.73
	Including: Loss from disposal of
	non-current assets	(9,107.96)	195,498,434.94	16,798.91	196,891,671.71
III.	Total profit (total loss is represented
	by “-”)	(104,443,853.39)	(527,711,282.22)	(494,545,852.44)	(701,833,646.56)

Less: Income tax expenses

– VII-278 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Unit: Yuan Currency: RMB Audit type: Unaudited

							Amount from
						Amount from	the beginning
						the beginning	of last year to
						of the year to	the end of the
				Amount for	Amount for the	the end of the	reporting
				the Reporting	same period	Reporting	period last
				Period	last year	Period	year
				(July to	(July to	(January to	(January to
Item				September)	September)	September)	September)
IV.	Net profit (net loss is represented by
	“-”)			(104,443,853.39)	(527,711,282.22)	(494,545,852.44)	(701,833,646.56)
V.	Net other comprehensive income after
	taxes				(3,441,147.54)		13,426,947.29
	(I)	Items	that may not be reclassified
		subsequently to profit or loss
		1.	Changes in net liabilities
			or net assets arising from
			the remeasurement of
			defined benefit plans
		2.	Shares of other
			comprehensive income of
			investees that may not be
			reclassified to profit or
			loss under the equity
			method
	(II)	Items	that may be subsequently
		reclassified to profit or loss			(3,441,147.54)		13,426,947.29
		1.	Shares of other
			comprehensive income of
			investees that may be
			reclassified to profit or
			loss under the equity
			method subsequently		(3,441,147.54)		13,426,947.29
		2.	Gains or losses from
			changes in fair value of
			available-for-sale financial
			assets

– VII-279 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Unit: Yuan Currency: RMB Audit type: Unaudited

Item

			Amount from
		Amount from	the beginning
		the beginning	of last year to
		of the year to	the end of the
Amount for	Amount for the	the end of the	reporting
the Reporting	same period	Reporting	period last
Period	last year	Period	year
(July to	(July to	(January to	(January to
September)	September)	September)	September)

Gains or losses from reclassifying held-tomaturity investments to available-for-sale financial assets
Effective portion of cash flow adjusted for hedging gains or losses
Exchange differences from retranslation of financial
- statements
Others
VI. Total comprehensive income

(104,443,853.39) (531,152,429.76) (494,545,852.44) (688,406,699.27)

VII. Earnings per share:
(1) Basic earnings per share (RMB per share)
(2) Diluted earnings per share (RMB per share)

– VII-280 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Consolidated Cash Flow Statement

January to September 2016

Prepared by: China Shipping Container Lines Company Limited

		_Unit: _	Yuan Currency: RMB Audit type: Unaudited	Yuan Currency: RMB Audit type: Unaudited
				Amount from
			Amount from	the beginning of
			the beginning of	last year to the
			the year to the	end of the
			end of the	reporting period
			Reporting Period	last year
			(January to	(January to
Item			September)	September)
				(Restated)
I.	Cash flow from operating activities:
	Cash received from sales of goods and provision of
	services		18,863,439,557.53	31,369,004,519.16
	Net increase in deposits from customers and placements
	from banks and other financial institutions		3,484,477,742.78	(3,883,149,118.60)
	Net increase in borrowings from central bank
	Net increase in placements from other financial
	institutions
	Cash received from premiums of original insurance
	contracts
	Net cash received from reinsurance business		28,610,684.18	15,937,720.08
	Net increase in deposits from policyholders and
	investments
	Net increase in disposal of financial assets at fair	value
	through profit and loss
	Cash received from interest, handling charges and
	commissions		221,194,723.67	234,239,614.22
	Net increase in capital due to banks and other financial
	institutions
	Net increase in repurchases business fund
	Tax rebates		250,756,508.57	527,655,376.10
	Other cash received from activities related to operation		636,911,470.35	597,184,456.49
	Sub-total of cash inflows from operating activities		23,485,390,687.08	28,860,872,567.45
	Cash paid for goods purchased and service rendered		16,307,178,845.51	25,090,094,048.59
	Net increase in loans and advances to customers		(1,041,699,020.00)	(981,909,340.00)
	Net increase in placements with central bank and
	other financial institutions		318,289,386.29	(873,702,913.30)
	Cash paid for claims on original insurance contracts
	Cash payment for interest, handling charges and
	commissions		36,257,004.50	49,746,808.83
	Cash payment for policyholder dividend
	Cash paid to and on behalf of employees		892,102,200.25	1,758,331,738.91
	Taxes paid		318,311,520.69	380,518,659.99
	Other cash paid for activities relating to operation
	activities		394,586,903.09	340,538,029.42
	Sub-total of cash outflow from operating activities		17,225,026,840.33	25,763,617,032.44
	Net cash flows from operating activities		6,260,363,846.75	3,097,255,535.01

– VII-281 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Unit: Yuan Currency: RMB Audit type: Unaudited

			Amount from
		Amount from	the beginning of
		the beginning of	last year to the
		the year to the	end of the
		end of the	reporting period
		Reporting Period	last year
		(January to	(January to
Item		September)	September)
			(Restated)
II.	Cash flow from investment activities:
	Cash received from disposal of investments	5,158,874,812.17	817,872,687.86
	Cash received from gains in investments	236,668,356.21	112,470,549.55
	Net cash received from disposal of fixed assets,
	intangible assets and other long-term assets	1,243,834,568.61	316,957,492.49
	Net cash received from disposal of subsidiaries and
	other operating entities		169,733,440.00
	Other cash received relating to investment activities
	Sub-total of cash inflow from investment activities	6,639,377,736.99	1,417,034,169.90
	Cash paid for purchase of fixed assets, intangible assets
	and other long-term assets	9,048,256,060.56	7,765,955,665.44
	Cash paid for investment	2,323,773,698.60	1,304,803,698.54
	Net increase in pledged loans
	Net cash paid for acquiring subsidiaries and
	other operating entities
	Other cash paid related to investment activities	379,077,430.20	8,005,312.74
	Sub-total of cash outflow from investment activities	11,751,107,189.36	9,078,764,676.72
	Net cash flow from investment activities	(5,111,729,452.37)	(7,661,730,506.82)
III.	Cash flow from financing activities:
	Proceeds received from investments		1,320,000,000.00
	Including: Proceeds received by subsidiaries from
	minority shareholder’s investment
	Cash received from borrowings	120,322,454,065.79	93,225,351,101.28
	Cash received from issue of bonds
	Cash received relating to other financing activities		3,497,062,100.00
	Sub-total of cash inflow from financing activities	120,322,454,065.79	98,042,413,201.28
	Cash paid for repayment of debts	83,578,284,682.51	89,387,660,970.65
	Cash payments for dividend and profit distribution or
	interest repayment	1,586,290,723.54	978,597,720.66
	Including: Dividend and profit paid by subsidiary to
	minority shareholders
	Other cash paid relating to financing activities	34,054,067,634.94	2,136,181,776.72
	Sub-total of cash outflow from financing activities	119,218,643,040.99	92,502,440,468.03
	Net cash flow from financing activities	1,103,811,024.80	5,539,972,733.25
IV.	Effect on cash and cash equivalents due to changes in
	foreign exchange rates	207,612,766.06	557,271,972.83
V.	Net increase in cash and cash equivalents	2,460,058,185.24	1,532,769,734.27
	Add: Balance of cash and cash equivalents at the
	beginning of the period	15,860,939,443.04	14,314,872,869.02
VI.	Balance of cash and cash equivalents at the
	end of the period	18,320,997,628.28	15,847,642,603.29

– VII-282 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Cash Flow Statement of the Parent Company

January to September 2016

Prepared by: China Shipping Container Lines Company Limited

		_Unit: _	Yuan Currency: RMB Audit type: Unaudited	Yuan Currency: RMB Audit type: Unaudited
				Amount from
			Amount from	the beginning of
			the beginning of	last year to the
			the year to	end of the
			end of the	reporting period
			Reporting Period	last year
			(January to	(January to
Item			September)	September)
I.	Cash flow from operating activities:
	Cash received from sales of goods and provision of
	services		2,480,236,495.43	8,082,474,159.57
	Tax rebates		139,816,028.82	158,223,450.07
	Other cash received from activities related to operation		228,166,402.89	317,755,151.99
	Sub-total of cash inflow from operating activities		2,848,218,927.14	8,558,452,761.63
	Cash paid for goods purchased and service rendered		5,491,542,114.87	6,533,062,369.99
	Cash paid to and on behalf of employees		488,282,150.42	570,607,477.81
	Taxes paid		77,983,245.92	115,283,786.16
	Other cash paid for activities related to operation		436,248,121.60	437,540,708.27
	Sub-total of cash outflow from operating activities		6,494,055,632.81	7,656,494,342.23
	Net cash flow from operating activities		(3,645,836,705.67)	901,958,419.40
II.	Cash flow from investment activities:
	Cash received from disposal of investments		4,725,253,113.39
	Cash received from gains in investments		243,491,037.45	121,782,558.99
	Net cash received from disposal of fixed assets,
	intangible assets and other long-term assets		168,942.93	46,198,519.61
	Net cash received from disposal of subsidiaries and
	other operating entities
	Other cash received relating to investment activities
	Sub-total of cash inflow from investment activities		4,968,913,093.77	167,981,078.60
	Cash paid for purchase of fixed assets, intangible assets
	and other long-term assets		3,374,548.86	23,628,261.83
	Cash paid for investment		10,273,166,400.00
	Net cash paid for acquiring subsidiaries and
	other operating entities			10,000,000.00
	Other cash paid relating to investment activities
	Sub-total of cash outflow from investment activities		10,276,540,948.86	33,628,261.83
	Net cash flow from investment activities		(5,307,627,855.09)	134,352,816.77
III.	Cash flow from financing activities:
	Proceeds received from investments
	Cash received from borrowings		8,767,966,197.79	611,960,000.00
	Cash received relating to other financing activities
	Sub-total of cash inflow from financing activities		8,767,966,197.79	611,960,000.00
	Cash paid for repayment of debts		199,876,889.08	999,476,000.00
	Cash payments for dividend and profit distribution	or
	interest repayment		77,500,000.00	101,726,666.25
	Other cash paid relating to financing activities		34,134,879.18
	Sub-total of cash outflow from financing activities		311,511,768.26	1,101,202,666.25
	Net cash flow from financing activities		8,456,454,429.53	(489,242,666.25)

– VII-283 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

Unit: Yuan Currency: RMB Audit type: Unaudited

Amount from
Amount from the beginning of
the beginning of last year to the the year to end of the end of the reporting period
Reporting Period last year (January to (January to
Item September) September) IV. Effect on cash and cash equivalents due to changes in foreign exchange rates (27,388,659.49) 98,795,497.03
V. Net increase in cash and cash equivalents (524,398,790.72) 645,864,066.95 Add: Balance of cash and cash equivalents at the beginning of the Reporting Period 5,610,905,082.75 5,394,887,115.75
VI. Balance of cash and cash equivalents at the end of the Reporting Period 5,086,506,292.03 6,040,751,182.70

Item

IV. Effect on cash and cash equivalents due to changes in foreign exchange rates
V. Net increase in cash and cash equivalents Add: Balance of cash and cash equivalents at the beginning of the Reporting Period

4. STATEMENT OF INDEBTEDNESS

Debt Securities and Term Loans

As at the close of business of 30 September 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 30 September 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 RMB83,949 million, comprising secured bank and other loans of approximately RMB10,560 million, unsecured bank and other loans of approximately RMB69,889 million, and RMB bonds of approximately RMB3,500 million.

Contingent Liabilities

As at the close of business of 30 September 2016, the Group has no material contingent liability or guarantees.

Mortgage and Charges

As at the close of business of 30 September 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.

– VII-284 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

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 30 September 2016.

5. MATERIAL CHANGE

Save and except as disclosed below, the Directors confirm that there is no material change in the financial or trading position or outlook 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) on 11 December 2015, the Company announced that a notification was received from China Shipping that the SASAC has granted its approval in principle of the restructuring of China Shipping and its subsidiaries and China Ocean Shipping (Group) Company and its subsidiaries in relation to their businesses in container shipping, vessel leasing, oil shipping, bulk shipping and the financial sectors. Such restructuring was passed at the extraordinary general meeting held on 1 February 2016. By virtue of such restructuring, the Company had its business focus shifted from container liner operation to integrated financial services consisting of diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing. Further details of the restructuring are set out in the Company’s circular dated 31 December 2015 and the poll results announcement of the extraordinary general meeting dated 1 February 2016;
(ii) 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 HKFRS, the Group recorded a loss for the period of approximately RMB806.9 million for the six months ended 30 June 2016 as compared 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 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

– VII-285 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX VII

(iii) 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 PRC GAAP, 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 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.

– VII-286 –

GENERAL INFORMATION

APPENDIX VIII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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.

The circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. All the Directors jointly and severally accept full responsibility for the accuracy of the information in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any of the statements in this circular misleading.

2. MARKET PRICE

The table below shows the closing prices of the H Shares on the Hong Kong Stock Exchange and the A Shares on the Shanghai Stock Exchange (i) on the last trading day of each of the six calendar months immediately preceding the date of the Announcement and up to the Latest Practicable Date; (ii) on the last trading day immediately preceding the date of the Announcement; (iii) on the date of the Announcement; and (iv) on the Latest Practicable Date.

	Closing price	Closing price
Date	per H Share	per A Share
	HK$	RMB
29 April 2016	1.78	4.36
31 May 2016	1.69	4.33
30 June 2016	1.60	3.96
29 July 2016	1.62	4.00
31 August 2016	1.62	4.04
27 September 2016 (being the last trading day of
the A Shares immediately preceding the date of
the Announcement)	N/A	3.98
30 September 2016	1.66	(Suspended)
7 October 2016 (being the last trading day of the
H Shares immediately preceding the date of the
Announcement)	1.73	(Suspended)
11 October 2016 (being the date of the
Announcement)	1.71	(Suspended)
31 October 2016	1.63	4.12
28 November 2016 (being the Latest Practicable
Date)	1.78	4.54

– VIII-1 –

GENERAL INFORMATION

APPENDIX VIII

The highest and lowest closing prices of the H Shares as quoted on the Hong Kong Stock Exchange during the period between the beginning of the six months preceding the date of the Announcement and up to the Latest Practicable Date were HK$1.98 per H Share on 13 April 2016 and HK$1.49 per H Share on 16 June 2016 respectively.

The highest and lowest closing prices of the A Shares as quoted on the Shanghai Stock Exchange during the period between the beginning of the six months preceding the date of the Announcement and up to the Latest Practicable Date were RMB5.03 per A Share on 13 April 2016 and RMB3.89 per A Share on 24 June 2016 respectively.

3. SHARE CAPITAL

The registered and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately after completion of the Proposed Non-public Issuance of A Shares (assuming that (i) the entire Cap is issued at the Benchmark Price and (ii) there is no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the A Shares pursuant to the Proposed Non-public Issuance of A Shares):

As at the Latest Practicable Date:

A Shares H Shares Total	Number of Shares 7,932,125,000 3,751,000,000
	11,683,125,000

Immediately after completion of the Proposed Non-public Issuance of A Shares (assuming that (i) the entire Cap is issued at the Benchmark Price and (ii) there is no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the A Shares pursuant to the Proposed Non-public Issuance of A Shares):

A Shares H Shares Total	Number of Shares 11,210,813,524 3,751,000,000
	14,961,813,524

The A Shares to be issued under the Proposed Non-public Issuance of A Shares when issued and fully paid, shall rank pari passu in all aspects amongst themselves with the A Shares in issue at the time of the issuance of such A Shares.

Since 31 December 2015 (being the end of the last financial year of the Company) and up to the Latest Practicable Date, no new Shares have been issued by the Company.

– VIII-2 –

GENERAL INFORMATION

APPENDIX VIII

As at the Latest Practicable Date, the Company has no outstanding warrants, options or securities convertible into Shares.

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

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 have voluntarily invested, with their own fund, in the Asset Management Plan, pursuant to which the executive Directors, Supervisor, senior management and employees of the Company have 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 will 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. As at the Latest Practicable Date, the Asset Management Plan has been fully funded and has acquired 6,900,000 H Shares on the market at an average price of HK$1.749 per H Share.

– VIII-3 –

GENERAL INFORMATION

APPENDIX VIII

Mr. Wang Daxiong is one of the participants of the Asset Management Plan through which he holds 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 represent 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 does not hold any Shares.
Mr. Liu Chong is one of the participants of the Asset Management Plan through which he holds 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 represent 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 does not hold any Shares.
Mr. Xu Hui is one of the participants of the Asset Management Plan through which he holds 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 represent 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 does not hold any Shares.
Mr. Fu Yi is one of the participants of the Asset Management Plan through which he holds 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 represent 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 does 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, is also the chief accountant and member of the Party leadership group of COSCO Shipping;
(ii) Mr. Chen Dong, an executive Director, is also a department general manager of COSCO Shipping;
(iii) Mr. Huang Jian, an non-executive Director, is also a department general manager of COSCO Shipping;
(iv) Mr. Feng Boming, an non-executive Director, is also a department general manager of COSCO Shipping;
(v) Mr. Hao Wenyi, a Supervisor, is also a department general manager of COSCO Shipping; and
(vi) Mr. Ye Hongjun, a Supervisor, is also the chief legal adviser of COSCO Shipping.

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.

– VIII-4 –

GENERAL INFORMATION

APPENDIX VIII

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

Notes:

“L” means long 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.

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.

– VIII-5 –

GENERAL INFORMATION

APPENDIX VIII

5. ARRANGEMENTS IN CONNECTION WITH THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

As at the Latest Practicable Date:

(i) no agreement, arrangement or understanding (including any compensation arrangement) exists between China Shipping or parties acting concert with it and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal;
(ii) there was no benefit to be given to any Directors as compensation for loss of office or otherwise in connection with Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal;
(iii) there was no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal or otherwise connected with the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal;
(iv) save for the CS Subscription Agreement, there was no material contract entered into by China Shipping in which any Director has a material personal interest; and
(v) there was no agreement, arrangement or understanding pursuant to which the A Shares to be issued to China Shipping under the CS Subscription Agreement and the Proposed Non-public Issuance of A Shares would be transferred, charged or pledged to any other persons.

6. SHAREHOLDINGS OF AND DEALINGS IN THE SECURITIES OF THE COMPANY AND CHINA SHIPPING AND PARTIES ACTING IN CONCERT WITH IT

As at the Latest Practicable Date:

(i) the Company did not hold, control or have direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in China Shipping and parties acting in concert with it and it has not dealt for value in any such securities of China Shipping and parties acting in concert with it during the Relevant Period;

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(ii) none of the Directors, Supervisors or chief executive of the Company held, controlled or had direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in China Shipping and parties acting in concert with it and it has not dealt for value in any such securities of China Shipping and parties acting in concert with it during the Relevant Period;
(iii) none of the advisers of the Company as specified in class (2) of the definition of associate under the Takeovers Code, held, controlled or had direction over any Shares, options, warrants, derivatives or convertible securities of the Company and none of them has dealt with for value in any such securities of the Company during the Relevant Period;
(iv) no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of an associate under the Takeovers Code during the Relevant Period;
(v) none of the subsidiaries of the Company, any pension fund of the Company and/or the Company’s subsidiaries nor any fund managed on a discretionary basis by any fund manager connected with the Company owned or controlled any Shares, warrants, options, derivatives or convertible securities of the Company or had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;
(vi) save as disclosed in the section headed “4. Disclosure of Interests – Interests and short positions of Directors, Supervisors and chief executives” in this appendix, none of the Directors, Supervisors or chief executive of the Company and their respective associates owned or controlled any Shares, warrants, options, derivatives or convertible securities of the Company. None of the Directors intends, in respect of his/her own beneficial shareholding, to vote for or against the resolutions with respect to the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal;
(vii) Mr. Liu Chong, Mr. Xu Hui, Mr. Wang Daxiong and Mr. Fu Yi, together with certain senior management and employees, have voluntarily invested in the Asset Management Plan, pursuant to which the aforementioned executive Directors and Supervisor, together with the senior management and employees have 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 will invest in the H Shares. As at the Latest Practicable Date, the Asset Management Plan has been fully funded and has acquired 6,900,000 H Shares on the market at an average price of HK$1.749 per H Share during the period from 18 November 2016 to 22 November 2016. Save as the aforementioned, none of the Directors, Supervisors or chief executive of the Company and their respective associates has dealt for value in any such securities of the Company during the Relevant Period; and

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(viii) neither the Company nor any of the Directors has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

As at the Latest Practicable Date, other than the 39.02% interest in the total issued share capital of the Company controlled by China Shipping and parties acting in concert with it and the transactions contemplated under the CS Subscription Agreement and as disclosed in this circular:

(i) China Shipping and parties acting in concert with it did not hold, control or have direction over any outstanding options, warrants, or any securities that are convertible into Shares or any derivatives in respect of securities in the Company, or hold, control or have direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company and none of them have dealt for value in any such securities of the Company during the Relevant Period;
(ii) China Shipping and parties acting in concert with it did not borrow or lend any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company;
(iii) save for the CS Subscription Agreement, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and China Shipping and parties acting in concert with it during the Relevant Period;
(iv) neither China Shipping nor parties acting in concert with it has received any irrevocable commitment to vote in favour of or against the Proposed Non-public Issuance of A Shares, the CS Subscription, the Specific Mandate, the Whitewash Waiver and/or the Special Deal; and
(v) none of the directors or investment committee of the manager (where applicable) of China Shipping and parties acting in concert with it owned or controlled any Shares, warrants, options, derivatives or convertible securities, of the Company, and none of them has dealt for value in any such securities of the Company during the Relevant Period.

– VIII-8 –

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APPENDIX VIII

7. 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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APPENDIX VIII

8. 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.

9. 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.

10. 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.

11. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the date of the Announcement and up to and including the Latest Practicable Date:

(i) the CS Subscription Agreement;
(ii) a subscription agreement dated 5 September 2016 entered into between 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 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 which the Company has conditionally agreed to subscribe for and Kingray has

– VIII-10 –

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APPENDIX VIII

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 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);
(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);

– VIII-11 –

GENERAL INFORMATION

APPENDIX VIII

(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, China Ocean Shipping (Group) 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 Co., Ltd. (“ 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);
(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);

– VIII-12 –

GENERAL INFORMATION

APPENDIX VIII

(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);
(xvi) an equity sales agreement dated 11 December 2015 entered into between the Company and COSCO Container Lines Co., Ltd. (“ 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 Holdings Company Limited (“ 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).

– VIII-13 –

GENERAL INFORMATION

APPENDIX VIII

12. SERVICE CONTRACTS

The service contracts in force entered into between the Company and each of the relevant Directors and Supervisors within six months before the date of the Announcement are as follows:

(i) the service contract with Ms. Sun Yueying, an executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Ms. Sun as a Director by the Company;
(ii) the service contract with Mr. Wang Daxiong, an executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Wang as a Director by the Company;
(iii) the service contract with Mr. Liu Chong, an executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Liu as a Director by the Company;
(iv) the service contract with Mr. Xu Hui, an executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Xu as a Director by the Company;
(v) the service contract with Mr. Feng Boming, an non-executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Feng as a Director by the Company;
(vi) the service contract with Mr. Huang Jian, an non-executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Huang as a Director by the Company;
(vii) the service contract with Mr. Chen Dong, an non-executive Director, for a term of service commencing on 6 September 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Chen as a Director by the Company;
(viii) the service contract with Mr. Cai Hongping, an independent non-executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, a fixed remuneration of RMB300,000 per year and no variable remuneration is payable to Mr. Cai as a Director by the Company;

– VIII-14 –

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APPENDIX VIII

(ix) the service contract with Mr. Tsang Hing Lun, an independent non-executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, a fixed remuneration of RMB300,000 per year and no variable remuneration is payable to Mr. Tsang as a Director by the Company;
(x) the service contract with Ms. Hai Chi Yuet, an independent non-executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, a fixed remuneration of RMB300,000 per year and no variable remuneration is payable to Ms. Hai as a Director by the Company;
(xi) the service contract with Mr. Graeme Jack, an independent non-executive Director, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, a fixed remuneration of RMB300,000 per year and no variable remuneration is payable to Mr. Graeme as a Director by the Company;
(xii) the service contract with Mr. Ye Hongjun, a Supervisor, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Ye as a Supervisor by the Company;
(xiii) the service contract with Mr. Hao Wenyi, a Supervisor, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Hao as a Supervisor by the Company;
(xiv) the service contract with Mr. Gu Xu, a Supervisor, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, a fixed remuneration of RMB150,000 per year and no variable remuneration is payable to Mr. Gu as a Supervisor by the Company;
(xv) the service contract with Mr. Zhang Weihua, a Supervisor, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, a fixed remuneration of RMB150,000 per year and no variable remuneration is payable to Ms. Zhang as a Supervisor by the Company;
(xvi) the service contract with Mr. Zhu Donglin, a Supervisor, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Zhu as a Supervisor by the Company; and
(xvii) the service contract with Mr. Fu Yi, a Supervisor, for a term of service commencing on 30 June 2016 until the conclusion of the annual general meeting of the Company for the year 2018. Pursuant to the service contract, no remuneration is payable to Mr. Fu as a Supervisor by the Company.

– VIII-15 –

GENERAL INFORMATION

APPENDIX VIII

As at the Latest Practicable Date, none of the Directors or the Supervisors had entered into any service contract with the Company or any of its subsidiaries or associated companies which:

(a) are continuous contracts with a notice period of 12 months or more; or
(b) which are fixed term contracts with more than 12 months to run irrespective of the notice period.

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).

13. EXPERTS

The following is the qualification of the experts who have given their opinions or advices which are contained in this circular:

Name	Qualification
Messis Capital Limited	A licensed corporation to carry out type 1
	(dealing in securities) and type 6 (advising
	on corporate finance) regulated activities
	under the SFO
Grandall Law Firm (Shanghai)	PRC legal advisers to the Company

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

As at the Latest Practicable Date, each of the above experts 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, each of the above experts 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).

– VIII-16 –

GENERAL INFORMATION

APPENDIX VIII

14. MISCELLANEOUS

(a) 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.
(b) The principal place of business of the Company in the PRC is Maritime Research Building, 628 Minsheng Road, Pudong New Area, Shanghai, the PRC.
(c) 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.
(d) The registered address of China Shipping is situated at 700 Dongdaming Road, Shanghai, the PRC.
(e) China Shipping is a PRC state-owned enterprise established on 9 August 1984 and is directly supervised and administered by the SASAC. China Shipping currently does not have any director. China Shipping is a wholly-owned subsidiary of COSCO Shipping, which is a PRC state-owned enterprise directly supervised and administered by the SASAC. The board of directors of COSCO Shipping comprises Xu Lirong, Wan Min, Liu Zhangmin, He Qingyuan, Zhong Ruiming and Xu Donggen. The ultimate controlling shareholder of China Shipping is the SASAC.
(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.
(g) 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.
(h) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

– VIII-17 –

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APPENDIX VIII

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents (i) 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 and (ii) will also be available for inspection on the website of the SFC at www.sfc.hk and the website of the Company at www.cscl.com.cn from the date of this circular up to and including the date of the EGM and the Class Meetings:

(a) the Articles of Association;
(b) the articles of association of China Shipping;
(c) the CS Subscription Agreement;
(d) the annual reports of the Company containing the audited consolidated financial statements of the Group for the three financial years ended 31 December 2013, 31 December 2014 and 31 December 2015;
(e) the interim report of the Company containing the unaudited consolidated financial statements of the Group for the six months ended 30 June 2016;
(f) the quarterly report of the Company containing the unaudited consolidated financial statements of the Group for the nine months ended 30 September 2016;
(g) the letter from the Board, the text of which is set out in the section headed “Letter from the Board” in this circular;
(h) 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;
(i) 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;
(j) the written consents referred to in the paragraph headed “Experts” in this Appendix;
(k) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;
(l) the service contracts referred to in the paragraph headed “Service Contracts” in this Appendix; and
(m) this circular.

– VIII-18 –

NOTICE OF EGM

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

This notice is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of China Shipping Container Lines Company Limited. 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)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of China Shipping Container Lines Company Limited (the “ Company ”) will be held at 2:30 p.m. on Friday, 16 December 2016 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the People’s Republic of China (the “ PRC ”) to consider and, if thought fit, pass the following resolutions. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as those defined in the announcement of the Company dated 11 October 2016 (the “ Announcement ”).

SPECIAL RESOLUTIONS

To consider and approve the resolution in relation to the proposed non-public issuance of not more than 3,278,688,524 A Shares by the Company to not more than 10 specific target subscribers, including China Shipping, under the Proposed Non-public Issuance of A Shares, details of which are set out in the Announcement:

“ THAT :

(a) each of the following items in respect of the Proposed Non-public Issuance of A Shares be and is hereby approved, confirmed and ratified, and be implemented conditional upon approvals and/or authorisations having been obtained from the relevant authorities:
(i) class and par value of shares to be issued;
(ii) method and time of issuance;

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

– EGM-1 –

NOTICE OF EGM

  - (iii) target subscribers;

  - (iv) Price Determination Date, issue price and pricing principles;

  - (v) number of A Shares to be issued and method of subscription;

  - (vi) lock-up period;

  - (vii) place of listing of the A Shares to be issued;

  - (viii) use of proceeds;

  - (ix) distribution of profit prior to the Proposed Non-public Issuance of A Shares; and

  - (x) validity period of resolution; and

(b) 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 (including affixing the common seal of the Company thereon) 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 Proposed Non-public Issuance of A Shares.”
To consider and approve the resolution in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares”, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.
To consider and approve the resolution in relation to the “Feasibility Report on the Use of Proceeds from the Proposed Non-public Issuance of A Shares”, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.
To consider and approve the resolution in relation to the CS Subscription Agreement dated 11 October 2016 entered into between the Company and China Shipping, details of which are set out in the Announcement:

“ THAT :

(a) the CS Subscription Agreement dated 11 October 2016 entered into between the Company and China Shipping, pursuant to which China Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and

– EGM-2 –

NOTICE OF EGM

(b) 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 (including affixing the common seal of the Company thereon) 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 CS Subscription Agreement and the transactions contemplated thereunder.”
To consider and approve the resolution in relation to the CS Subscription constituting a connected transaction under the relevant PRC laws and regulations.
To consider and approve the resolution in relation to the waiver of China Shipping’s obligation to make a general offer of the securities of the Company as a result of the CS Subscription under the relevant PRC laws and regulations.
To consider and approve the resolution in relation to the Proposed Amendments to the Articles of Association, details of which are set out in the Announcement:

“ THAT :

(a) the Proposed Amendments to the Articles of Association be and are hereby approved and confirmed; and
(b) any one Director be and is hereby authorised to do all such acts and things (including filing the amended Articles of Association with the relevant authorities for approval, endorsement and/or registration as appropriate) and execute and deliver all such documents, deeds or instruments (including affixing the common seal of the Company thereon) 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 Proposed Amendments to the Articles of Association.”
To consider and approve the resolution in relation to the Special Deal, details of which are set out in the Announcement:

“ THAT :

(a) subject to the consent of the Executive pursuant to Rule 25 of the Takeovers Code and the satisfaction of any condition(s) attached thereon imposed by the Executive, all transactions contemplated under the Proposed Non-public Issuance of A Shares which constitute a special deal under Rule 25 of the Takeovers Code be and are hereby approved, confirmed and ratified; and
(b) 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 (including affixing the common seal of the Company thereon) 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 Special Deal.”

– EGM-3 –

NOTICE OF EGM

To consider and approve the resolution in relation to the Specific Mandate, details of which are set out in the Announcement:

“ THAT :

(a) the Board be and is hereby granted a specific mandate to issue not more than 3,278,688,524 A Shares at an issue price of not less than RMB3.66 per A Share to not more than 10 specific target subscribers, including China Shipping, under the Proposed Non-public Issuance of A Shares (including the issue of such number of A Shares to China Shipping pursuant to the CS Subscription Agreement); and
(b) 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 (including affixing the common seal of the Company thereon) 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 Special Mandate.”
To consider and approve the resolution in relation to the authorisation to the Board and any person authorised by the Board to handle all matters in connection with the Proposed Non-public Issuance of A Shares.

ORDINARY RESOLUTIONS

To consider and approve the resolution in relation to the satisfaction of the criteria for non-public issuance of A Shares by the Company.
To consider and approve the resolution in relation to the exemption from the preparation of a report on the utilisation of proceeds from previous fund raising, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.
To consider and approve the resolution in relation to the Shareholders’ Return Plan, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.
To consider and approve the resolution in relation to the “Remedial Measures regarding Dilution on Current Returns and the Impact on the Company’s Major Financial Indicators by the Proposed Non-public Issuance of A Shares”, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.

– EGM-4 –

NOTICE OF EGM

To consider and approve the resolution in relation to the relevant undertakings by the Company’s controlling shareholders, Directors and senior management with regards to the remedial measures regarding dilution on current returns by the Proposed Non-public Issuance of A Shares, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.
To consider and approve the resolution in relation to the Whitewash Waiver, details of which are set out in the Announcement:

“ THAT :

(a) subject to the Executive granting the Whitewash Waiver to China Shipping and the satisfaction of any condition(s) attached to the Whitewash Waiver imposed by the Executive, the waiver pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code in respect of the obligations of China Shipping and parties acting in concert with it to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by China Shipping and parties acting in concert with it which would otherwise arise as a result of the issue of the A Shares under the Proposed Non-public Issuance of A Shares and the CS Subscription Agreement be and is hereby approved, confirmed and ratified; and
(b) 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 (including affixing the common seal of the Company thereon) 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 Whitewash Waiver.”

By order of the Board of

China Shipping Container Lines Company Limited Yu Zhen

Joint Company Secretary

Shanghai, the People’s Republic of China 1 November 2016

– EGM-5 –

NOTICE OF EGM

Notes:

For the purpose of holding the EGM, the register of H Shares members of the Company (the “ Register of Members ”) will be closed from 16 November 2016 to 16 December 2016 (both days inclusive), during which period no transfer of H Shares of the Company will be registered. H Shareholders whose names appear on the Register of Members at the close of business on 15 November 2016 are entitled to attend and vote at the EGM.
In order to attend the EGM, the H Shareholders shall lodge all transfer documents together with the relevant share certificates to Computershare Hong Kong Investor Services Limited (“ Computershare ”), the Company’s H Share registrar, not later than 4:30 p.m. on 15 November 2016.

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

H Shareholders who intend to attend the EGM must complete the reply slips and return them to the Directorate Secretary Office of the Company not later than 20 days before the date of the EGM (i.e. not later than 26 November 2016).

The address of the Directorate Secretary Office of the Company is as follows: 22nd Floor, Maritime Research Building 628 Minsheng Road Pudong New Area Shanghai 200135 the People’s Republic of China Tel: (8621) 6596 7333 Fax: (8621) 6596 6813

Each H Shareholder who has the right to attend and vote at the EGM is entitled to appoint in writing one or more proxies, whether a Shareholder or not, to attend and vote on his behalf at the EGM.
The instrument appointing a proxy must be in writing under the hand of the appointer or his attorney duly authorised in writing. If that instrument is signed by an attorney of the appointer, the power of attorney authorising that attorney to sign, or other documents of authorisation, must be notarially certified.
To be valid, for H Shareholders, the form of proxy, and if the form of proxy is signed by a person under a power of attorney or other authority on behalf of the appointer, a notarially certified copy of that power of attorney or other authority, must be delivered to Computershare at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time for holding the EGM or any adjournment thereof in order for such documents to be valid.
If a proxy attends the EGM on behalf of a Shareholder, he/she should produce his/her identity card and the form of proxy signed by the Shareholder or his/her legal representative or his/her duly authorised attorney, and specify the date of its issuance. If a legal person Shareholder appoints its corporate representative to attend the EGM, such representative should produce his/her identity card and the notarised copy of the resolution passed by the Board or other authorities or other notarised copy of the licence issued by such legal person Shareholder.
Pursuant to the Listing Rules, any vote of Shareholders at a general meeting must be taken by way of poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. As such, each of the resolutions set out in the notice of the EGM will be voted on by poll. Results of the poll voting will be published on the website of the Stock Exchange at www.hkexnews.hk after the EGM.
The EGM is estimated to last for half a day. Shareholders who attend the EGM in person or by proxy shall bear their own transportation and accommodation expenses.

The Board 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.

– EGM-6 –

NOTICE OF H SHARES CLASS MEETING

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

(Stock Code: 02866)

NOTICE OF H SHARES CLASS MEETING

NOTICE IS HEREBY GIVEN that a class meeting of H Shareholders (the “ H Shares Class Meeting ”) of China Shipping Container Lines Company Limited (the “ Company ”) will be held at 2:30 p.m. on Friday, 16 December 2016 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the People’s Republic of China to consider and, if thought fit, pass the following resolutions. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as those defined in the announcement of the Company dated 11 October 2016 (the “ Announcement ”).

SPECIAL RESOLUTIONS

To consider and approve the resolution in relation to the proposed non-public issuance of not more than 3,278,688,524 A Shares by the Company to not more than 10 specific target subscribers, including China Shipping, under the Proposed Non-public Issuance of A Shares, details of which are set out in the Announcement:

“ THAT :

(a) each of the following items in respect of the Proposed Non-public Issuance of A Shares be and is hereby approved, confirmed and ratified, and be implemented conditional upon approvals and/or authorisations having been obtained from the relevant authorities:
(i) class and par value of shares to be issued;
(ii) method and time of issuance;

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

– HCM-1 –

NOTICE OF H SHARES CLASS MEETING

  - (iii) target subscribers;

  - (iv) Price Determination Date, issue price and pricing principles;

  - (v) number of A Shares to be issued and method of subscription;

  - (vi) lock-up period;

  - (vii) place of listing of the A Shares to be issued;

  - (viii) use of proceeds;

  - (ix) distribution of profit prior to the Proposed Non-public Issuance of A Shares; and

  - (x) validity period of resolution; and

(b) 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 (including affixing the common seal of the Company thereon) 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 Proposed Non-public Issuance of A Shares.”
To consider and approve the resolution in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares”, details of which are set out in the overseas regulatory announcement of the Company dated 11 October 2016.
To consider and approve the resolution in relation to the CS Subscription Agreement dated 11 October 2016 entered into between the Company and China Shipping, details of which are set out in the Announcement:

“ THAT :

(a) the CS Subscription Agreement dated 11 October 2016 entered into between the Company and China Shipping, pursuant to which China Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion under the Proposed Non-public Issuance of A Shares, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) 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 (including affixing the common seal of the Company thereon) 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 CS Subscription Agreement and the transactions contemplated thereunder.”

– HCM-2 –

NOTICE OF H SHARES CLASS MEETING

To consider and approve the resolution in relation to the Special Deal, details of which are set out in the Announcement:

“ THAT :

(a) subject to the consent of the Executive pursuant to Rule 25 of the Takeovers Code and the satisfaction of any condition(s) attached thereon imposed by the Executive, all transactions contemplated under the Proposed Non-public Issuance of A Shares which constitute a special deal under Rule 25 of the Takeovers Code be and are hereby approved, confirmed and ratified; and
(b) 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 (including affixing the common seal of the Company thereon) 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 Special Deal.”
To consider and approve the resolution in relation to the Specific Mandate, details of which are set out in the Announcement:

“ THAT :

(a) the Board be and is hereby granted a specific mandate to issue not more than 3,278,688,524 A Shares at an issue price of not less than RMB3.66 per A Share to not more than 10 specific target subscribers, including China Shipping, under the Proposed Non-public Issuance of A Shares (including the issue of such number of A Shares to China Shipping pursuant to the CS Subscription Agreement); and
(b) 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 (including affixing the common seal of the Company thereon) 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 Special Mandate.”
To consider and approve the resolution in relation to the authorisation to the Board and any person authorised by the Board to handle all matters in connection with the Proposed Non-public Issuance of A Shares.

By order of the Board of

China Shipping Container Lines Company Limited Yu Zhen

Joint Company Secretary

Shanghai, the People’s Republic of China 1 November 2016

– HCM-3 –

NOTICE OF H SHARES CLASS MEETING

Notes:

For the purpose of holding the H Shares Class Meeting, the register of H Shares members of the Company (the “ Register of Members ”) will be closed from 16 November 2016 to 16 December 2016 (both days inclusive), during which period no transfer of H Shares of the Company will be registered. H Shareholders whose names appear on the Register of Members at the close of business on 15 November 2016 are entitled to attend and vote at the H Shares Class Meeting.
In order to attend the H Shares Class Meeting, H Shareholders shall lodge all transfer documents together with the relevant share certificates to Computershare Hong Kong Investor Services Limited (“ Computershare ”), the Company’s H Share registrar, not later than 4:30 p.m. on 15 November 2016. The address of Computershare is as follows: Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong.
H Shareholders, who intend to attend the H Shares Class Meeting, must complete the reply slips and return them to the Directorate Secretary Office of the Company not later than 20 days before the date of the H Shares Class Meeting (i.e. not later than 26 November 2016). The address of the Directorate Secretary Office of the Company is as follows: 22nd Floor, Maritime Research Building 628 Minsheng Road Pudong New Area Shanghai 200135 the People’s Republic of China Tel: (8621) 6596 7333 Fax: (8621) 6596 6813.
Each H Shareholder who has the right to attend and vote at the H Shares Class Meeting is entitled to appoint in writing one or more proxies, whether a Shareholder or not, to attend and vote on his behalf at the H Shares Class Meeting.
The instrument appointing a proxy must be in writing under the hand of the appointer or his attorney duly authorised in writing. If that instrument is signed by an attorney of the appointer, the power of attorney authorising that attorney to sign, or other documents of authorisation, must be notarially certified.
To be valid, for H Shareholders, the form of proxy, and if the form of proxy is signed by a person under a power of attorney or other authority on behalf of the appointer, a notarially certified copy of that power of attorney or other authority, must be delivered to Computershare at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time for holding the H Shares Class Meeting or any adjournment thereof in order for such documents to be valid.
If a proxy attends the H Shares Class Meeting on behalf of a Shareholder, he/she should produce his/her identity card and the form of proxy signed by the Shareholder or his/her legal representative or his/her duly authorised attorney, and specify the date of its issuance. If a legal person Shareholder appoints its corporate representative to attend the H Shares Class Meeting, such representative should produce his/her identity card and the notarised copy of the resolution passed by the Board or other authorities or other notarised copy of the licence issued by such legal person Shareholder.
Pursuant to the Listing Rules, any vote of Shareholders at a general meeting must be taken by way of poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. As such, each of the resolutions set out in the notice of the H Shares Class Meeting will be voted on by poll. Results of the poll voting will be published on the website of the Stock Exchange at www.hkexnews.hk after the H Shares Class Meeting.
The H Shares Class Meeting is estimated to last for half a day. Shareholders who attend the H Shares Class Meeting in person or by proxy shall bear their own transportation and accommodation expenses.

– HCM-4 –

AI assistant

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

50782_rns_2016-11-30_7ea5b149-f178-4f24-a0ff-2d541ed3115d.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(3) APPLICATION FOR WHITEWASH WAIVER

(4) SPECIAL DEAL

(5) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

(6) PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER

(3) APPLICATION FOR WHITEWASH WAIVER

(4) SPECIAL DEAL

(5) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

(6) PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

I. INTRODUCTION

LETTER FROM THE BOARD

II. PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

1. Details of the Proposed Non-public Issuance of A Shares

Q = Q0 x (P0/P)

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Price Determination Date, issue price and pricing principles:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Conditions precedent of the Proposed Non-public Issuance of A Shares:

LETTER FROM THE BOARD

Lock-up period:

Use of proceeds:

LETTER FROM THE BOARD

2. Proposal in relation to the Proposed Non-public Issuance of A Shares

4. Proposal in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares”

9. Proposal in relation to the Specific Mandate

III. CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF A SHARES BY CHINA SHIPPING

1. Principal terms of the CS Subscription Agreement

LETTER FROM THE BOARD

2. Information on the parties to the CS Subscription Agreement

The Company

China Shipping

3. Proposal in relation to the CS Subscription Agreement and the transactions contemplated thereunder

4. Proposal in relation to the CS Subscription constituting a connected transaction under the relevant PRC laws and regulations

IV. EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

1. Effect of the Proposed Non-public Issuance of A Shares and the CS Subscription on the shareholding structure of the Company

2. Fund raising activities in the past twelve months

V. REASONS FOR AND BENEFITS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES AND THE CS SUBSCRIPTION

The Proposed Non-public Issuance of A Shares

LETTER FROM THE BOARD

The CS Subscription

Alternative financing

VI. IMPLICATIONS UNDER THE LISTING RULES

VII. IMPLICATIONS UNDER THE TAKEOVERS CODE

1. Application for the Whitewash Waiver

LETTER FROM THE BOARD

2. Special Deal in relation to the Proposed Non-public Issuance of A Shares

LETTER FROM THE BOARD

VIII. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

LETTER FROM THE BOARD

IX. PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

X. EGM AND CLASS MEETINGS

XI. RECOMMENDATION

XII. FURTHER INFORMATION

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

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

(Stock Code: 02866)

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully,

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER

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

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