COSCO SHIPPING Development Co., Ltd.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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

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

(Stock Code: 02866)

(1) PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR (2) PROPOSED APPOINTMENT OF SUPERVISOR (3) MAJOR TRANSACTION DISPOSAL OF CIMC SHARES AND

(4) NOTICE OF EGM

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

A letter from the Board is set out on pages 6 to 29 of this circular.

A notice convening the EGM to be held at 1:30 p.m. on Thursday, 29 October 2020 at Level 3, Ocean Hotel Shanghai, 1171 Dong Da Ming Road, Hong Kou District, Shanghai, the PRC is set out on pages EGM-1 to EGM-5 of this circular.

* The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Development Co., Ltd.”.

13 October 2020

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . .	I-1
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .	II-1
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-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
“Administrative Measures for Material Asset Restructuring”
Administrative Measures for the Material Asset Restructuring of Listed Companies (《上市公司重大資產重組管理辦法》)
“Annexation Loan”
the annexation loan of the Company from China Development Bank in the principal amount of US$1.37 billion
“Appointment Announcement”
the announcement of the Company dated 12 October 2020 in relation to, among other things, the proposed appointment of Mr. Ip as a non-executive Director and the proposed appointment of Ms. Zhu as a shareholder representative Supervisor
“Articles of Association”
the articles of association of the Company
“associate”
has the meaning ascribed to it under the Hong Kong Listing Rules
“Board” the board of directors of the Company
“CIMC”
China International Marine Containers (Group) Co., Ltd.[#] (中國國際海運集裝箱(集團)股份有限公司), a joint stock company incorporated in the PRC with limited liability, the H shares and A shares of which are listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 02039) and the Shenzhen Stock Exchange (Stock Code: 000039), respectively
“CIMC Group” CIMC and its subsidiaries
“CIMC Share(s)” the share(s) of CIMC
“Company”

COSCO SHIPPING Development Co., Ltd.* (中遠海運發展股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 02866) and the Shanghai Stock Exchange (Stock Code: 601866), respectively

– 1 –

DEFINITIONS

“Completion”

completion of the Disposal

“Computershare”
Computershare Hong Kong Investor Services Limited, the H Share registrar of the Company
“Conditions Precedent”
the conditions precedent to payment of the Consideration under the Share Transfer Agreement
“connected person” has the meaning ascribed to it under the Hong Kong Listing Rules
“Consideration”
the consideration in the aggregate amount of RMB6,340,454,365.11 payable by the Purchasers to the Vendors under the Share Transfer Agreement
“controlling shareholder” has the meaning ascribed to it under the Hong Kong Listing Rules
“COSCO Container”
COSCO Container Industries Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of the Company
“COSCO SHIPPING”
China COSCO Shipping Corporation Limited[#] (中國遠洋海運集團有限公司), a PRC state-owned enterprise and an indirect controlling shareholder of the Company
“CSDC”
China Securities Depository and Clearing Corporation Limited (Shenzhen Branch)
“CSRC”
China Securities Regulatory Commission
“Director(s)” director(s) of the Company
“Disposal”
the disposal of the Target Shares by the Vendors to the Purchasers pursuant to the Share Transfer Agreement
“Disposal Announcement”

the announcement of the Company dated 12 October 2020 in relation to, among other things, the Disposal

“EGM”

the extraordinary general meeting of the Company to be convened at 1:30 p.m. on Thursday, 29 October 2020 at Level 3, Ocean Hotel Shanghai, 1171 Dong Da Ming Road, Hong Kou District, Shanghai, the PRC (or any adjournment thereof) to consider and, if thought fit, approve, among other things, the proposed appointment of Mr. Ip as a non-executive Director, the proposed appointment of Ms. Zhu as a shareholder representative Supervisor and the Disposal

– 2 –

DEFINITIONS

“Form of Proxy”

the form of proxy of the Company in respect of the resolutions set out in the Notice of EGM

“Group” the Company and its subsidiaries
“H Share(s)”
the overseas listed foreign shares in the ordinary share capital of the Company with a par value of RMB1.00 each, which are listed on the Main Board of the Hong Kong Stock Exchange
“HK$”
Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules”
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Hong Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Latest Practicable Date”
12 October 2020, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Long Honour”
Long Honour Investments Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company
“Mr. Ip”
Mr. Ip Sing Chi (葉承智)
“Ms. Zhu”
Ms. Zhu Mei (朱媚)
“Notice of EGM”
the notice of the EGM dated 13 October 2020, which is set out on EGM-1 to EGM-5 of this circular
“percentage ratios”
has the meaning ascribed to it under the Hong Kong Listing Rules
“PRC”
the People’s Republic of China, and for the purpose of this circular only, excluding Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan
“P/B Ratio”
price-to-book ratio
“P/E Ratio”
price-to-earnings ratio
“Provisions on Material Asset Restructuring”
Provisions on Issues Concerning Regulating the Material Asset Restructuring of Listed Companies (《關於規範上市公司重大資產重組若干問題的規定》)

– 3 –

DEFINITIONS

“Purchasers” collectively, Shenzhen Capital Operation and Shenzhen Capital Hong Kong
“Restructuring” the Disposal constituting a material asset restructuring of the Company pursuant to the PRC laws and regulations
“RMB” Renminbi, the lawful currency of the PRC “SASAC” the 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)
“Security Deposits” the security deposits in the aggregate amount of RMB1,902,136,309.53 payable by the Purchasers to the Vendors under the Share Transfer Agreement
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)
“Share(s)” A Share(s) and H Share(s)
“Share Transfer Agreement”
the share transfer agreement dated 12 October 2020 entered into between COSCO Container, Long Honour, Shenzhen Capital Operation, Shenzhen Capital Hong Kong and the Company in relation to the Disposal
“Shareholder(s)” holder(s) of the Share(s)
“Shenzhen Capital Hong Kong”
Shenzhen Capital (Hong Kong) Container Investments Co., Ltd. (深圳資本(香港)集裝箱投資有限公司), a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Shenzhen Capital Operation
“Shenzhen Capital Operation”
Shenzhen Capital Operation Group Co. Ltd.[#] (深圳市資本運營集團有限公司), a company established in the PRC with limited liability
“Shenzhen SASAC”
the State-owned Assets Supervision and Administration Commission of Shenzhen (深圳市國有資產監督管理委員會)
“Supervisor(s)” supervisor(s) of the Company
“Supervisory Committee” the supervisory committee of the Company
“Takeovers Code”
the Hong Kong Code on Takeovers and Mergers

– 4 –

DEFINITIONS

“Target A Shares”

350,000,000 A shares of CIMC held by COSCO Container

“Target A Shares Consideration” the consideration in the amount of RMB3,440,500,000 payable by Shenzhen Capital Operation to COSCO Container in respect of the transfer of the Target A Shares under the Share Transfer Agreement
“Target H Shares” 264,624,090 H shares of CIMC held by COSCO Container and 30,386,527 H shares of CIMC held by Long Honour
“Target H Shares Consideration” the consideration in the aggregate amount of RMB2,899,954,365.11 payable by Shenzhen Capital Hong Kong to the Vendors in respect of the transfer of the Target H Shares under the Share Transfer Agreement
“Target Shares” collectively, the Target A Shares and the Target H Shares “US$” the United States dollars, the lawful currency of the United States of America
“Vendors” collectively, COSCO Container and Long Honour “%” per cent

* The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Development Co., Ltd.”.

# For identification purpose only.

– 5 –

LETTER FROM THE BOARD

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

(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 Mr. Wang Daxiong Room A-538 Mr. Liu Chong International Trade Center Mr. Xu Hui China (Shanghai) Pilot Free Trade Zone Shanghai Non-executive Directors The PRC Mr. Feng Boming Mr. Huang Jian Principal place of business in the PRC Mr. Liang Yanfeng 5299 Binjiang Dadao Pudong New District Independent non-executive Directors Shanghai Mr. Cai Hongping The PRC Ms. Hai Chi Yuet Mr. Graeme Jack Principal place of business in Hong Kong Mr. Lu Jianzhong 50/F, COSCO Tower Ms. Zhang Weihua 183 Queen’s Road Central Hong Kong

13 October 2020

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR

(2) PROPOSED APPOINTMENT OF SUPERVISOR (3) MAJOR TRANSACTION DISPOSAL OF CIMC SHARES AND

(4) NOTICE OF EGM

I. INTRODUCTION

Reference is made to the Appointment Announcement and the Disposal Announcement in relation to, among other things, the proposed appointment of Mr. Ip as a non-executive Director, the proposed appointment of Ms. Zhu as a shareholder representative Supervisor and the Disposal.

– 6 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, further details of the proposed appointment of Mr. Ip as a non-executive Director, the proposed appointment of Ms. Zhu as a shareholder representative Supervisor and the Disposal and other information reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolutions to be proposed at the EGM.

At the EGM, ordinary resolutions will be proposed to approve the proposed appointment of Mr. Ip and Ms. Zhu and special resolutions will be proposed to approve, among other things, the Disposal and other related resolutions.

II. PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR

As disclosed in the Appointment Announcement, on 12 October 2020, the Board proposed to appoint Mr. Ip as a non-executive Director. According to the Articles of Association, the proposed appointment of Mr. Ip is subject to the approval by the Shareholders at a general meeting of the Company. The ordinary resolution in relation to the proposed appointment of Mr. Ip will be proposed at the EGM.

The biographical details of Mr. Ip are set out as follows:

Mr. Ip Sing Chi (葉承智), aged 67, currently serves as the group managing director of Hutchison Port Holdings Limited and the chairman of Yantian International Container Terminals Limited. Mr. Ip is also an executive director of Hutchison Port Holdings Management Pte. Limited (the trustee-manager of Hutchison Ports Holding Trust, listed in Singapore, stock code: NS8U), a non-executive director of Orient Overseas (International) Limited (listed in Hong Kong, stock code: 316), an independent non-executive director of Piraeus Port Authority S.A. (listed in Greece, stock code: PPA) and a non-independent non-executive director of Westports Holdings Berhad (listed in Malaysia, stock code: 5246).

Mr. Ip was the founding chairman (in 2000-2001) of the Hong Kong Container Terminal Operators Association Limited, and was a non-executive director of Tradelink Electronic Commerce Limited (listed in Hong Kong, stock code: 536). He had been an outside director of HMM Co., Ltd. (formerly known as Hyundai Merchant Marine Co., Ltd.) (listed in South Korea, stock code: 11200), an independent non-executive director of COSCO SHIPPING Ports Limited (listed in Hong Kong, stock code: 1199) from November 2012 to October 2016, and an independent non-executive director of COSCO SHIPPING Energy Transportation Co., Ltd. (listed in Hong Kong, stock code: 1138) from June 2014 to June 2020. In addition, he was a member of the Hong Kong Port Development Council from 2009 to December 2014. Mr. Ip has over 35 years of experience in the maritime industry, and holds a Bachelor of Arts degree.

Subject to the approval by the Shareholders of the proposed appointment of Mr. Ip at the EGM, Mr. Ip will enter into a service contract with the Company for a term of service commencing on the date of his appointment until the end of the term of the current session of the Board. Mr. Ip will not receive any remuneration from the Company.

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LETTER FROM THE BOARD

Save as disclosed above, as at the Latest Practicable Date, Mr. Ip (i) did not have any relationship with any directors, senior management or substantial or controlling shareholders of the Company; (ii) did not have any interests in the shares of the Company within the meaning of Part XV of the SFO; (iii) did not hold any other directorships in public companies the securities of which are listed on any securities market in Hong Kong or overseas in the last three years; and (iv) did not hold any other positions with other members of the Group.

Save as disclosed above, there are no other matters that need to be brought to the attention of the Shareholders in connection with the proposed appointment of Mr. Ip and there is no information which is required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Hong Kong Listing Rules.

III. PROPOSED APPOINTMENT OF SUPERVISOR

As disclosed in the Appointment Announcement, on 12 October 2020, the Supervisory Committee proposed to appoint Ms. Zhu as a shareholder representative Supervisor. According to the Articles of Association, the proposed appointment of Ms. Zhu is subject to the approval by the Shareholders at a general meeting of the Company. The ordinary resolution in relation to the proposed appointment of Ms. Zhu will be proposed at the EGM.

The biographical details of Ms. Zhu are set out as follows:

Ms. Zhu Mei (朱媚), aged 51, currently serves as an outside director of COSCO SHIPPING (Shanghai) Co. Ltd. and COSCO SHIPPING Seafarer Management Co., Ltd. respectively. Ms. Zhu had previously worked in the general manager’s office of Shanghai Shipping (Group) Company, the transport department of China Shipping (Group) Company, China Shipping Development Co., Ltd. Oil Tanker Company and the board of director’s office of China Shipping (Group) Company.

Ms. Zhu also served as the Party Secretary and the Vice Principal of the Party School of China Shipping (Group) Company and the deputy dean of the Group Management Cadre College. Ms. Zhu was also a member of the Municipal Party Committee, a member of the Standing Committee and the deputy mayor of the Municipal Government of Lincang, Yunnan Province.

Ms. Zhu graduated from Shanghai Maritime University with a master degree. She further obtained a Master of Business Administration degree from Fudan University.

Subject to the approval by the Shareholders of the proposed appointment of Ms. Zhu at the EGM, Ms. Zhu will enter into a service contract with the Company for a term of service commencing on the date of her appointment until the end of the term of the current session of the Supervisory Committee. Ms. Zhu will not receive any remuneration from the Company.

– 8 –

LETTER FROM THE BOARD

Save as disclosed above, as at the Latest Practicable Date, Ms. Zhu (i) did not have any relationship with any Directors, senior management or substantial or controlling shareholders of the Company; (ii) did not have any interests in the shares of the Company within the meaning of Part XV of the SFO; (iii) did not hold any other directorships in public companies the securities of which are listed on any securities market in Hong Kong or overseas in the last three years; and (iv) did not hold any other positions with other members of the Group.

Save as disclosed above, there are no other matters that need to be brought to the attention of the Shareholders in connection with the proposed appointment of Ms. Zhu and there is no information which is required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Hong Kong Listing Rules.

IV. THE DISPOSAL

Reference is made to the Disposal Announcement. On 12 October 2020, COSCO Container, Long Honour, Shenzhen Capital Operation, Shenzhen Capital Hong Kong and the Company entered into the Share Transfer Agreement, pursuant to which COSCO Container and Long Honour have agreed to sell, and Shenzhen Capital Operation and Shenzhen Capital Hong Kong have agreed to purchase, the Target Shares, being an aggregate of 645,010,617 CIMC Shares, comprising 350,000,000 A shares and 295,010,617 H shares and representing approximately 17.94% of the total issued share capital of CIMC as at the Latest Practicable Date.

The principal terms of the Share Transfer Agreement are as follows:

Parties: (1) COSCO Container, as Vendor;

(2) Long Honour, as Vendor;
(3) Shenzhen Capital Operation, as Purchaser;
(4) Shenzhen Capital Hong Kong, as Purchaser; and
(5) the Company.

Subject matter:

Pursuant to the Share Transfer Agreement and subject to the terms and conditions thereunder:

(1) COSCO Container has agreed to sell, and Shenzhen Capital Operation has agreed to purchase, 350,000,000 A shares of CIMC;

– 9 –

LETTER FROM THE BOARD

(2) COSCO Container has agreed to sell, and Shenzhen Capital Hong Kong has agreed to purchase, 264,624,090 H shares of CIMC; and
(3) Long Honour has agreed to sell, and Shenzhen Capital Hong Kong has agreed to purchase, 30,386,527 H shares of CIMC.

Consideration:

The parties agree the price per Target Share for the Disposal shall be not lower than the higher of:

(1) the arithmetic average of the daily weighted average price of the CIMC Shares for the 30 trading days before the indicative announcement of CIMC on 25 August 2020 in relation to the Disposal, being approximately RMB8.48 per A share of CIMC and approximately HK$7.64 per H share of CIMC; and
(2) the audited net asset value per CIMC Share for the latest financial year, being RMB9.83 per CIMC Share.

The abovementioned RMB9.83 per CIMC Share represents the audited net assets per share attributable to the shareholders of CIMC (and excluding holders of other equity instruments of CIMC) as at 31 December 2019.

Accordingly, the parties agreed that the price per Target Share for the Disposal shall be RMB9.83 per Target Share and the aggregate consideration for the Disposal shall be RMB6,340,454,365.11, subject to adjustments as further described below.

The price per Target Share and the Consideration were determined after arm’s length negotiations between the Vendors and the Purchasers on normal commercial terms with reference to the prevailing trading price of the CIMC Shares and the audited net asset value per CIMC Share as at 31 December 2019 and in accordance with the relevant requirements under the Measures for the Supervision and Administration of Stateowned Equities of Listed Companies (《上市公司國有股權監督管理辦法》).

Adjustments to the The price per Target Share and the Consideration shall be Consideration: subject to adjustments as follows:

– 10 –

LETTER FROM THE BOARD

(1) in the event of the distribution of cash dividends by CIMC during the period between the date of signing of the Share Transfer Agreement and the date of completion of registration of transfer of the Target Shares, the Purchasers shall be entitled to such cash dividends and the Vendors shall pay such cash dividends to the Purchasers within three (3) working days after receiving the cash dividends, if the Vendors fail to pay such amounts in time, the Purchasers shall be entitled to deduct the aforementioned amount of cash dividends from the Consideration payable under the Share Transfer Agreement; and
(2) in the event of ex-right events of CIMC including placing, bonus issues and capitalization of capital reserves during the period between the date of signing of the Share Transfer Agreement and the date of completion of registration of transfer of the Target Shares, the number of the Target Shares and the price per Target Share shall be adjusted accordingly, but the parties shall endeavour to ensure that the Consideration shall remain unchanged.

As at the Latest Practicable Date, none of the abovementioned events has occurred and therefore, there has been no adjustment to the price per Target Share and the Consideration.

Payment:

The Target A Shares Consideration shall be settled in RMB and the Target H Shares Consideration shall be settled in HK$, which shall be calculated based on the middle exchange rate of HK$ to RMB published by People’s Bank of China on the day immediately before the date of payment of the Target H Shares Consideration.

Within five (5) working days after the satisfaction of the Conditions Precedent, Shenzhen Capital Operation shall inform COSCO Container and the Company of the date of payment of the Target A Shares Consideration in writing. Within two (2) working days of the aforementioned payment date, (i) the payment of the Target A Shares Consideration (net of applicable taxes payable by COSCO Container) by Shenzhen Capital Operation to the designated account of COSCO Container; and (ii) the return of the Security Deposits by the Company to Shenzhen Capital Operation shall be completed. Within five (5) working days of the aforementioned payment date, Shenzhen Capital Operation shall provide to COSCO Container evidence of full payment on behalf of COSCO Container of the applicable taxes.

– 11 –

LETTER FROM THE BOARD

COSCO Container shall, within ten (10) working days after the payment of the Target A Shares Consideration, submit an application to the Shenzhen Stock Exchange for the transfer of the Target A Shares and, within five (5) working days after the issue of the confirmation by the Shenzhen Stock Exchange, cooperate with Shenzhen Capital Operation to apply for the share transfer registration of the Target A Shares with CSDC.

On the day of the submission by Shenzhen Capital Operation of the application to CSDC for the share transfer registration of the Target A Shares, the Target H Shares Consideration shall be paid by Shenzhen Capital Hong Kong to the Vendors in HK$ calculated based on the applicable exchange rate as described above and the Target H Shares shall be delivered to Shenzhen Capital Hong Kong, through the Central Clearing and Settlement System.

Security Deposits: Within five (5) working days after the signing of the Share Transfer Agreement, the Purchasers shall pay the Security Deposits in the aggregate amount of RMB1,902,136,309.53, which is equivalent to 30% of the Consideration, to the designated onshore account of the Company.

As disclosed in the sub-section headed “The Disposal – Payment” above, the Security Deposits shall be returned to Shenzhen Capital Operation upon the payment of the Target A Shares Consideration. In the event of the termination of the Share Transfer Agreement in accordance with the terms thereof, the Security Deposits (together with accrued interest, if any) shall be returned to Shenzhen Capital Operation.

Effectiveness of the Share Transfer Agreement:
The effectiveness of the Share Transfer Agreement is subject to the following conditions:
(1) the Share Transfer Agreement having been duly executed by the parties;
(2) the Disposal having been approved by the Shareholders at the general meeting of the Company;
(3) the Vendors having obtained the approval of SASAC in respect of the non-public agreement transfer of stateowned equities involved in the Disposal; and
(4) the Purchasers having obtained the approval of Shenzhen SASAC in respect of the acquisition by state-owned shareholder of listed shares involved in the Disposal.

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LETTER FROM THE BOARD

If any of the above conditions is not satisfied, the Share Transfer Agreement shall not become effective (save for the provisions in relation to the Security Deposits, confidentiality and liabilities for breach) and the parties shall not be liable for each other.

Conditions precedent:

Payment of the Consideration shall be subject to the satisfaction or, if applicable, waiver of the following Conditions Precedent:

(1) the Share Transfer Agreement having been executed and delivered and having come into effect;
(2) the representations and warranties of the parties under the Share Transfer Agreement remaining valid and there being no material breach of the Share Transfer Agreement by any parties;
(3) the Disposal not being subject to the prohibitions under and not being non-compliant with the applicable laws, regulations, departmental rules, listing rules or prohibitive orders;
(4) the approval, filing or waiver in respect of the outbound direct investment and overseas remittance of funds involved in the payment of the Target H Shares Consideration having been obtained; and
(5) the parties having issued a written confirmation, together with supporting documents, in respect of the satisfaction or, if applicable, waiver of the relevant Conditions Precedent.

Pursuant to the Share Transfer Agreement, the Conditions Precedent set out in sub-paragraphs (1) and (3) above cannot be waived as they relate to the necessary internal and regulatory approval in respect of the Disposal. The parties shall endeavour to ensure that the abovementioned Conditions Precedent are satisfied on or before 30 November 2020. If any of the Conditions Precedent is not satisfied by the aforementioned long stop date, the parties shall negotiate in respect of full or partial waiver of the Conditions Precedent, extension of the long stop date or termination of the Share Transfer Agreement and endeavour to reach unanimous agreement on the aforementioned matters within twenty (20) working days thereafter.

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LETTER FROM THE BOARD

If upon the expiration of the abovementioned twenty (20) working day period, the Conditions Precedent are not satisfied and the parties have not reached any unanimous agreement, the Share Transfer Agreement shall be terminated.

As at the Latest Practicable Date, none of the Conditions Precedent has been satisfied.

Completion:

Termination:

Completion shall take place upon the full payment of the Consideration and the completion of the transfer of the Target Shares.

The parties may terminate the Share Transfer Agreement in the following circumstances:

(1) the parties unanimously agree to terminate the Share Transfer Agreement;
(2) in the event of delay of the Purchasers in the payment of the Consideration in accordance with the terms of the Share Transfer Agreement, the Vendors shall be entitled to a late penalty of 0.015% of the Consideration for each day of the delay, and if the delay is for thirty (30) days or more, the Vendors shall be entitled to unilaterally terminate the Share Transfer Agreement by way of written notice and return the Security Deposits (together with accrued interest, if any);
(3) in the event of delay of the Vendors in arranging for the share transfer registration of the Target Shares in accordance with the terms of the Share Transfer Agreement, the Purchasers shall be entitled to a late penalty of 0.015% of the Consideration for each day of the delay, and if the delay is for thirty (30) days or more, the Purchasers shall be entitled to request for return of the Consideration paid and unilaterally terminate the Share Transfer Agreement by way of written notice;
(4) in the event of material breach of the Share Transfer Agreement by one party rendering the purpose of the Share Transfer Agreement be no longer achievable, the nonbreaching party shall be entitled to terminate the Share Transfer Agreement;
(5) the Share Transfer Agreement may be terminated upon the occurrence of force majeure events in accordance with the terms thereof;

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LETTER FROM THE BOARD

(6) in the event of the occurrence of material changes which were not expected at the time of signing of the Share Transfer Agreement which render the performance of the Share Transfer Agreement being unfair to any of the parties or unable to fulfill the purpose of the Disposal, the parties may unanimously agree to terminate the Share Transfer Agreement; and
(7) If (i) the SFC rules in writing that the Purchasers are required to make a general offer under the Takeovers Code for the shares of CIMC or any of the listed companies controlled by CIMC; or (ii) the SFC rules that the Vendors and the Purchasers are acting in concert under the Takeovers Code, any of the parties is entitled to terminate the Share Transfer Agreement.

The Vendors shall return the Consideration received or the Security Deposits (together with accrued interest, if any) in full to the Purchasers within five (5) working days of the termination of the Share Transfer Agreement and the Purchasers shall return the Target Shares (if applicable) to the Vendors. In the event of delay by a party of the aforementioned obligations, the party in breach shall pay a late penalty of 0.015% of the Security Deposits for each day of the delay.

V. INFORMATION ON THE PARTIES TO THE SHARE TRANSFER AGREEMENT

Information on the Group

The Company is a joint stock limited 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 shipping and industry-related leasing businesses, manufacturing of containers and provision of investment and financial services.

Long Honour is a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company. It is principally engaged in investment holding.

COSCO Container is a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company. It is principally engaged in investment holding.

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LETTER FROM THE BOARD

Information on Shenzhen Capital Operation and Shenzhen Capital Hong Kong

Shenzhen Capital Operation is a company established in the PRC with limited liability and is primarily engaged in investment management, asset management, and establishment of various kind of entities. The ultimate beneficial owner of Shenzhen Capital Operation is Shenzhen SASAC.

Shenzhen Capital Hong Kong is a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Shenzhen Capital Operation. It is principally engaged in investment holding.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, Shenzhen Capital Operation, Shenzhen Capital Hong Kong and their ultimate beneficial owner are third parties independent of the Company and its connected persons.

VI. INFORMATION ON THE CIMC GROUP

CIMC is a joint stock limited 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 Shenzhen Stock Exchange. The CIMC Group is principally engaged in the manufacture of containers, road transportation vehicles, energy, chemicals, liquid food equipment, offshore engineering equipment, logistics services and airport facilities equipment.

Based on the financial statements of the CIMC Group prepared in accordance with the China Accounting Standards for Business Enterprises, the financial information of the CIMC Group for the two years ended 31 December 2018 and 2019 and the six months ended 30 June 2020 was approximately as follows:

				For the six
		For the year	ended	months ended
		31 December		30 June
		2018	2019	2020
		(audited)	(audited)	(unaudited)
		(RMB’000)	(RMB’000)	(RMB’000)
Profit	before taxation	6,683,558	5,613,874	641,350
Profit	after taxation	4,068,455	2,510,113	242,218

The unaudited net assets of the CIMC Group as at 30 June 2020 were approximately RMB56,078,331,000, comprising (i) the unaudited net assets attributable to the shareholders of CIMC (and excluding holders of other equity instruments of CIMC) as at 30 June 2020 of approximately RMB34,336,149,000; (ii) the unaudited net assets attributable to the holders of

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LETTER FROM THE BOARD

other equity instruments of CIMC as at 30 June 2020 of approximately RMB6,111,060,000; and (iii) the unaudited net assets attributable to minority interests as at 30 June 2020 of approximately RMB15,631,122,000.

VII. FINANCIAL EFFECTS OF THE DISPOSAL

As at the Latest Practicable Date, COSCO Container held 783,230,302 CIMC Shares, comprising 518,606,212 A shares and 264,624,090 H shares and representing approximately 21.79% of the total issued share capital of CIMC, and Long Honour held 30,386,527 H shares of CIMC, representing approximately 0.85% of the total issued share capital of CIMC. Upon Completion, COSCO Container will hold 168,606,212 A shares of CIMC, representing approximately 4.69% of the total issued share capital of CIMC, and Long Honour will cease to hold any CIMC Shares. The equity interest of the Group in CIMC will decrease from approximately 22.63% to approximately 4.69% upon Completion and CIMC will continue to be accounted for as an associate of the Company.

Earnings

Assuming that Completion had taken place on 30 June 2020, it is estimated that the Group will recognise an unaudited gain before income tax of approximately RMB376,540,000 from the Disposal (before net of related costs and expenses), which is calculated based on the sum of (i) the difference between (a) the Consideration of approximately RMB6,340,454,000 based on RMB9.83 per Target Share, less the estimated PRC value-added tax and related surcharges in relation to the Disposal of approximately RMB31,729,000; and (b) the carrying amount of the Target Shares as at 30 June 2020, being approximately RMB6,587,022,000; (ii) the release of other reserves and other comprehensive income attributable to the CIMC Group of approximately RMB397,515,000 as at 30 June 2020; and (iii) the reversal of the deferred tax liabilities in relation to the withholding tax of the CIMC Group of approximately RMB257,322,000 as at 30 June 2020.

Assets and liabilities

Assuming that Completion had taken place on 30 June 2020 and without considering the use of the proceeds from the Disposal for the repayment of the Annexation Loan (as set out below), the Disposal is expected to generate an unaudited gain before income tax of approximately RMB376,540,000, among which RMB397,515,000 is reclassified from other reserves and other comprehensive income (which form part of the equity of the Group). The consolidated net asset value attributable to equity holders of the Company is expected to decrease by RMB20,975,000 upon Completion. The consolidated total assets of the Group is expected to decrease by RMB278,297,000 and the consolidated total liabilities of the Group is expected to decrease by RMB257,322,000.

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Proposed use of proceeds

The Group intends to apply the net proceeds from the Disposal (after deducting related costs and expenses) for the partial repayment of the Annexation Loan in the principal amount of US$1.37 billion which is repayable by instalments with the last repayment in September 2023. The Annexation Loan was obtained for the purpose of the acquisition of Long Honour by the Group in 2016 as part of its restructuring and pursuant to the terms of the Annexation Loan, the proceeds from the sale of the CIMC Shares directly and/or indirectly held by Long Honour shall, after completion of such sale, be used for the early repayment of the Annexation Loan prior to its maturity.

As disclosed in the circular of the Company dated 31 December 2015, the aggregate consideration for the acquisition by the Group of the entire equity interests in Long Honour and the assignment of the outstanding debts of Long Honour to its then parent company was approximately RMB10,183,532,000 (equivalent to approximately US$1.60 billion based on the then applicable exchange rate). The said consideration was determined with reference to (a) the appraised value of Long Honour based on the sum of (i) the then market value of 22.58% equity interest in CIMC then directly and indirectly held by Long Honour (being its principal assets) determined with reference to the average trading price of the CIMC Shares for the 30 days prior to the relevant benchmark date, being 31 October 2015; and (ii) the book value of other assets held by Long Honour and its wholly-owned subsidiary, less the book value of debts, as set out in the relevant valuation report; and (b) the book value of the outstanding debts of Long Honour to its parent company. The said consideration was funded by the internal resources of the Group and the Annexation Loan. As at the Latest Practicable Date, the outstanding principal amount of the Annexation Loan was US$1.23 billion. On the assumption that the net proceeds from the Disposal is approximately RMB6.3 billion and based on the illustrative exchange rate of US$1 to RMB6.78, following the repayment of the Annexation Loan with the net proceeds from the Disposal (being approximately US$929 million), it is estimated that the outstanding principal amount of the Annexation Loan will be approximately US$301 million, which will continue to be repayable by instalments over the period up to its maturity in September 2023.

VIII.REASONS FOR AND BENEFITS OF THE DISPOSAL

The Group is principally engaged in shipping and industry-related leasing businesses, manufacturing of containers and provision of investment and financial services. As a shipping financing platform, the Group will integrate premium resources and give full play to its advantages in the shipping industry. Synergic development will be pursued for various financial businesses in an attempt to become China’s leading and the world’s first-class integrated supply chain financial service provider with distinct shipping logistics features.

As set out in the sub-section headed “X. Implications under the Shanghai Stock Exchange – 8. Proposal in relation to the review report and the valuation report in respect of the Restructuring” below, the price of RMB9.83 per CIMC Share represents a premium over the arithmetic averages of the daily weighted average prices of the A shares and H shares of CIMC for the periods of one (1), five (5), ten (10), twenty (20), thirty (30) and sixty (60) trading days before the benchmark date of 25 August 2020, being the date of the indicative announcement

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of CIMC in relation to the Disposal. Taking into account the aforementioned premium, the historical trading prices of the CIMC Shares (whereas for the 52 weeks immediately preceding the Latest Practicable Date, the A shares of CIMC were trading within the range between RMB6.85 and RMB10.58 and the H shares of CIMC were trading within the range between HK$5.82 and HK$9.00) as well as the recent stock market volatility, the Directors consider that the Disposal represents a good opportunity for the Group to realise its investment in CIMC.

As the proceeds from the Disposal will be used to repay the Annexation Loan, there will be a decrease in the level of debt of the Group following such repayment and a consequential reduction in the interest expenses of the Group. As such, the Group may focus its resources in pursuing strategic development opportunities for its principal businesses, which is in line with the strategic development needs of the Group. The repayment of the Annexation Loan following completion of the Disposal is also expected to optimise the asset structure of the Group, thereby facilitating the development of its shipping and industry-related leasing business, container manufacturing business and investment and related service business.

The Directors (including the independent non-executive Directors) consider that the terms of the Share Transfer Agreement, which were negotiated on an arm’s length basis, are fair and reasonable and the Disposal is in the interests of the Company and the Shareholders as a whole.

IX. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

As one or more of the applicable percentage ratios calculated in respect of the Disposal in accordance with the Hong Kong Listing Rules exceed 25% but are less than 75%, the Disposal constitutes a major transaction of the Company which is subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Hong Kong Listing Rules.

X. IMPLICATIONS UNDER THE SHANGHAI LISTING RULES

The Disposal, if materialized, will constitute a material asset restructuring of the Company under the Administrative Measures for Material Asset Restructuring issued by the CSRC. Pursuant to the relevant requirements under the Shanghai Listing Rules and the PRC laws and regulations, the following proposals will be submitted for the Shareholders’ consideration and approval at the EGM.

1. Proposal in relation to the Restructuring

Each of the following resolutions in relations to the Restructuring will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM:

(a) transaction overview;
(b) transaction method;

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(c) target assets;
(d) transaction counterparties;
(e) transaction price and pricing basis;
(f) method of payment of the consideration;
(g) share transfer registration in respect of the target assets;
(h) the Restructuring not constituting a connected transaction;
(i) the Restructuring constituting a material asset restructuring; and
(j) validity period of the resolutions.

2. Proposal in relation to the Share Transfer Agreement

The proposal in relation to the Share Transfer Agreement and the transactions contemplated thereunder will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

3. Proposal in relation to the Report on the Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft) (《中遠海運發展股份有限公司重大資產出售報告書(草案)》) and its summary

In accordance with the relevant requirements under the Administrative Measures for Material Asset Restructuring, the Company has prepared the Report on the Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft) (《中遠海運發展股份有限公司重大資產出售報告書(草案)》) and Summary Report on the Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft) (《中遠海運發展股份有限公司重大資產出售報告書(草案)》摘要) in relation to the Restructuring, which set out, among other things, an overview of the Restructuring, information on the Company, the Purchasers and CIMC, principal terms of the Restructuring and related information. Further details of the aforementioned report and its summary are set out in the relevant overseas regulatory announcement of the Company dated 12 October 2020.

The proposal in relation to Report on the Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft) (《中遠海運發展股份有限公司重大資產出售報告書(草案)》) and its summary will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

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LETTER FROM THE BOARD

4. Proposal in relation to the Restructuring being in compliance with the relevant laws and regulations

Pursuant to relevant laws and regulations including the Company Law of the PRC, the Securities Laws of the PRC, the Administrative Measures for Material Asset Restructuring, and the Provisions on Material Asset Restructuring, as well as relevant departmental rules and regulatory documents, based on the actual operation conditions of the Company and upon self-verification, the Restructuring is in compliance with the relevant laws and regulations.

The proposal in relation to the Restructuring being in compliance with the relevant laws and regulations will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

5. Proposal in relation to the completeness and compliance of the legal procedures and the validity of the legal documentation in respect of the Restructuring

The Company has conducted the necessary legal procedures in respect of the Restructuring at current stage in accordance with relevant laws, regulations and regulatory documents such as the Company Law of the PRC, the Securities Laws of the PRC, the Administrative Measures for Material Asset Restructuring, and the Provisions on Material Asset Restructuring, the Administrative Measures for the Information Disclosure of Listed Companies (《上市公司信息披露管理辦法》) and the Shanghai Listing Rules, as well as the Articles of Association. The legal procedures conducted by the Company in relation to the Restructuring are complete, lawful and effective and the legal documentation in relation to the Restructuring submitted by the Company to relevant regulatory authorities are lawful and effective.

The proposal in relation to the completeness and compliance of the legal procedures and the validity of the legal documentation in respect of the Restructuring will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

6. Proposal in relation to the Restructuring complying with Article 4 of the Provisions on Material Asset Restructuring

The Board has assessed and considered that the Restructuring is in compliance with Article 4 of the Provisions on Material Asset Restructuring on the basis of the following:

(a) the target assets of the Restructuring involves the shares of a listed company, which is not subject to filing or approval in relation to project initiation, environmental protection, industry access, use of land, planning, construction or other relevant matters;

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(b) the Restructuring does not involve the purchase of assets or equity interests; and
(c) the Restructuring will help to improve the financial condition and the profitability of the Company and will not affect its independence. The Restructuring will not result in horizontal competition and connected transactions between the Company and its controlling shareholders and their controlled corporations.

The proposal in relation to the Restructuring complying with Article 4 of the Provisions on Material Asset Restructuring will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

7. Proposal in relation to the Restructuring complying with Article 11 of the Administrative Measures for Material Asset Restructuring

The Board has assessed and considered that the Restructuring is in compliance with Article 11 of the Administrative Measures for Material Asset Restructuring on the basis of the following:

(a) the Restructuring is in compliance with state industry policies, and is not in contravention of the laws and regulations in relation to environmental protection, land management and anti-monopoly;
(b) the Restructuring will not result in non-fulfilment of the conditions of listing of the Shares;
(c) the pricing basis for the target assets of the Restructuring is fair and does not prejudice the legitimate rights of the Company and the Shareholders;
(d) there are distinct ownership rights over the target assets involved in the Restructuring, and there are no legal obstacles for the assets transfer and the treatment for relevant creditors’ rights and debts is lawful;
(e) the Restructuring is conducive to the profitability of the Company, and there are no circumstances resulting in cash becoming the major assets of the Company or the Company having no specific business operations upon completion of the Restructuring;
(f) the Restructuring is conducive to the preservation of the independence of the Company with its controlling shareholders and their associates in terms of business, assets, finances, personnel and institution and comply with the relevant independence requirement of listed companies of the CSRC; and

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(g) the Restructuring is conducive to the establishment or maintenance of a sound and effective governance structure of the Company.

The proposal in relation to the Restructuring complying with Article 11 of the Administrative Measures for Material Asset Restructuring will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

8. Proposal in relation to the review report and the valuation report in respect of the Restructuring

Pursuant to the relevant requirements under the Administrative Measures for Material Asset Restructuring, the Company has engaged Shinewing Certified Public Accountants LLP and China International Capital Corporation Limited for the issuance of the review report on the pro forma consolidated financial statements of the Group and the valuation report in respect of the Restructuring, respectively. Further details of the aforementioned review report and valuation report are set out in the relevant overseas regulatory announcements of the Company dated 12 October 2020.

The abovementioned pro forma consolidated financial statements of the Group were prepared solely for the purpose of the relevant application by the Company to the CSRC for the implementation of the Restructuring and comprise (i) the pro forma consolidated balance sheets of the Group as at 31 December 2019 and 30 June 2020; and (ii) the pro forma consolidated statements of profit or loss of the Group for the year ended 31 December 2019 and for the six months ended 30 June 2020, which were prepared based on China Accounting Standards for Business Enterprises and as if the Restructuring was completed at the beginning of the respective reporting periods.

The abovementioned valuation report provides for an analysis on the reasonableness of the Consideration based on an analysis of comparable companies and historical prices of the CIMC Shares with the benchmark date being 25 August 2020, being the date of the indicative announcement of CIMC in relation to the Disposal. In conducting the analysis, the P/E ratio and P/B ratio of 11 comparable companies listed in the PRC and overseas and which are engaged in similar businesses as the CIMC Group were compared to the corresponding P/E ratio and P/B ratio of CIMC based on the price of RMB9.83 per CIMC Share. The following table sets forth a summary of the comparison:

	Company name Stock code Place of listing P/E Ratio (Last Year Ratio) P/B Ratio (Last Year Ratio) A share listed comparable companies Sinotruk Jinan Truck Co., Ltd. (中國重汽集團濟南卡車股份有限公司) 000951.SZ Shenzhen Stock Exchange 20.39 3.56

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									P/E	P/E	P/B Ratio	P/B Ratio
								Place of (Last Year			(Last Year
Company name				Stock		code		listing	Ratio)		Ratio)
FAW Car Company				000800.SZ			Shenzhen		425.93			0.79
Limited (一汽解放集								Stock
團股份有限公司)							Exchange
Hualing Xingma				600375.SH			Shanghai			89.25		1.39
Automobile (Group)								Stock
Co., Ltd. (華菱星馬汽							Exchange
車(集團)股份有限公司)
COSCO SHIPPING				601866.SH			Shanghai			16.68		1.43
Development Co., Ltd.								Stock
(中遠海運發展股份有							Exchange
限公司)
Zhangjiagang Furui				300228.SZ			Shenzhen Negative					1.80
Special Equipment								Stock		value
Co., Ltd.							Exchange
(張家港富瑞特種裝備
股份有限公司)
Square		Technology		603339.SH			Shanghai			24.78		1.83
Group Co., Ltd.								Stock
(四方科技集團股份有							Exchange
限公司)
Houpu Clean Energy				300471.SZ			Shenzhen		167.89			2.85
Co., Ltd. (厚普清潔能								Stock
源股份有限公司)							Exchange
			Average							37.77		1.95
			Median							22.58		1.80
H share listed comparable companies and								other comparable companies				listed in
overseas markets
Sinotruk (Hong Kong)				3808.HK			Hong Kong			16.79		2.16
Limited (中國重汽								Stock
(香港)有限公司)							Exchange
Wabash National				WNC.N			New York			7.82		1.32
Corporation								Stock
							Exchange
COSCO SHIPPING				2866.HK			Hong Kong			5.57		0.49
Development Co., Ltd.								Stock
(中遠海運發展股份有							Exchange
限公司)
Chart	Industries Inc.			GTLS.O			NASDAQ			53.81		2.15
Trinity		Industries Inc.		TRN.N			New York			19.06		1.23
								Stock
							Exchange
			Average							20.61		1.47
			Median							16.79		1.32
CIMC (based on the price of					RMB9.83 per CIMC					26.26		1.00
				Share)

Note: The above ratios were calculated based on relevant data up to the trading day immediately before the benchmark date and was sourced from Bloomberg. In calculating the average value and median of the above ratios, negative values and values greater than 100 were excluded.

The valuation report also compared the price of RMB9.83 per CIMC Share with the arithmetic average of the daily weighted average prices of the A shares and H shares of CIMC before the benchmark date of 25 August 2020. The following table sets forth a summary of the comparison:

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		Transfer price		Transfer price
		per CIMC		per CIMC
		Share over	Arithmetic	Share over
	Arithmetic	arithmetic	average of the	arithmetic
	average of the	average of the	daily weighted	average of the
	daily weighted	daily weighted	average price	daily weighted
	average price	average price	per H share	average price
	per A share of	per A share of	of CIMC	per H share of
Period	CIMC (RMB per share)	CIMC (%) (Note 1)	(HK$ per share)	CIMC (%) (Notes 1 and 2)
1 trading day before
the benchmark date	9.08	108.28%	8.29	132.91%
5 trading days before
the benchmark date	9.10	108.04%	8.14	135.25%
10 trading days before
the benchmark date	8.88	110.69%	7.83	140.62%
20 trading days before
the benchmark date	8.58	114.55%	7.71	142.90%
30 trading days before
the benchmark date	8.48	115.86%	7.64	144.20%
60 trading days before
the benchmark date	7.89	124.56%	7.03	156.74%

Note:

For the purpose of the comparison, the exact arithmetic averages of the daily weighted average price per A share and H share of CIMC (i.e. before rounding to two decimal places) were adopted.
For the purpose of the comparison, the transfer price of RMB9.83 per CIMC Share was converted to HK$11.01 per CIMC Share based on the RMB to HK$ middle exchange rate on the benchmark date.

The proposal in relation to the review report and the valuation report in respect of the Restructuring will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

9. Proposal in relation to the independence of valuation agency, reasonableness of the assumptions of the valuation, correlation between the approach and purpose of the valuation and fairness of the basis of the consideration

Pursuant to relevant requirements under the Administrative Measures for Material Asset Restructuring, the Company has engaged China International Capital Corporation Limited as the valuation agency in respect of the Restructuring. The Board has assessed the independence of the valuation agency, reasonableness of the assumptions of the valuation, correlation between the approach and purpose of the valuation and fairness of the basis of the consideration as follows:

(a) save for normal business relationship, China International Capital Corporation Limited is not related to the Company or CIMC and there are no actual or potential interest or conflicts which may affect the its provision of the valuation service. China International Capital Corporation Limited is independent for the purpose of providing the valuation service;

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(b) the assumptions adopted in the valuation report are reasonable in accordance with relevant national laws and regulations and industry norms and consistent with the common market practices and the actual circumstances of the target;
(c) the valuation of the target assets was conducted in accordance with valuation methods which are in compliance with laws and regulations and meet the actual circumstances of target assets and the transaction, and based on the principles of independence, impartiality and fairness. The valuation methods, being analysis on comparable companies and historical price of the CIMC Shares, are suitable taking into account of the purpose of valuation and characteristics of the target assets, and there is correlation between the approach and purpose of valuation; and
(d) the basis of the consideration was determined after arm’s length negotiations between the parties and is fair and reasonable.

The proposal in relation to the independence of valuation agency, reasonableness of the assumptions of the valuation, correlation between the approach and purpose of the valuation and fairness of the basis of the consideration will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

10. Proposal in relation to the authorization to the Board and its authorized persons to handle all matters in connection with the Restructuring

In order to ensure effective and efficient implementation of the Restructuring, the Board proposes to seek approval from the Shareholders at the EGM for authorization to the Board and its authorized persons to handle all matters in connection with the Restructuring in accordance with applicable laws and regulations, including but not limited to the following:

(a) authorize the Board to revise and implement the specific plan of the Restructuring in accordance with the provisions of laws, regulations and regulatory documents and the resolutions of the EGM, and to be responsible for handling and determining specific issues of the Restructuring based on the approval of the Shareholders at the EGM and the approval from relevant regulatory authorities;
(b) authorize the Board to determine and engage intermediaries such as independent financial advisors, law firms and accounting firms, to sign service agreements with relevant intermediaries and to revise, supplement, sign, submit, report on and execute all agreements and documents relating to the Restructuring;
(c) authorize the Board to handle the opening of bank account and onshore and offshore share transfer registration in respect of the Restructuring;

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(d) authorize the Board to make corresponding adjustments to the Restructuring plan and other application documents in accordance with the requirements of securities regulatory authorities, state-owned assets regulatory authorities and stock exchanges; and
(e) authorize the Board to take all necessary actions to determine and handle other matters relating to the Restructuring.

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

11. Proposal in relation to the Shareholders’ Return Plan for the coming three years (2020 to 2022) of the Company

Pursuant to the relevant laws and regulations including 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》) issued by the CSRC, regulatory documents and the Articles of Association, the Board has formulated and proposes to adopt the Shareholders’ Return Plan for the coming three years (2020 to 2022), pursuant to which the Company will 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 and will mainly distribute cash dividends in the coming three years, subject to compliance with the relevant laws and regulations and the Articles of Association. Further details of the aforementioned Shareholders’ Return Plan for the coming three years (2020 to 2022) are set out in the relevant overseas regulatory announcement of the Company dated 12 October 2020.

The proposal in relation to the Shareholders’ Return Plan for the coming three years (2020 to 2022) will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

12. Proposal in relation to the dilution on current returns and the remedial measures of the Company

Pursuant to the requirements set out in the Several Opinions of the State Council on Further Facilitating the Healthy Development of the 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》), the Opinions of the General Office of the State Council on Further Strengthening the Protection of the Legitimate Rights and Interests of

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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 conducted an analysis on the dilution on current returns and the impact on the Company’s major financial indicators of the Restructuring and the remedial measures of the Company. Further details of the aforementioned dilution on current returns and remedial measures are set out in the relevant overseas regulatory announcement of the Company dated 12 October 2020.

The proposal in relation to the dilution on current returns and the remedial measures of the Company will be submitted, by way of a special resolution, for the Shareholders’ consideration and approval at the EGM.

XI. EGM

The EGM will be convened at 1:30 p.m. on Thursday, 29 October 2020 at Level 3, Ocean Hotel Shanghai, 1171 Dong Da Ming Road, Hong Kou District, Shanghai, the PRC, for the Shareholders to consider and, if thought fit, approve the Share Transfer Agreement and the transactions contemplated thereunder. The Notice of EGM is set out on pages EGM-1 to EGM-5 of this circular.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder had a material interest in the Share Transfer Agreement and the transactions contemplated thereunder and therefore no Shareholder is required to abstain from voting at the EGM for the relevant resolution.

If you intend to appoint a proxy to attend the EGM, you are required to complete and return the accompanying form of proxy in accordance with the instructions printed thereon. The form of proxy must be delivered to Computershare not less than 24 hours before the time for holding the EGM or any adjourned meeting thereof in order for such documents to be valid.

For the H Shareholders, the Form of Proxy should be returned to Computershare, the H Share registrar of the Company, by hand or by post not less than 24 hours before the time appointed for holding the EGM or any adjourned meeting thereof.

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

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LETTER FROM THE BOARD

XII. RECOMMENDATION

The Board (including the independent non-executive Directors) is of the view that the proposed appointment of Mr. Ip as a non-executive Director, the proposed appointment of Ms. Zhu as a shareholder representative Supervisor and the Disposal are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends all the Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

As Completion is subject to a number of conditions, the Disposal may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

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

Cai Lei

Joint Company Secretary

The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Development Co., Ltd.”.

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

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

The audited consolidated financial statements of the Company for the financial years ended 31 December 2017, 2018 and 2019, and the unaudited condensed consolidated financial statements of the Company for the six months ended 30 June 2020, together with the relevant notes thereof are disclosed in the following documents:

(i) the annual report of the Company for the year ended 31 December 2017 (pages 93 to 212) (https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0427/ ltn20180427562.pdf);
(ii) the annual report of the Company for the year ended 31 December 2018 (pages 86 to 212) (https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0426/ ltn20190426653.pdf);
(iii) the annual report of the Company for the year ended 31 December 2019 (pages 91 to 220) (https://www1.hkexnews.hk/listedco/listconews/sehk/ 2020/0427/2020042700731.pdf); and
(iv) the interim report of the Company for the six months ended 30 June 2020 (pages 22 to 48) (https://www1.hkexnews.hk/listedco/listconews/sehk/ 2020/0924/2020092400594.pdf).

2. STATEMENT OF INDEBTEDNESS

Debt securities and term loans

As at 31 August 2020, 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 31 August 2020, 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 RMB111,868 million, comprising secured bank and other loans of approximately RMB37,473 million, unsecured bank and other loans of approximately RMB47,917 million and RMB bonds of approximately RMB26,478 million.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Contingent liabilities

As at 31 August 2020, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group has no material contingent liabilities or guarantees.

Mortgages and charges

As at 31 August 2020, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group’s general banking facilities and the above outstanding secured borrowings were secured by the Group’s property, plant and equipment, certain equity investments and certain bank deposits.

Save as aforesaid or as otherwise mentioned herein and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, bank loans and overdrafts or other similar borrowings or indebtedness, liabilities under acceptance (other than normal trade bills) or acceptance credits or hire purchase commitments, guarantees or other material contingent liabilities as at 31 August 2020.

The Directors confirm that there was no material change in the indebtedness status of the Group since 31 August 2020 up to the Latest Practicable Date.

3. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

In the first half of 2020, the economic growth of major economies across the world dropped significantly as the COVID-19 pandemic upended global economy and financial system. In the World Economic Outlook Update, June 2020, the International Monetary Fund forecasted a -4.9% growth for the global economy, substantially more pessimistic than its April forecast. The sluggish market, resulting in the disruptions to shipping industrial chain and supply chain amid the decline in global trade and investment, has imposed pressure on the business operations of the Company. In the second half of 2020, as the international environment becomes increasingly complicated, and the impact of the global COVID-19 pandemic remains severe, instability and uncertainty intensify.

The Company will strengthen macro analysis and market research, promote reform and transformation, develop new competitive strengths focusing on industry-finance integration, continuously improve high-quality development, and seek breakthroughs in distinctive shipping financial services. The Disposal is in line with the strategic development needs of the Group and is expected to optimise the asset structure of the Group, thereby facilitating the development of its shipping and industry-related leasing business, container manufacturing business and investment and related service business.

In terms of shipping and industry-related leasing segments, the Company will continue to strengthen the combination of industry and finance, reinforce the collaboration among internal industry chains, and steadily expand external business. In terms of business model, the

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company will step up efforts to develop leasing business for special containers and reefer containers, and study and explore smart container leasing, in a bid to build a shipping leasing company with unique competitive strengths. Meanwhile, the Company will uphold the strategy of organic, sustainable, high-quality development to promote the development of other industry-related leasing business, expand financing channels, and develop value-added leasing services, in an effort to become a leader in the leasing industry.

In terms of container manufacturing segment, the Company will steadily advance the multi-dimensional integration of its entrusted container manufacturing assets into the Company’s existing business, and enhance its overall competitiveness through technological upgrading, management improvement, process promotion and cultural integration; strengthen communication with industry peers to maintain a healthy business environment of the industry; enhance customer service awareness and seize opportunities to develop the market, so as to enable the industrial chain to grow stronger and better; reinforce the concept of green environmental protection, deepen fine management, continuously improve research and innovation capabilities, in an effort to build a world-class container manufacturing company.

In terms of investment and services segment, the Company will focus on upstream and downstream customers in the industrial chain, constantly optimize its investment portfolio, and seek a balance between strategic value and financial returns; gather external capital, talents and technology through industry funds and other models to boost the development of shipping business and new business lines; improve professional service capabilities and vigorously explore the market to build up a shipping insurance expert platform; combine industry with finance and provide one-stop supply chain financial services covering logistics, financing and risk management, in a great effort to build a supply chain financial ecosystem featuring shipping logistics.

4. WORKING CAPITAL

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

– I-3 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong 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.

2. 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
						percentage of the	Approximate
						total number of	percentage of
					Number of	the relevant class	the issued
			Class of		Shares	of Shares	share capital
Name		Position	Shares	Capacity	interested	of the Company	of the Company
					(Note 1)	(%)	(%)
Wang	Daxiong	Director	A Shares	Beneficial owner	1,500,000 (L)	0.02	0.01
					(Note 2)
			H Shares	Other	834,677 (L)	0.02	0.01
					(Notes 3
					and 4)

– II-1 –

GENERAL INFORMATION

APPENDIX II

					Approximate	Approximate
					percentage of the		Approximate
					total number of		percentage of
				Number of	the relevant class		the issued
		Class of		Shares		of Shares	share capital
Name	Position	Shares	Capacity	interested	of the Company		of the Company
				(Note 1)		(%)	(%)
Liu Chong	Director	A Shares	Beneficial owner	1,490,100 (L)		0.02	0.01
				(Note 2)
		H Shares	Other	1,112,903 (L)		0.03	0.01
				(Notes 3
				and 5)
Xu Hui	Director	A Shares	Beneficial owner	1,490,100 (L)		0.02	0.01
				(Note 2)
		H Shares	Other	945,968 (L)		0.03	0.01
				(Notes 3
				and 6)
Feng Boming	Director	A Shares	Beneficial owner	29,100 (L)		0.00037	0.00025

Notes:

“L” means long position in the shares.
Such interests relate to share options granted to the Directors on 30 March 2020 pursuant to the A Share option incentive scheme of the Company approved by the Shareholders on 5 March 2020.
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 an asset management plan (the “ Asset Management Plan ”), pursuant to which the executive Directors, Supervisor, senior management and employees of the Company had subscribed to the units of the Asset Management Plan and entrusted the manager of the Asset Management Plan to manage the Asset Management Plan, which would invest in the H Shares. The manager of the Asset Management Plan shall be responsible for, among other things, the investment and re-investment of the assets under the Asset Management Plan and shall be entitled to exercise the voting rights and other relevant rights in respect of the H Shares held under the Asset Management Plan. The Company did not participate in the Asset Management Plan, and the Asset Management Plan does not constitute a share option scheme or any type of employee benefit scheme of the Company. 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.
Mr. Wang Daxiong was one of the participants of the Asset Management Plan through which he held approximately 12.10% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 834,677 H Shares 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 did not hold any Shares.
Mr. Liu Chong was one of the participants of the Asset Management Plan through which he held approximately 16.13% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 1,112,903 H Shares 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 did not hold any Shares.

– II-2 –

GENERAL INFORMATION

APPENDIX II

Mr. Xu Hui was one of the participants of the Asset Management Plan through which he held approximately 13.71% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 945,968 H Shares 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 did not hold any Shares.

Interests in the shares of associated corporations of the Company

						Approximate
						percentage of	Approximate
						the number of	percentage of
						shares of the	the issued share
						relevant class of	capital of the
					Number of	the relevant	relevant
Name of associated			Class of		shares	associated	associated
corporation	Name	Position	shares	Capacity	interested	corporation	corporation
					(Note 1)	(%)	(%)
COSCO SHIPPING Holdings	Feng Boming	Director	A shares	Beneficial	936,000 (L)	0.00967	0.00763
Co. Ltd.				owner
				Interest of	530,000 (L)	0.00548	0.00432
				spouse	(Note 2)
COSCO SHIPPING Ports	Feng Boming	Director	Ordinary	Beneficial	31,231 (L)	0.00096	0.00096
Limited			shares	owner

Notes:

“L” means long position in the shares.
As at the Latest Practicable Date, the spouse of Mr. Feng Boming held 530,000 A share options under the A Share option incentive scheme of COSCO SHIPPING Holdings.

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

As at the Latest Practicable Date:

(a) Mr. Huang Jian, a non-executive Director, was also a department general manager of COSCO SHIPPING;
(b) Mr. Feng Boming, a non-executive Director, was also a department general manager of COSCO SHIPPING;
(c) Mr. Hao Wenyi, a Supervisor, was also a department general manager of COSCO SHIPPING; and
(d) Mr. Ye Hongjun, a Supervisor, was also the chief legal adviser of COSCO SHIPPING.

– II-3 –

GENERAL INFORMATION

APPENDIX II

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

Interests of substantial Shareholders

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

				Approximate
				percentage of	Approximate
				the total number	percentage of
				of the relevant	the issued
	Class of		Number of	class of Shares	share capital
Name of Shareholder	Shares	Capacity	Shares interested	of the Company	of the Company
			(Note 1)	(%)	(%)
China Shipping Group	A Shares	Beneficial owner	4,458,195,175 (L)	56.20	38.41
Company Limited			(Note 2)
(“China Shipping”)
	H Shares	Interest of controlled	100,944,000 (L)	2.75	0.87
		corporation	(Note 3)
China COSCO Shipping	A Shares	Interest of controlled	4,458,195,175 (L)	56.20	38.41
Corporation Limited		corporation	(Note 2)
	H Shares	Interest of controlled	100,944,000 (L)	2.75	0.87
		corporation	(Note 3)

Notes:

“L” means long position in the shares.
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.

– II-4 –

GENERAL INFORMATION

APPENDIX II

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.

3. SERVICE CONTRACTS

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

4. LITIGATION

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

5. MATERIAL INTERESTS

As at the Latest Practicable Date:

(a) none of the Directors or the Supervisors had any direct or indirect interest in any assets which had been, since 31 December 2019 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and
(b) none of the Directors or the Supervisors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

6. 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 Hong Kong Listing Rules.

– II-5 –

GENERAL INFORMATION

APPENDIX II

7. MATERIAL CONTRACTS

Set out below are the material contracts (not being contracts entered into in the ordinary course of business) entered into by any member of the Group within the two years immediately preceding the Latest Practicable Date:

(a) the Share Transfer Agreement;
(b) the capital increase agreement dated 24 April 2020 entered into among the Company, COSCO SHIPPING, COSCO SHIPPING Energy Transportation Co., Ltd., COSCO Shipping Tanker (Dalian) Co., Ltd., COSCO SHIPPING Lines Co., Ltd., COSCO International Freight Co., Ltd., COSCO SHIPPING Specialized Carriers Co., Ltd., Guangzhou Ocean Shipping Co., Ltd., COSCO (Tianjin) Co., Ltd., China Ocean Shipping Agency Co., Ltd., COSCO (Qingdao) Co., Ltd., COSCO Shipbuilding Industry Company Limited, COSCO Shipyard Group Co., Ltd., China Marine Bunker (Petro China) Co., Ltd., COSCO (Xiamen) Co., Ltd. and China Ocean Shipping Tally Co., Ltd., pursuant to which the parties (as existing shareholders of COSCO SHIPPING Finance Company Limited) have agreed to increase the registered capital of COSCO SHIPPING Finance Company Limited by RMB3,200,000,000 in proportion to their respective shareholding (please refer to the announcement of the Company dated 24 April 2020 for further details);
(c) the equity transfer agreement dated 25 March 2019 entered into between the Company and COSCO SHIPPING Logistics Co., Ltd., pursuant to which the Company has agreed to dispose of, and COSCO SHIPPING Logistics Co. Ltd. has agreed to acquire, 25% of the equity interests in E-Shipping Global Supply Chain Management (Shenzhen) Co., Ltd. (please refer to the announcement of the Company dated 25 March 2019 for further details);
(d) the four memoranda of agreement dated 10 January 2019 entered into between (i) CSCL Spring Shipping Co., Ltd., CSCL Summer Shipping Co., Ltd., CSCL Winter Shipping Co., Ltd. and CSCL Bohai Sea Shipping Co., Ltd. (collectively, the “ Vessel Sellers ”) and (ii) FPG Shipholding Panama 48 S.A., FPG Shipholding Panama 49 S.A., FPG Shipholding Panama 50 S.A. and FPG Shipholding Panama 51 S.A. (collectively, the “ Vessel Purchasers ”), pursuant to which the Vessel Sellers have agreed to sell, and the Vessel Purchasers have agreed to purchase, the Vessels, for the aggregate consideration of US$267 million (please refer to the announcement of the Company dated 10 January 2019 for further details);
(e) the four instalment sale agreements dated 10 January 2019 entered into between (i) the Vessel Purchasers as sellers and (ii) Ship No. 140 Co., Ltd., Ship No. 141 Co., Ltd., Ship No. 142 Co., Ltd. and Ship No. 143 Co., Ltd., as buyers in respect of the instalment sale of the Vessels (please refer to the announcement of the Company dated 10 January 2019 for further details); and

– II-6 –

GENERAL INFORMATION

APPENDIX II

(f) the four bareboat charters dated 10 January 2019 entered into between the Vessel Owners and COSCO SHIPPING Development (Hong Kong) Co., Ltd., pursuant to which the Vessel Owners have agreed to charter, and COSCO SHIPPING Development (Hong Kong) Co., Ltd. agreed to take on charter, the Vessels, with the maximum aggregate amount of the instalments of charter hire payable by COSCO SHIPPING Development (Hong Kong) Co., Ltd. to the Vessel Owners estimated to be approximately US$248 million (please refer to the announcement of the Company dated 10 January 2019 for further details).

Save as disclosed above, there is no material contract (not being entered into in the ordinary course of business) entered into by any member of the Group within the two years immediately preceding the issue of this circular.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at 50/F, COSCO Tower, 183 Queen’s Road Central, Hong Kong from the date of this circular up to and including the date of the EGM:

(a) the Share Transfer Agreement;
(b) the letter from the Board, the text of which is set out in the section headed “Letter from the Board” in this circular;
(c) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;
(d) the articles of association of the Company;
(e) the annual reports of the Company for the years ended 31 December 2017, 2018 and 2019;
(f) the interim report of the Company for the six months ended 30 June 2020; and
(g) this circular.

9. MISCELLANEOUS

(a) The joint company secretaries of the Company are Mr. Cai Lei (“ Mr. Cai ”) and Ms. Ng Sau Mei (“ Ms. Ng ”). Mr. Cai is qualified as a national judicial professional and an insurance assessor, and holds the title of intermediate economist. Ms. Ng is an associate member of both The Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute (formerly known as The Institute of Chartered Secretaries and Administrators) in the United Kingdom.

– II-7 –

GENERAL INFORMATION

APPENDIX II

(b) 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.
(c) The principal place of business of the Company in the PRC is 5299 Binjiang Dadao, Pudong New Area, Shanghai, the PRC.
(d) The principal place of business of the Company in Hong Kong is 50/F, COSCO Tower, 183 Queen’s Road Central, Hong Kong.
(e) 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.

– II-8 –

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.

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

(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 COSCO SHIPPING Development Co., Ltd. (the “ Company ”) will be held at 1:30 p.m. on Thursday, 29 October 2020 (or at any adjournment thereof) at Level 3, Ocean Hotel Shanghai, 1171 Dong Da Ming Road, Hong Kou District, Shanghai, the People’s Republic of China to consider and, if thought fit, pass the following resolutions.

Unless otherwise defined, capitalized terms used herein shall have the same meanings as those defined in the circular of the Company dated 13 October 2020 (the “ Circular ”).

SPECIAL RESOLUTIONS

To consider and approve the resolution in relation to the Restructuring:
(a) transaction overview;
(b) transaction method;
(c) target assets;
(d) transaction counterparties;
(e) transaction price and pricing basis;
(f) method of payment of the consideration;
(g) share transfer registration in respect of the target assets;

– EGM-1 –

NOTICE OF EGM

(h) the Restructuring not constituting a connected transaction;
(i) the Restructuring constituting a material asset restructuring; and
(j) validity period of the resolutions.
To consider and approve the resolution in relation to the Share Transfer Agreement, further details of which are set out in the Circular:

“ THAT

(a) the Share Transfer Agreement 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 Share Transfer Agreement and the transactions contemplated thereunder.”
To consider and approve the resolution in relation to the Report on the Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft) (《中遠海運發展股份有限公司重大資產出售報告書(草案)》) and its summary, further details of which are set out in the relevant overseas regulatory announcements of the Company dated 12 October 2020.
To consider and approve the resolution in relation to the Restructuring being in compliance with the relevant laws and regulations.
To consider and approve the resolution in relation to the completeness and compliance of the legal procedures and the validity of the legal documentation in respect of the Restructuring.
To consider and approve the resolution in relation to the Restructuring complying with Article 4 of the Provisions on Issues Concerning Regulating the Material Asset Restructuring of Listed Companies (《關於規範上市公司重大資產重組若干問題的規定》).
To consider and approve the resolution in relation to the Restructuring complying with Article 11 of the Administrative Measures for the Material Asset Restructuring of Listed Companies (《上市公司重大資產重組管理辦法》).

– EGM-2 –

NOTICE OF EGM

To consider and approve the resolution in relation to the review report and the valuation report in respect of the Restructuring, details of which are set out in the relevant overseas regulatory announcements of the Company dated 12 October 2020.
To consider and approve the resolution in relation to the independence of valuation agency, reasonableness of the assumptions of the valuation, correlation between the approach and purpose of the valuation and fairness of the basis of the consideration.
To consider and approve the resolution in relation to the authorization to the Board and its authorized persons to handle all matters in connection with the Restructuring.
To consider and approve the resolution in relation to the Shareholders’ Return Plan for the coming three years (2020 to 2022) of the Company, further details of which are set out in the relevant overseas regulatory announcement of the Company dated 12 October 2020.
To consider and approve the resolution in relation to the dilution on current returns and the remedial measures of the Company, further details of which are set out in the relevant overseas regulatory announcement of the Company dated 12 October 2020.

ORDINARY RESOLUTIONS

To consider and approve the resolution in relation to the proposed appointment of Mr. Ip Sing Chi as a non-executive Director.
To consider and approve the resolution in relation to the proposed appointment of Ms. Zhu Mei as a Supervisor.

By order of the Board

Cai Lei

Joint Company Secretary

Shanghai, the People’s Republic of China

13 October 2020

– EGM-3 –

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 27 October 2020 to 29 October 2020 (both days inclusive), during which period no transfer of H Shares of the Company will be registered. Holders of the Company’s H Shares (the “ H Shareholders ”) whose names appear on the Register of Members at the close of business on 23 October 2020 are entitled to attend and vote at the EGM.
In order to attend and vote at 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 23 October 2020.

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

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/her behalf at the EGM.
The Form of Proxy must be signed by the Shareholder or his/her attorney duly authorised in writing or, in the case of a legal person, must either be executed under its common seal or under the hand of a legal representative or other attorney duly authorised to sign the same. If the Form of Proxy is signed by an attorney of the appointer, the power of attorney authorising that attorney to sign, or other document 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 17M 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 of directors or other authorities, or other notarised copy of the licence issued by such legal person Shareholder. The Form of Proxy duly signed and submitted by HKSCC Nominees Limited are deemed to be valid, and it is not necessary for the proxy(ies) appointed by HKSCC Nominees Limited to produce the signed Form of Proxy when the proxy(ies) attend(s) the EGM. Completion and return of the Form of Proxy will not preclude a Shareholder from attending in person and voting at the EGM or any adjournment thereof should he/she so wish.
Pursuant to the Hong Kong 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, 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 Hong Kong Stock Exchange at www.hkexnews.hk after the EGM.
Where there are joint registered holders of any share of the Company, only the person whose name stands first on the Register of Members in respect of such share may vote at the EGM, either personally or by proxy, in respect of such share as if he/she were solely entitled thereto.
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.

– EGM-4 –

NOTICE OF EGM

The Board as at the date of this notice comprises Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, being executive Directors, Mr. Feng Boming, Mr. Huang Jian and Mr. Liang Yanfeng, being non-executive Directors, and Mr. Cai Hongping, Ms. Hai Chi Yuet, Mr. Graeme Jack, Mr. Lu Jianzhong and Ms. Zhang Weihua, being independent non-executive Directors.

The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Development Co., Ltd.”.

– EGM-5 –

AI assistant

COSCO SHIPPING Development Co., Ltd. — Proxy Solicitation & Information Statement 2020

50782_rns_2020-10-12_3b067bf6-3b5f-4e65-ac4b-1058dd159c72.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.[*]

(Stock Code: 02866)

(1) PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR (2) PROPOSED APPOINTMENT OF SUPERVISOR (3) MAJOR TRANSACTION DISPOSAL OF CIMC SHARES AND

(4) NOTICE OF EGM

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

(Stock Code: 02866)

(1) PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR

(2) PROPOSED APPOINTMENT OF SUPERVISOR (3) MAJOR TRANSACTION DISPOSAL OF CIMC SHARES AND

(4) NOTICE OF EGM

I. INTRODUCTION

II. PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR

LETTER FROM THE BOARD

III. PROPOSED APPOINTMENT OF SUPERVISOR

LETTER FROM THE BOARD

IV. THE DISPOSAL

Subject matter:

Consideration:

LETTER FROM THE BOARD

Payment:

LETTER FROM THE BOARD

Conditions precedent:

Completion:

Termination:

LETTER FROM THE BOARD

V. INFORMATION ON THE PARTIES TO THE SHARE TRANSFER AGREEMENT

Information on the Group

Information on Shenzhen Capital Operation and Shenzhen Capital Hong Kong

VI. INFORMATION ON THE CIMC GROUP

VII. FINANCIAL EFFECTS OF THE DISPOSAL

Earnings

Assets and liabilities

Proposed use of proceeds

VIII.REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

IX. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

X. IMPLICATIONS UNDER THE SHANGHAI LISTING RULES

1. Proposal in relation to the Restructuring

2. Proposal in relation to the Share Transfer Agreement

4. Proposal in relation to the Restructuring being in compliance with the relevant laws and regulations

5. Proposal in relation to the completeness and compliance of the legal procedures and the validity of the legal documentation in respect of the Restructuring

6. Proposal in relation to the Restructuring complying with Article 4 of the Provisions on Material Asset Restructuring

8. Proposal in relation to the review report and the valuation report in respect of the Restructuring

10. Proposal in relation to the authorization to the Board and its authorized persons to handle all matters in connection with the Restructuring

11. Proposal in relation to the Shareholders’ Return Plan for the coming three years (2020 to 2022) of the Company

12. Proposal in relation to the dilution on current returns and the remedial measures of the Company

XI. EGM

XII. RECOMMENDATION

Cai Lei

1. FINANCIAL INFORMATION OF THE GROUP

2. STATEMENT OF INDEBTEDNESS

Debt securities and term loans

Borrowings and indebtedness

Contingent liabilities

Mortgages and charges

3. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

APPENDIX I

4. WORKING CAPITAL

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Interests and short positions of Directors, Supervisors and chief executives

Interests in the shares of associated corporations of the Company

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

Interests of substantial Shareholders

3. SERVICE CONTRACTS

4. LITIGATION

5. MATERIAL INTERESTS

6. COMPETING INTERESTS

7. MATERIAL CONTRACTS

8. DOCUMENTS AVAILABLE FOR INSPECTION

9. MISCELLANEOUS

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

(Stock Code: 02866)

COSCO SHIPPING Development Co., Ltd. Proxy Solicitation & Information Statement 2020