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

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

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

(Stock Code: 1919)

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS PROPOSED APPOINTMENT OF DIRECTORS AND SUPERVISOR AND NOTICE OF EGM

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

The letter from the Board is set out on pages 7 to 25 of this circular. The letter from the Independent Board Committee is set out on pages 26 to 27 of this circular. The letter from the Independent Financial Adviser is set out on pages 28 to 56 of this circular. A notice convening the extraordinary general meeting (the “ EGM ”) of the Company to be held at Conference Room, 47th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong and Ocean Hall, 5th Floor, Shanghai Ocean Hotel, No. 1171, Dong Da Ming Road, Shanghai, People’s Republic of China on Friday, 16 December 2016 at 2:00 p.m. is set out on pages 72 to 79 of this circular.

Whether or not you intend to attend the EGM, you are requested to complete and return the form of proxy in accordance with the instructions printed on it. The proxy form should be returned to the H share registrar of the Company, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 24 hours before the time appointed for the EGM or any adjournment of it. If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to the H share registrar of the Company, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on or before Friday, 25 November 2016.

Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

* For identification purpose only

29 October 2016

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Major Transaction and Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . .	8
Proposed Appointment of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Proposed Appointment of Supervisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . .	26
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . .	28
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . . .	57
APPENDIX II — BIOGRAPHIES OF PROPOSED DIRECTORS AND SUPERVISOR .	60
APPENDIX III — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	64
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72

— i —

DEFINITIONS

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

“Articles of Association”

the articles of association of the Company as amended, revised or supplemented from time to time

“associate(s)”

has the meaning ascribed to it under the Hong Kong Listing Rules

“Board”

the board of Directors

“Business Day(s)”

a day on which banks in the PRC and Hong Kong are generally open for normal banking business

“CBRC”
China Banking Regulatory Commission (中國銀行業監督管理委員會)
“China Shipping”
China Shipping (Group) Company* (中國海運 (集團) 總公司), a PRC state-owned enterprise and a wholly-owned subsidiary of COSCO SHIPPING
“China Shipping Group”

China Shipping and its subsidiaries

“Company”
China COSCO Holdings Company Limited (中國遠洋控股股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H shares of which are listed on the Stock Exchange and the A shares of which are listed on the Shanghai Stock Exchange
“Continuing Connected Transactions”
the continuing connected transactions of the Company contemplated under each of the Master Agreements and the Trademark Licence Agreement
“COSCO”
China Ocean Shipping (Group) Company (中國遠洋運輸(集團)總公司), a Chinese state-owned enterprise and the controlling Shareholder, and a wholly-owned subsidiary of COSCO SHIPPING
“COSCO Bulk”
China COSCO Bulk Shipping (Group) Co., Ltd.* (中遠散貨運輸(集團)有限公司), a limited liability company established in the PRC and a direct wholly-owned subsidiary of COSCO
“COSCO Finance”
COSCO Finance Co., Ltd. (中遠財務有限責任公司), a company established in the PRC and a subsidiary of COSCO
“COSCO Group”
COSCO and its subsidiaries and associates (excluding the Group)

— 1 —

DEFINITIONS

“COSCO SHIPPING”
“COSCO SHIPPING Group”
“COSCO SHIPPING Ports”
“COSCO SHIPPING Ports Financial Services Agreement”
“COSCON”
“CSCL”

“CS Finance”

“CS Finance Financial Services Agreement”
“CSCL Group”
“Definitive Agreements”

“Directors”

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

COSCO Shipping and its subsidiaries and associates

COSCO SHIPPING Ports Limited (formerly known as COSCO Pacific Limited), a limited liability company incorporated in Bermuda whose shares are listed on the Stock Exchange, and an indirect subsidiary of the Company

the financial services agreement dated 25 August 2016 between COSCO SHIPPING Ports and COSCO Finance for the provision of certain financial services provided by COSCO Finance to COSCO SHIPPING Ports and its subsidiaries, as further described in the announcement of COSCO SHIPPING Ports dated 25 August 2016
COSCO Container Lines Co., Ltd (中遠集裝箱運輸有限公司), a company incorporated in the PRC and a subsidiary of the Company
China Shipping Container Lines Company Limited* (中海集裝箱運輸股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 2866) and the A shares of which are listed on the Shanghai Stock Exchange in the PRC (Stock Code: 601866)
China Shipping Finance Company Limited (中海集團財務有限責任公司), a company incorporated in the PRC with limited liability and a non-wholly-owned subsidiary of CSCL
the financial services agreement dated 30 March 2016 entered into between the Company and CS Finance, details of which were set out in the announcement of the Company dated 30 March 2016
CSCL and its subsidiaries and associates

the definitive agreements to be entered into between members of the Group and members of the COSCO SHIPPING Group under the relevant Master Agreement

directors of the Company

— 2 —

DEFINITIONS

“EGM”

“Existing CS Finance Financial Services Agreement”
“Existing Financial Services Agreement”
“Existing Master Port Services Agreement”
“Existing Master Vessel Services Agreement”
“Financial Services Agreement”
“Freight Forwarding Master Agreement”
“Group”
“HK$”
“HKFRSs”
“Hong Kong”
“Hong Kong Listing Rules” or “Listing Rules”

the extraordinary general meeting of the Company to be held at Conference Room, 47th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong and Ocean Hall, 5th Floor, Shanghai Ocean Hotel, No. 1171, Dong Da Ming Road, Shanghai, People’s Republic of China on Friday, 16 December 2016 at 2:00 p.m.

the financial services agreement dated 30 March 2016 between the Company and CS Finance in relation to the provision of certain financial services provided by CS Finance to the COSCO Group

the financial services agreement dated 29 August 2013 between COSCO Finance and the Company for the provision of certain financial services provided by COSCO Finance

the master port services agreement dated 29 August 2013 between the Company and COSCO in relation to provision of port services by the COSCO Group to the Group

the master vessel services agreement dated 29 August 2013 between the Company and COSCO in relation to mutual provision of vessel services between the Group and the COSCO Group

the financial services agreement dated 14 September 2016 entered into between COSCO SHIPPING and the Company for the provision of certain financial services by COSCO Finance and CS Finance to the Company and its subsidiaries

the freight forwarding master agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to mutual provision of freight forwarding services, freight solicitation and other related services between the COSCO SHIPPING Group and the Group

the Company and its subsidiaries and associates

Hong Kong dollars, the lawful currency of Hong Kong

Hong Kong Financial Reporting Standards

Hong Kong Special Administrative Region of the People’s Republic of China

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

— 3 —

DEFINITIONS

“Independent Board Committee”
“Independent Financial Advisers”
“Independent Shareholders”
“Latest Practicable Date”
“Lease Agreement”
“Master Agreements”
“Master Container Services Agreement”
“Master General Services Agreement”

independent board committee of the Board consisting of all the independent non-executive Directors

Platinum Securities Company Limited, a licensed corporation under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Non-exempt Master Agreements and the respective proposed annual caps for such transactions and the proposed annual caps of the transactions for each of the three years ending 31 December 2019

the Shareholders other than the COSCO SHIPPING Group and its associates
22 October 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion herein.

the lease agreement dated 11 December 2015 entered into between the Company and CSCL in relation to provision of the leasing of vessels and containers by CSCL to Company, details of which were disclosed in the announcement of the Company dated of 11 December 2015 and the circular of the Company dated 30 December 2015

collectively, the Master General Services Agreement, the Master Vessel Services Agreement, the Master Container Services Agreement, the Master Seamen Leasing Agreement, the Freight Forwarding Master Agreement, the Master Port Services Agreement, the Master Premises Leasing Agreement, the Financial Services Agreement and the Master Vessel and Container Asset Services Agreement

the master container services agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to mutual provision of container services between the Group and the COSCO SHIPPING Group the master general services agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to mutual provision of general services between the Group and the COSCO SHIPPING Group

— 4 —

DEFINITIONS

“Master Port Services Agreement”
“Master Premises Leasing Agreement”
“Master Seamen Leasing Agreement”

master port services agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to provision of port services by the COSCO SHIPPING Group to the Group the master premises leasing agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to mutual leasing of premises between the Group and the COSCO SHIPPING Group the master seamen leasing agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to mutual provision of seamen leasing services between the Group and the COSCO SHIPPING Group

“Master Vessel and Container Asset Services Agreement”
the master vessel and container asset services agreement dated 14 September 2016 entered into between the Company and COSCO SHIPPING in relation to the leasing of vessels and containers by the Group from the COSCO SHIPPING Group and the sale of containers by COSCO SHIPPING Group to the Group

“Master Vessel Services the master vessel services agreement dated 14 September Agreement” 2016 entered into between the Company and COSCO SHIPPING in relation to mutual provision of vessel services between the Group and the COSCO SHIPPING Group “Non-exempt Continuing the continuing connected transactions under the Non-exempt Connected Transactions” Master Agreements

“Non-exempt Master Agreements” collectively, (i) the Master Vessel Services Agreement, (ii) the Master Port Services Agreement, (iii) the Financial Services Agreement, and (iv) the Master Vessel and Container Asset Services Agreement
“PBOC”

the People’s Bank of China, the central bank of the PRC

“PRC”
the People’s Republic of China which, for the purpose of this circular and for geographical reference only, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
“PRC GAAP” the PRC Generally Accepted Accounting Principles

— 5 —

DEFINITIONS

“Restructuring Circular”	the circular of the Company dated 31 December 2015 in
	relation to certain asset restructuring activities of the
	Company involving, among other things, the entering into of
	the Lease Agreement
“RMB”	Reminbi yuan, the lawful currency of the PRC
“SASAC”	國務院國有資產監督管理委員會 (State-owned Assets
	Supervision and Administration Commission of the State
	Council of the PRC)
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholder(s)”	holder(s) of the share(s) of the Company
“Shares”	the shares of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supervisor(s)”	supervisor(s) of the Company
“Trademark Licence Agreement”	the trademark licence agreement dated 14 September 2016
	entered into between the Company and COSCO SHIPPING in
	relation to the granting of the non-exclusive right to the
	Company and its subsidiaries to use certain trademarks of
	COSCO SHIPPING
“%”	per cent

— 6 —

LETTER FROM THE BOARD

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中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

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

(Stock Code: 1919)

Directors: Mr. WAN Min[2] (Chairman) Mr. HUANG Xiaowen[1] (Vice Chairman) Ms. SUN Yueying[2] Mr. SUN Jiakang[1] Mr. YE Weilong[1] Mr. WANG Yuhang[2] Mr. XU Zunwu[1] Dr. FAN HSU Lai Tai, Rita[3]

Mr. KWONG Che Keung, Gordon[3] Mr. Peter Guy BOWIE[3] Mr. YANG, Liang Yee Philip[3]

Registered Office: 2nd Floor, 12 Yuanhang Business Centre Central Boulevard and East Seven Road Junction Tianjin Airport Economic Zone Tianjin, the PRC

Head office and principal place of business in Hong Kong: 49th Floor COSCO Tower 183 Queen’s Road Central Hong Kong

1 Executive Director

2 Non-executive Director

3 Independent Non-executive Director

29 October 2016

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS AND PROPOSED APPOINTMENT OF DIRECTORS AND SUPERVISOR

INTRODUCTION

Reference is made to the announcement of the Company dated 14 September 2016 in relation to, among other things, the Continuing Connected Transactions and the announcements of the Company dated 25 August 2016 and 28 October 2016 in relation to, among other things, the proposed appointment of Directors and Supervisor.

* For identification purpose only

— 7 —

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details of the Non-exempt Continuing Connected Transactions and the respective proposed annual caps for such transactions for each of the three years ending 31 December 2019 ; (ii) a letter from the Independent Board Committee with its recommendation to the Independent Shareholders on the Non-Exempt Continuing Connected Transactions; (iii) a letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders; (iv) details of the proposed appointment of Directors and Supervisor; and (v) the notice of EGM.

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

1. MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

Each of the Non-exempt Master Agreements were entered into on 14 September 2016 and shall take effect subject to the approval of the relevant Non-exempt Master Agreements and the proposed annual caps thereunder from relevant authoritative bodies (including at the meetings of the Board and the Shareholders’ meetings, if required) in accordance with the articles of association of the relevant contracting parties, applicable laws, regulations and securities exchange rules.

During the term of each of the Non-exempt Master Agreements, relevant members of the Group may enter into Definitive Agreements with relevant members of the COSCO SHIPPING Group from time to time in respect of the provision and receipt of the relevant goods and services to and/or from the Group, upon and subject to the terms and conditions in compliance with the relevant Non-exempt Master Agreement.

Particulars of the Non-exempt Master Agreements are set forth below:

(1) Financial Services Agreement

Parties: (1) the Company (for itself and on behalf of its subsidiaries); and (2) COSCO SHIPPING (for itself and on behalf of its subsidiaries) Nature of transaction: Pursuant to the Financial Services Agreement, COSCO SHIPPING will procure COSCO Finance and CS Finance (each being a non wholly-owned subsidiary of COSCO SHIPPING) to provide the Company and its subsidiaries with certain financial services, including the following:

(i) deposit services;
(ii) loan services;
(iii) clearing services;
(iv) foreign exchange services; and
(v) any other services that COSCO Finance and CS Finance can engage in as permitted by the CBRC.

— 8 —

LETTER FROM THE BOARD

The transaction terms of the services to be provided under the Financial Services Agreement shall be normal commercial terms and fair and reasonable, and shall not be less favourable to the Company and its subsidiaries than those offered by COSCO Finance and CS Finance to other members of the COSCO SHIPPIING Group for the same type of services and shall not be less favourable than the terms offered by independent third party onshore financial institutions to the Company and its subsidiaries for the same type of services.

Pricing policies:

The interest rates for deposits shall be determined (i) with reference to market interest rates, being interest rates determined by independent third party onshore commercial banks providing the same type of deposit services in their ordinary course of business in the same or nearby service area and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness; and (ii) with reference to the interest rate charged by COSCO Finance and CS Finance for the same type of deposits from other entities.

The interest rates for loans shall be determined (i) with reference to market interest rates, being interest rates determined by independent third party onshore commercial banks providing the same type of loan services in their ordinary course of business in the same or nearby service area and subject to normal commercial terms, and shall be in accordance with the principle of fairness and reasonableness; and (ii) with reference to the interest rate charged by COSCO Finance and CS Finance on the same type of loans provided to other entities.

The clearing services provided by COSCO Finance and CS Finance to the Company and its subsidiaries shall be free of charge for the time being.

The pricing policies for other services, including but not limited to foreign exchange services, shall be determined with reference to (i) the handling fees charged by independent third party onshore commercial banks to the Company and its subsidiaries for the same type of services; and (ii) the handling fees charged by COSCO Finance and CS Finance to independent third parties with the same credit rating for the same type of services.

— 9 —

LETTER FROM THE BOARD

To ensure that the pricing policies under the Financial Services Agreement are complied with, prior to conducting transactions under the Financial Services Agreement, the Company will enquire with third party commercial banks and other financial institutions about the interest rates for loans and deposits in the same or nearby area for the same type of services and the handling fees for provision of similar financial services, to compare with the interest rates for loans and deposits and handling fees provided by COSCO Finance or CS Finance.

Historical transaction amounts:

The table below sets forth the historical transaction amounts of the financial services provided by COSCO Finance and CS Finance to the Company and its subsidiaries under the Existing Financial Services Agreement and the CS Finance Financial Services Agreement for the two years ended 31 December 2015 and the six months ended 30 June 2016 and the aggregate annual cap for the year ending 31 December 2016 under the Existing Financial Services Agreement and Existing CS Finance Financial Services Agreement:

				Aggregate
				annual cap for
	For the year	For the year	For the six	the year
	ended 31	ended 31	months ended	ending 31
	December	December	30 June	December
	2014(1)	2015(1)	2016(2)	2016
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Maximum daily outstanding balance	12,725,649	11,567,673	10,909,864	COSCO
of deposits (including accrued				Finance(1):
interest and handling fee) placed				18,000,000
by the Company and its				CS Finance:
subsidiaries with COSCO Finance				650,000
and CS Finance
Maximum daily outstanding balance	122,803	1,554,710	2,533,718	COSCO
of loans (including accrued				Finance(1):
interest and handling fee) granted				8,000,000
by COSCO Finance and CS				CS Finance:
Finance to the Company and its				120,000
subsidiaries

(1) these amounts exculde the deposits placed by or loans granted to COSCO SHIPPING Ports and its subsidiaries and were determined in accordance with HKFRSs

(2) these amounts were determined in accordance with PRC GAAP

As far as the Directors are aware, the annual caps for the year ending 31 December 2016 had not been exceeded as at the Latest Practicable Date.

— 10 —

LETTER FROM THE BOARD

Proposed annual caps and basis of determination for annual caps:

The proposed annual caps for the transactions contemplated under the Financial Services Agreement for the three years ending 31 December 2019 and the basis of determination for such annual caps are set out as follows:

Deposit Services

	For the year	For the year	For the year
	ending 31	ending 31	ending 31
	December	December	December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Maximum daily outstanding balance of deposits
(including accrued interest and handling fee) to
be placed by the Company and its subsidiaries
with COSCO Finance and CS Finance	29,000,000	31,000,000	33,000,000

The above proposed annual caps were determined with reference to (i) the historical transactions amounts, (ii) the strategies of the capital management of the Company, and (iii) the expected positive development in the shipping market.

Loan Services

	For the year	For the year	For the year
	ending 31	ending 31	ending 31
	December	December	December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Maximum daily outstanding balance of loans (including
accrued interest and handling fee) to be granted by
COSCO Finance and CS Finance to the Company and
its subsidiaries	22,000,000	24,000,000	26,000,000

The above proposed annual caps were determined with reference to (i) the historical transactions amounts, (ii) the capital management strategies of the Company and (iii) the expected positive development in the shipping market and the expected increase in shipping capacity of the Group.

— 11 —

LETTER FROM THE BOARD

Reasons for entering into the Financial Services Agreement:

The operations of COSCO Finance and CS Finance are subject to the guidelines and requirements issued by the PBOC and the supervision of the CBRC. To the best of the Directors’ knowledge and belief, COSCO Finance and CS Finance have been in compliance with all the major financial services rules and regulations and have sound internal control systems. As intra-group service providers, COSCO Finance and CS Finance generally have better and more efficient communication with the Company and its subsidiaries compared with independent banks and financial institutions. COSCO Finance and CS Finance can provide financial services, including the foreign exchange deposits and lending services, based on the approval issued by the CBRC. The Company and its subsidiaries may negotiate more favourable terms with COSCO Finance and CS Finance compared with other commercial banks.

On 25 August 2016, COSCO SHIPPING Ports (an indirect subsidiary of the Company) (for itself and on behalf of its subsidiaries) and COSCO Finance entered into the COSCO SHIPPING Ports Financial Services Agreement, the principal terms of which are substantially the same as the Financial Services Agreement. The transactions contemplated under the COSCO SHIPPING Ports Financial Services Agreement and the proposed annual caps are proposed to be covered by the Financial Services Agreement. The COSCO SHIPPING Ports Financial Services Agreement will take effect upon obtaining approvals from the independent shareholders of COSCO SHIPPING Ports. For more details of the COSCO SHIPPING Ports Financial Services Agreement, please refer to the announcement of COSCO SHIPPING Ports dated 25 August 2016.

(2) Master Vessel Services Agreement

Parties:	(1)	the Company (for itself and on behalf of its subsidiaries
		and/or associates); and
	(2)	COSCO SHIPPING (for itself and on behalf of its
		subsidiaries and/or associates)
Nature of transaction:	Mutual provision of the following vessel services between the
	Group and the COSCO SHIPPING Group:
	(i)	vessel lubricants;
	(ii)	vessel fuel;
	(iii)	vessel materials and related repairing services;
	(iv)	vessel safety management and technical consultancy
		services for vessel;
	(v)	paint for vessel and maintenance of paint;
	(vi)	vessel repairing and conversion services;
	(vii)	vessel parts;

— 12 —

LETTER FROM THE BOARD

(viii) radio communication equipment reservation, repairing and installation;
(ix) provision and repairing of vessel equipment services;
(x) shipbuilding supervision technology services;
(xi) brokerage services in respect of vessel trade and vessel insurance and brokerage services; and
(xii) other vessels-related services.

Pricing policy:

The services fees charged under the Master Vessel Services Agreement will be determined with reference to the prevailing market price, being the price charged by independent third party service providers providing similar types of services in their ordinary course of business in the same or nearby service area and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness.

To ensure that the pricing policies under the Master Vessel Services Agreement are complied with:

(i) in respect of fuel purchases, prices will be determined based on (i) the market prices quoted by the two major suppliers in the tax-paid onshore marine bunker market, China Marine Bunker (Petrochina) Co., Ltd., whose equity interest is held as to 50% by each of COSCO and PetroChina, and China Shipping & Sinopec Suppliers Co., Ltd., whose equity interest is held as to 50% by each of China Shipping and Sinopec, in respect of tax-paid onshore fuel purchases; and (ii) the benchmark prices quoted on Platts in respect of offshore fuel and tax exempt onshore fuel purchases.
(ii) in respect of other transactions, the Company will strictly comply with the supply and purchase management procedures, and reference will be made to the pricing guidance issued by the relevant industry association or quotations from third parties will be solicited as comparison to ensure that the terms offered to or by the independent third parties are not more favorable to the Group than those offered to or by COSCO Shipping Group under the Master Vessel Services Agreement.

— 13 —

LETTER FROM THE BOARD

Historical transaction amounts:

The table below sets forth the historical transaction amounts of the transactions under the Existing Master Vessel Services Agreement for the two years ended 31 December 2015 and the six months ended 30 June 2016 and the annual cap for the year ending 31 December 2016:

				Annual cap
	For the year	For the year	For the Six	for the year
	ended 31	ended 31	months ended	ending 31
	December	December	30 June	December
	2014(1)	2015(1)	2016(2)	2016
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of vessel services from the
COSCO Group under the Existing
Master Vessel Services Agreement	10,750,465	6,768,610	1,517,911	29,000,000
Provision of vessel services to the
COSCO Group under the Existing
Master Vessel Services Agreement	17,352	20,518	13,622	140,000

(1) these amounts were determined in accordance with HKFRSs
(2) these amounts were determined in accordance with PRC GAAP

As far as the Directors are aware, the annual caps for the year ending 31 December 2016 had not been exceeded as at the Latest Practicable Date.

Proposed annual caps and basis of determination for annual caps:

The proposed annual caps for the transactions contemplated by the Master Vessel Services Agreement for the three years ending 31 December 2019 and the basis of determination for such annual caps are set out as follows:

	For the year	For the year	For the year
	ending 31	ending 31	ending 31
	December	December	December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of vessel services from the
COSCO SHIPPING Group	30,000,000	31,000,000	32,000,000
Provision of vessel services to the
COSCO SHIPPING Group	140,000	160,000	180,000

— 14 —

LETTER FROM THE BOARD

The above proposed annual caps were determined with reference to (i) the historical transactions amounts, (ii) potential oil price increase and usage of oil in the future, (iii) exchange rate fluctuation of RMB against the US dollar, and (iv) the expected growth in the level of operations of the Group. In respect of provision of vessel services, in determining the proposed annual caps, consideration had also been given to the expected increase in service charges due to the expected increase in demand for materials and parts, vessel repairs and others vessel services from the COSCO SHIPPING Group.

Reasons for entering into the Master Vessel Services Agreement:

Vessel services such as vessel repair and provision of fuel and lubricants do not form a main part of the business of the Group, and in order to operate its vessel fleet, the Group mainly outsources such services. COSCO SHIPPING, owns professional companies which provide vessel repairing services and supply vessel fuel and lubricants. In light of the good relationship between COSCO SHIPPING and the Group, the Group had negotiated more favourable terms with COSCO SHIPPING compared with other suppliers historically and is expected to be able to continue to negotiate more favourable terms with COSCO SHIPPING compared with other suppliers.

Certain subsidiaries of the Company also operate the business of providing materials, parts and repair services to the Group’s self-operated vessels in certain domestic and overseas areas. Provision of such services to the COSCO SHIPPING Group in such areas will enhance the business scope and reduce the operation costs of the Group.

(3) Master Port Services Agreement:

Parties: (1) the Company (for itself and on behalf of its subsidiaries and/or associates); and (2) COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates) Nature of transaction: The provision by the COSCO SHIPPING Group to the Group of the following: (i) containers and goods loading and unloading at port; (ii) container port and shipping services; (iii) port concession arrangements; (iv) leasing and electricity supply in relation to port coastline and port land; and (v) other port-related and ancillary services. Pricing policy: The services fees charged under the Master Port Services Agreement will be determined with reference to the prevailing market price, being the price charged by independent third party service providers providing similar types of services in their ordinary course of business in the same or nearby service area and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness.

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LETTER FROM THE BOARD

To ensure that the pricing policies under the Master Port Services Agreement are complied with, in respect of offshore port services, the Company will (i) conduct market research to collect market service fees in the same industry; and (ii) solicit at least three service providers to provide quotations if there are other appropriate service providers in the same or nearby area available, and selection will be made primarily based on price offered, but consideration will also be given to the efficiency of operation of ports, service levels and effectiveness of communication of the service providers.

In respect of onshore port-related and ancillary services, the Group will centralize purchase to obtain discount rates and pricing will be based on the reference rates published by the Ministry of Transport of the PRC, which the market commonly relies on.

Historical transaction amounts:

The table below sets forth the historical transaction amounts of the transactions under the Existing Master Port Services Agreement for the two years ended 31 December 2015 and the six months ended 30 June 2016 and the annual cap for the year ending 31 December 2016:

				Annual cap
	For the year	For the year	For the six	for the year
	ending 31	ending 31	months ended	ending 31
	December	December	30 June	December
	2014(1)	2015(1)	2016(2)	2016
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of services from the
COSCO Group and under the
Existing Master Port Services
Agreement	901,570	754,767	425,048	1,250,000

(1) these amounts were determined in accordance with HKFRSs

(2) this amount was determined in accordance with PRC GAAP

As far as the Directors are aware, the annual cap for the year ending 31 December 2016 had not been exceeded as at the Latest Practicable Date.

Proposed annual caps and basis of determination for annual caps:

The proposed annual caps for the transactions contemplated by the Master Port Services Agreement for the three years ending 31 December 2019 and the basis of determination for such annual cap amounts are set out as follows:

	For the year	For the year	For the year
	ending 31	ending 31	ending 31
	December	December	December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of services from the
COSCO SHIPPING Group	3,600,000	4,000,000	4,500,000

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LETTER FROM THE BOARD

The above proposed annual caps were determined by reference to (i) the historical transactions amounts, (ii) general inflation, (iii) exchange rate fluctuations, and (iv) the expected increase in the provision of port services to the Group in relation to the ports of COSCO SHIPPING, including the ports in Long Beach, California, Los Angeles and Seattle of the United States of America and the port in Piraeus, Greece which was recently acquired.

Reasons for entering into the Master Port Services Agreement

The Directors consider the Master Port Services Agreement to be consistent with the business and commercial objectives of the Group. Port services at terminals are provided by terminal operators. The port services being covered by the Master Port Services Agreement principally represent port services, such as container handling, storage and loading and unloading, provided by the COSCO SHIPPING Group at its owned and operated terminals. In light of the good relationship between COSCO SHIPPING and the Group, the Group had negotiated more favourable terms with COSCO SHIPPING compared with other suppliers historically and is expected to be able to continue to negotiate more favourable terms with COSCO SHIPPING compared with other suppliers.

(4) Master Vessel and Container Asset Services Agreement

On 14 September 2016, the Company and COSCO SHIPPING entered into the Master Vessel and Container Asset Services Agreement in relation to, among other things, the leasing of vessels and containers by the Group from the COSCO SHIPPING Group and the sale of containers by the COSCO SHIPPING Group to the Group. Transactions contemplated under the Lease Agreement and the proposed annual caps in respect of the leasing of vessels and containers from the CSCL Group by the Group for the two years ending 31 December 2018 are proposed to be covered by the Master Vessel and Container Asset Services Agreement.

Parties:

(1) the Company (for itself and on behalf of its subsidiaries and/or associates); and
(2) COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates)

Nature of transaction:

The COSCO SHIPPING Group shall provide the following services to the Group:

(i) charter and leasing of vessels and containers owned and operated by members of the COSCO SHIPPING Group; and
(ii) manufacture of containers.

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LETTER FROM THE BOARD

Pricing policy:

The fees payable by the Group under the Master Vessel and Container Asset Services Agreement shall be determined based on market rates determined by independent third parties providing similar types of products or services in their ordinary course of business in the same or nearby area and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness. In case of leasing of vessels and containers covered by the Lease Agreement, the fees shall be determined in accordance with the pricing policies set out in the Lease Agreement, which was determined with reference to the consultancy report issued by Drewry Shipping Consultant Ltd in 2015, as further described in the Restructuring Circular.

To ensure that the pricing policies under the Master Vessel and Container Asset Services Agreement are complied with:

In respect of the leasing of vessels, the Company will (i) regularly conduct market research to gauge the leasing rates in the vessel leasing market; and (ii) refer to the pricing and estimates on the various types of vessels of China Shipping Group in the report prepared by Drewry Shipping Consultant Ltd. (a summary of which is disclosed in the Restructuring Circular).
In respect of the leasing of containers, based on the specific requirements of the Company, quotations will be solicited from the panel of approved suppliers of the Company (which currently comprises at least 13 independent third party suppliers and 1 supplier within the COSCO Shipping Group), and selection will be primarily based on pricing, and considering other factors such as principal terms offered.
In respect of the manufacture of containers, the Group will solicit quotations in the open market normally from each of the four principal container manufacturers in the PRC, and selection shall be based on price, delivery schedule, delivery services and quality of containers based on historical transactions.

Historical transaction amounts:

The table below sets forth the historical transaction amounts of the leasing of containers and vessels payable by the Group to the COSCO SHIPPING Group for the six months ended 30 June 2016:

For the six months ended 30 June 2016[(1)] (RMB’000) Aggregate amount payable by the Group in respect of leasing of vessels and containers 3,075,432

(1) this amount was determined in accordance with PRC GAAP

— 18 —

LETTER FROM THE BOARD

Proposed annual caps and basis of determination for annual caps:

The proposed annual caps for the transactions contemplated by the Master Vessel and Container Asset Services Agreement for the three years ending 31 December 2019 and the basis of determination for such annual caps are set out as follows:

	For the year	For the year	For the year
	ending 31	ending 31	ending 31
	December	December	December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Aggregate amount payable by the Group to the
COSCO SHIPPING Group in respect of leasing
of vessels and containers as well as manufacture
and sale of containers	15,000,000	18,000,000	25,000,000

The above proposed annual caps in respect of leasing of vessels and containers were determined with reference to: (i) the proposed annual caps for the leasing of vessels and containers from the CSCL Group to the Group under the Lease Agreement which was approved at the extraordinary general meeting of the Company held on 1 February 2016; (ii) the expected transaction amount in the coming three years in respect of other vessel and container leasing transactions between COSCO Container Lines Co., Ltd. and COSCO SHIPPING and its subsidiaries; (iii) fluctuations in the exchange rate of RMB against the US dollar; (iv) fluctuations in rents in the vessel and container markets; and (v) the expansion of the business scale of the Group.

The above proposed annual caps in respect of manufacture and sale of containers were determined with reference to the expected amount in the coming three years in respect of transactions for the manufacture of new containers between COSCO Container Lines Co., Ltd and subsidiaries of COSCO SHIPPING.

Reasons for entering into the Master Vessel and Container Asset Services Agreement

The Directors believe that the Master Vessel and Container Asset Services Agreement is in line with the business and commercial objective of the Company. In view of the rapid expanding and development of both international and domestic container transportation market, improving shipping route network layout as well as good corporate brand and creditworthiness of the COSCO SHIPPING Group, the Directors believe that the continuing long-term collaboration in respect of the vessel and container asset leasing and container manufacturing service between the Group and the COSCO SHIPPING Group would decrease operating costs and achieve advantages complementation, as well as achieve synergy in the domestic and international shipping market.

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LETTER FROM THE BOARD

2. INTERNAL CONTROL PROCEDURES

In addition to the annual review by the auditors and independent non-executive Directors pursuant to the requirements of Chapter 14A of the Hong Kong Listing Rules, as part of the Group’s internal controls systems to ensure that the transactions between the Group and its connected persons are conducted in accordance with the pricing policy under the Master Agreements, the Company will implement the following internal control arrangements:

(i) The legal and risk management department of the Company, in conjunction with the supervision and audit department of the Company, will regularly examine the pricing of transactions under the Master Agreements to ensure that the continuing connected transactions under the Master Agreements are conducted in accordance with the pricing terms thereof, including reviewing the transaction records of the Company for the purchase or provision of similar goods or services from or to independent third parties, as the case may be.
(ii) The supervision and audit department of the Company may request for written documents to be provided by the connected persons under the Master Agreements to demonstrate that their transaction pricing complies with the pricing terms as stipulated in the Master Agreements and that the prices offered to or received from the Group are not less favorable to the Group than the prices offered to or received from other independent third parties for similar types of services or goods.
(iii) The legal and risk management department, the financial management department and the supervision and audit department of the Company will regularly convene meetings to discuss issues in the transactions under the Master Agreements and recommendations for improvement.
(iv) The legal and risk management department of the Company will summarize the transaction amounts incurred under the Master Agreements regularly on a monthly basis and submit reports to the management of the Company. The management and the competent departments of the Company can be informed of the status of the continuing connected transactions in a timely manner such that the transactions can be conducted within the annual cap.

The Board is of the view that the above methods and procedures can ensure that the pricing and other contract terms for the Group’s continuing connected transactions are on normal commercial terms, fair and reasonable and in the interests of the Company and its shareholders and that the continuing connected transactions are conducted as agreed in the relevant Master Agreement and in compliance with Chapter 14A of the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

3. DIRECTORS’ CONFIRMATION

Mr. Wan Min, Mr. Huang Xiaowen, Ms. Sun Yueying, Mr. Sun Jiakang, Mr. Ye Weilong, Mr. Wang Yuhang and Mr. Xu Zunwu, all being Directors nominated by COSCO have abstained from voting on the relevant board resolutions approving the Continuing Connected Transactions pursuant to the Articles of Association. Other than the above mentioned Directors, the remaining Directors are the independent non-executive Directors. Dr. Fan Hsu Lai Tai, an independent non-executive Director, has voluntarily abstained from voting on the Financial Services Agreement for the reason that she is an independent non-executive director of COSCO SHIPPING Ports, and the Financial Services Agreement would cover transactions under the COSCO SHIPPING Ports Financial Services Agreement, for which she has voluntarily abstained from voting. The independent non-executive Directors are of the view that the Master Agreements are entered into in the ordinary and usual course of business of the Company on normal commercial terms, and that the terms of the Master Agreements and the respective proposed annual caps thereunder for each of the three years ending 31 December 2019 are fair and reasonable and in the interests of the Shareholders as a whole (save for Dr. Fan Hsu Lai Tai who has abstained from voting and providing her view on the Financial Services Agreement).

4. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

COSCO SHIPPING is the indirect controlling Shareholder and therefore members of the COSCO SHIPPING Group are connected persons of the Company under Chapter 14A of the Hong Kong Listing Rules. Accordingly, the transactions contemplated under the Master Agreements and the Trademark Licence Agreement constitute connected transactions of the Company.

As one or more of the applicable percentage ratios of the proposed annual caps in respect of the transactions contemplated under each of the Master Vessel Services Agreement, the Master Port Services Agreement, and the Master Vessel and Container Asset Services Agreement exceed 5%, such transactions and the respective proposed annual caps for such transactions for each of the three years ending 31 December 2019 are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

As one or more of the applicable percentage ratios of the proposed annual caps for the deposit transactions under the Financial Services Agreement exceed 25%, such transactions constitute continuing connected transactions and a major transaction for the Company subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Hong Kong Listing Rules. As the loan transactions under the Financial Services Agreement will be conducted on normal commercial terms and will not be secured by the assets of the Group, and no service fee will be charged by COSCO Finance and CS Finance in relation to the clearing transactions, such loans and clearing transactions will be fully exempt from the reporting, annual review, announcement and shareholder approval requirements under Chapter 14A of the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

5. REQUIREMENTS UNDER THE SHANGHAI LISTING RULES

Pursuant to the Shanghai Listing Rules, transaction amounts under all types of related party transactions entered into in the ordinary and usual course of business of the Company and entered into between the Company and the same related party within a 12-month period should be aggregated (save for those which have complied with the relevant approval and/or disclosure procedures), and if the total aggregated transaction amount exceeds 5% of the net asset value of the Company and its subsidiaries as at the end of the preceding financial year, such related party transactions should be presented to a general meeting for independent shareholders’ approval. As the Continuing Connected Transactions also constitute related party transactions entered into in the ordinary and usual course of business of the Company under the Shanghai Listing Rules and were all entered into between the Company and COSCO SHIPPING, all the proposed annual caps in respect of the Continuing Connected Transactions shall be aggregated pursuant to the requirements under the Shanghai Listing Rules. It is expected that such aggregated amount for the year ending 31 December 2017 would exceed 5% of the net asset value of the Company and its subsidiaries as at 31 December 2016. Accordingly, despite that only the Non-exempt Master Agreements and the proposed annual caps thereunder are required to be approved by the Independent Shareholders under the Hong Kong Listing Rules, ordinary resolutions will be proposed at the EGM for the Independent Shareholders to consider and, if thought fit, approve all the Continuing Connected Transactions and the proposed annual caps contemplated thereunder.

6. INFORMATION ON THE RELEVANT PARTIES TO THE CONTINUING CONNECTED TRANSACTIONS

The Company was established in the PRC on 3 March 2005. The Company, through its various subsidiaries, provides a wide range of container shipping and terminal services covering the whole shipping value chain for both international and domestic customers.

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

COSCO is one of the mega-size state-owned enterprises under the SASAC. Apart from the business operated by the Group, the main business currently operated by the COSCO Group also includes operation of oil tankers and other liquefied bulk cargo shipping, general cargo and special vessel shipping, ship repair and retrofit, ship building, provision of vessel fuels, and provision of financial services, ship trading services and seaman and ship management services, etc.

COSCO Finance is a non-bank finance company established with the approval of PBOC which operates under the relevant guidelines and requirements issued by CBRC, being a non-bank financial institution authorized to provide treasury and other financial services to member companies and investment companies of the COSCO SHIPPING Group. As at the Latest Practicable Date, the equity interest in COSCO Finance was held as to 17.25% by the Company and 82.75% by other members of the COSCO Group, and is a subsidiary of COSCO.

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LETTER FROM THE BOARD

CS Finance is a non-wholly-owned subsidiary of CSCL. CS Finance is a company incorporated in the PRC with its principal business in deposit services, credit services, financial and financing consultation, credit verification and related consultation and agency services, settlement, and liquidation.

PROPOSED APPOINTMENT OF DIRECTORS

As disclosed in the announcement of the Company dated 25 August 2016, Mr. Wang Haimin and Mr. Zhang Wei (張為) have been proposed by the Board to be appointed as executive Directors of the fourth session of the Board, and Mr. Feng Boming, Mr. Zhang Wei (張煒) and Mr. Chen Dong have been proposed by the Board to be appointed as non-executive Directors of the fourth session of the Board. As disclosed in the announcement of the Company dated 28 October 2016, Mr. Ma Jianhua has been proposed by the Board to be appointed as a non-executive Director for the fourth session of the Board. According to the Articles of Association, the appointment of Directors is subject to the approval of the Shareholders at a general meeting. At the EGM, ordinary resolutions will be proposed to approve the appointment of Mr. Wang Haimin and Mr. Zhang Wei (張為) as executive Directors and the appointment of Mr. Feng Boming, Mr. Zhang Wei (張煒), Mr. Chen Dong and Mr. Ma Jianhua as non-executive Directors.

As, following the proposed change of Directors, the number of independent non-executive Directors will fall below the minimum requirement under Rule 3.10A of the Hong Kong Listing Rules, the Company will adjust the composition of the Board and ensure compliance with Rule 3.10A of the Hong Kong Listing Rules as soon as practicable.

The biographical details of Mr. Wang Haimin, Mr. Zhang Wei (張為), Mr. Feng Boming, Mr. Zhang Wei (張煒), Mr. Chen Dong and Mr. Ma Jianhua are included in Appendix II to this circular.

PROPOSED APPOINTMENT OF SUPERVISOR

As disclosed in the announcement of the Company dated 25 August 2016, Mr. Hao Wenyi has been nominated for the election as a Supervisor representing the Shareholders. At the EGM, an ordinary resolution will be proposed to approve the appointment of Mr. Hao Wenyi as a Supervisor of the fourth supervisory committee of the Company.

The biographical details of Mr. Hao Wenyi are set out in Appendix II to this circular.

EGM

The EGM will be held for the Shareholders to consider and, if thought fit, approve the Continuing Connected Transactions and the proposed appointment of Directors and Supervisor.

— 23 —

LETTER FROM THE BOARD

In accordance with the Hong Kong Listing Rules, COSCO SHIPPING Group, being connected persons of the Company and having material interest (which are different from those of the Independent Shareholders) in the Continuing Connected Transactions will abstain from voting at the EGM for the relevant resolutions. As at the Latest Practicable Date, COSCO SHIPPING Group held and controlled the voting rights of 4,557,594,644 A Shares and 87,635,000 H Shares, representing approximately 45.47% of the issued share capital of the Company.

A notice of the EGM, is set out on pages 72 to 79 of this circular. The EGM will be held at Conference Room, 47th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong and Ocean Hall, 5th Floor, Shanghai Ocean Hotel, No. 1171, Dong Da Ming Road, Shanghai, People’s Republic of China on Friday, 16 December 2016 at 2:00 p.m..

Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment of it should you so wish.

Pursuant to Rule 13.39(4) of the Hong Kong Listing Rules, any vote of the Shareholders to be taken at a general meeting of the Company shall be taken by poll. An announcement of the poll results will be made by the Company after the EGM in the manner prescribed under Rule 13.39(5) of the Hong Kong Listing Rules.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 26 to 27 of this circular and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 28 to 56 of this circular in connection with the continuing connected transactions contemplated under the Non-exempt Master Agreements, their respective proposed annual caps, and the principal factors and reasons considered by the Independent Financial Adviser in arriving at such advice.

The Independent Board Committee, having considered the terms of the Non-exempt Master Agreements and the advice of the Independent Financial Adviser, are of the opinion that: (i) the Non-exempt Master Agreements are entered into in the ordinary and usual course of business of the Company on normal commercial terms, (ii) the terms of the Non-exempt Master Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and (iii) the proposed annual caps for such transactions for each of the three years ending 31 December 2019 are fair and reasonable and in the interests of the Company and the Shareholders as a whole (save for Dr.

— 24 —

LETTER FROM THE BOARD

Fan Hsu Lai Tai who has abstained from voting and providing her view on the Financial Services Agreement). Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to approve Non-exempt Master Agreements and their proposed annual caps (save for Dr. Fan Hsu Lai Tai who has abstained from voting and providing her view on the Financial Services Agreement).

The Board recommends the Independent Shareholders to vote in favour of the resolutions to approve the Non-exempt Master Agreements, and the respective proposed annual caps for such transactions for each of the three years ending 31 December 2019 and the other Master Agreements and the Trademark Licence Agreement at the EGM.

ADDITIONAL INFORMATION

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

Yours faithfully, By order of the Board China COSCO Holdings Company Limited Guo Huawei Company Secretary

— 25 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [76 x 62] intentionally omitted <==

中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

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

(Stock Code: 1919)

29 October 2016

To the Independent Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to H Shareholders dated 29 October 2016 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to advise the Independent Shareholders as to whether (i) the Non-exempt Master Agreements were entered into in the ordinary and usual course of business of the Company on normal commercial terms, (ii) the terms of the Non-exempt Master Agreements are fair and reasonable and in the interests of the Shareholders as a whole, and that (iii) the proposed annual caps for such transactions for each of the three years ending 31 December 2019 are fair and reasonable and in the interests of the Shareholders as a whole.

Platinum Securities Company Limited has been appointed to act as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt Master Agreements. The text of the letter of advice from the Independent Financial Adviser containing their recommendations and the principal factors they have taken into account in arriving at their recommendations are set out from pages 28 to 56 of the Circular.

* For identification purposes only

— 26 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Non-exempt Master Agreements and the advice of the Independent Financial Adviser, we are of the opinion that (i) the Non-exempt Master Agreements are entered into in the ordinary and usual course of business of the Company on normal commercial terms, (ii) the terms of the Non-exempt Master Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and (iii) the proposed annual caps for such transactions for each of the three years ending 31 December 2019 are fair and reasonable and in the interests of the Company and the Shareholders as a whole (save for Dr. Fan Hsu Lai Tai who has abstained from voting and providing her view on the Financial Services Agreement). We therefore recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM to approve the Non-exempt Master Agreements and their respective proposed annual caps (save for Dr. Fan Hsu Lai Tai who has abstained from voting and providing her view on the Financial Services Agreement).

Yours faithfully,

For and on behalf of Independent Board Committee

Dr. FAN HSU Lai Tai, Mr. KWONG Che Keung, Mr. Peter Guy Mr. YANG, Liang Yee Rita Gordon BOWIE Philip Independent non-executive Directors

— 27 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Continuing Connected Transactions for the purpose of incorporation into this circular.

PLATINUM Securities Company Limited

21/F LHT Tower 31 Queen’s Road Central Hong Kong Telephone (852) 2841 7000 Facsimile (852) 2522 2700 Website www.platinum-asia.com

29 October 2016

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

MAJOR TRASACTION AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the (i) Financial Services Agreement, (ii) Master Vessel Services Agreement, (iii) Master Port Services Agreement, and (iv) Master Vessel and Container Asset Services Agreement (collectively, the “Agreements”). Details of the terms of the Agreements are contained in the circular of the Company dated 29 October 2016 (the “Circular”). Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

In our capacity as the Independent Financial Adviser, our role is to advise the Independent Board Committee and the Independent Shareholders as to whether the Agreements entered into were in the ordinary and usual course of business of the Group on normal commercial terms; the terms of the Agreements and the respective proposed annual caps under such agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole; and to give independent advice to the Independent Board Committee and the Independent Shareholders.

In formulating our opinion, we have relied on the information and facts supplied to us by the Directors and/or management of the Company. We have reviewed, among other things:

(i) the Agreements;
(ii) the announcement of the Company dated 14 September 2016;
(iii) the circular of the Company dated 19 September 2013;
(iv) the audited annual report of the Company for the financial year ended 31 December 2015; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) the Company’s internal control policies related to the Agreements.

We have assumed that all information, facts, opinions and representations contained in the Circular and all information, statements and representation provided to us by the Directors and/or the management of the Company, which we have relied on, are true, complete and accurate and not misleading in all material respects as at the date hereof. The Directors have confirmed that they take full responsibility for the contents of the Circular and have made all reasonable inquiries that no material facts have been omitted from the information supplied to us.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other matters not contained in the Circular, the omission of which would make any statement in the Circular misleading or deceptive.

We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy or completeness of the information of all facts as set out in the Circular and of the information and representations provided to us by the Directors and/or management of the Company. Furthermore, we have no reason to suspect the reasonableness of the opinions and representations expressed by the Directors and/or management of the Company which have been provided to us. In line with normal practice, we have not conducted a verification process of the information supplied to us, nor have we conducted any independent in-depth investigation into the business and affairs of the Company. We consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our opinion regarding the Non-exempted Continuing Connected Transactions.

We are independent from, and are not associated with the Company or any other party to the Non-exempt Continuing Connected Transactions, or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules and accordingly, are considered eligible to give independent advice on the Non-exempt Continuing Connected Transactions. We will receive a fee from the Company for our role as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Non-exempt Continuing Connected Transactions. Apart from this normal professional fee payable to us in connection with this appointment, no arrangements exist whereby we will receive any fees or benefits from the Company or any other party to the Non-exempt Continuing Connected Transactions or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules.

During the past two years, either or both of Mr. Liu Chee Ming and Mr. Li Lan, for and on behalf of Platinum Securities Company Limited, had signed the opinion letters from the independent financial adviser contained in the Company’s circulars (i) dated 12 September 2014 in respect of continuing connected transactions — new financial services agreement by COSCO Pacific Limited; (ii) dated 2 October 2015 in respect of discloseable and connected transaction — COSCO KHI Shipbuilding Agreements; and (iii) dated 31 December 2015 in respect of the major and connected transactions — (1) disposal of all the equity interests in China COSCO Bulk Shipping (Group) Co., Ltd; (2) acquisition of equity interests in agency companies; (3) disposal of all the issued shares of Florens Container Holdings Limited; (4) acquisition of all the issued shares of China Shipping Ports Development Co., Limited; and continuing connected transactions — leasing transactions. The past engagements were limited to providing independent advisory services to the independent board

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

committee and the independent shareholders of the Company pursuant to the Listing Rules. Under the past engagements, Platinum Securities Company Limited received normal professional fees from the Company. Notwithstanding the past engagements, as at the Latest Practicable Date, we were independent from, and were not associated with the Company or any other party to the Non-exempt Continuing Connected Transactions, or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules and accordingly, are considered eligible to give independent advice on the Non-exempt Continuing Connected Transactions. We will receive a fee from the Company for our role as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Non-exempt Continuing Connected Transactions. Apart from this normal professional fee payable to us in connection with this appointment, no arrangements exist whereby we will receive any fees or benefits from the Company or any other party to the Non-exempt Continuing Connected Transactions or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules.

The Independent Board Committee, comprising Dr. FAN HSU Lai Tai, Rita, Mr. KWONG Che Keung, Gordon, Mr. Peter Guy BOWIE and Mr. YANG Liang Yee Philip, has been established to advise the Independent Shareholders as to whether the Agreements were entered into in the ordinary and usual course of business of the Group on normal commercial terms, and the terms of the Agreements and the respective proposed annual caps under such agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Dr. Fan Hsu Lai Tai, an independent non-executive Director, is also an independent non-executive director of COSCO SHIPPING Ports. Since the Financial Services Agreement would cover transactions with the COSCO SHIPPING Ports, she has voluntarily abstained from voting.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating and giving our independent financial advice to the Independent Board Committee and the Independent Shareholders, we have taken into account the following principal factors:

1. Background of the Continuing Connected Transactions

Reference is made to the announcement of the Company dated 14 September 2016 in relation to, among other things, the Continuing Connected Transactions.

Each of the Non-exempt Master Agreements shall take effect subject to the approval of the relevant Non-exempt Master Agreements and the proposed annual caps thereunder from relevant authoritative bodies (including at the meetings of the Board and the Shareholders’ meetings, if required) in accordance with the articles of association of the relevant contracting parties, applicable laws, regulations and securities exchange rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Company was established in the PRC on 3 March 2005. The Company, through its various subsidiaries, provides a wide range of container shipping, dry bulk shipping, freight forwarding, terminals and container leasing services covering the whole shipping value chain for both international and domestic customers.

Chart 1: Corporate Chart of COSCO SHIPPING Group

==> picture [437 x 299] intentionally omitted <==

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

COSCO SHIPPING
100% 100%
COSCO China Shipping
39.02%
43.13% 45.47%
Company
COSCO Finance (1919 HK) (601919 SS) CSCL
(2866 HK)(601866 SS)
25%
46.06% 100%
COSCO SHIPPING PORTS
(1199 HK) COSCO Container
Lines Co., Ltd CS Finance
Formerly known as COSCO
Pacific Limited
----- End of picture text -----

Source: Stock Exchange, 2015 annual reports of the respective companies and announcement of the respective companies regarding the controlling shareholder restructure dated 4 May 2016.

Above is a simplified corporate and shareholding structure of COSCO SHIPPING Group after the completion of certain asset restructuring activities of the Company and CSCL.

2. Major terms of the Financial Services Agreement

Parties: (1) the Company (for itself and on behalf of its subsidiaries); and (2) COSCO SHIPPING (for itself and on behalf of its subsidiaries)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Nature of transaction:

Pursuant to the Financial Services Agreement, COSCO SHIPPING will procure COSCO Finance and CS Finance (each being a non wholly-owned subsidiary of COSCO SHIPPING) to provide the Company and its subsidiaries with certain financial services, including the following:

(i) deposit services;

(ii) loan services;

(iii) clearing services;

(iv) foreign exchange services; and
(v) any other services that COSCO Finance and CS Finance can engage in as permitted by the CBRC.

The transaction terms of the services to be provided under the Financial Services Agreement shall be normal commercial terms and fair and reasonable, and shall not be less favourable to the Company and its subsidiaries than those offered by COSCO Finance and CS Finance to other members of the COSCO SHIPPING Group for the same type of services and shall not be less favourable than the terms offered by independent third party onshore financial institutions to the Company and its subsidiaries for the same type of services.

Pricing policies:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The clearing services provided by COSCO Finance and CS Finance to the Company and its subsidiaries shall be free of charge for the time being.

Historical transaction amounts:

The table below sets forth the historical transaction amounts of the financial services provided by COSCO Finance and CS Finance to the Company and its subsidiaries under the Existing Financial Services Agreement and the Existing CS Finance Financial Services Agreement for the two years ended 31 December 2015 and the six months ended 30 June 2016 and the aggregate annual cap for the year ending 31 December 2016 under the Existing Financial Services Agreement and Existing CS Finance Financial Services Agreement:

				Aggregate
	For the year	For the year	For the six	annual cap for
	ended	ended	months ended	the year ending
	31 December	31 December	30 June	31 December
	2014(1)	2015(1)	2016(2)	2016
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Maximum daily outstanding	12,725,649	11,567,673	10,909,864	COSCO
balance of deposits				Finance(1):
(including accrued interest				18,000,000
and handling fee) placed				CS Finance:
by the Company and its				650,000
subsidiaries with COSCO
Finance and CS Finance

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Note(s):

(1) these amounts excluded the deposits placed by COSCO SHIPPING Ports and its subsidiaries and were determined in accordance with HKFRSs

(2) this amount was determined in accordance with PRC GAAP

As far as the Directors are aware, the annual caps for the year ending 31 December 2016 had not been exceeded as at the Latest Practicable Date.

Proposed annual caps and basis of determination for annual caps:

The proposed annual caps for the deposit services contemplated under the Financial Services Agreement for the three years ending 31 December 2019 and the basis of determination for such annual caps are set out as follows:

	For the year	For the year	For the year
	ending 31	ending 31	ending 31
	December	December	December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Maximum daily outstanding balance of	29,000,000	31,000,000	33,000,000
deposits (including accrued interest and
handling fee) to be placed by the Company
and its subsidiaries with COSCO Finance
and CS Finance

The historical maximum daily outstanding balance of deposits (including accrued interest and handling fee) to be placed by the Company and its subsidiaries with COSCO Finance and CS Finance has reached as high as 70.7% of the existing annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016. Independent Shareholders are advised to take note that we are of the view that it is fair and reasonable to exclude the annual cap of RMB650,000 with CS Finance from the calculation as it was determined prior to the COSCO Group’s restructuring exercise, whereby the annual cap of RMB650,000 with CS Finance did not form part of the consideration at time. Detailed information of the restructuring exercising can be referred to the Restructuring Circular. Should the annual cap of RMB650,000 with CS Finance be included, the utilization of the annual cap would have been 68.23%.

The proposed annual caps for the deposit services increase by approximately 6.5% to 6.9% year-on-year during the three years ending 31 December 2019.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Reasons for and benefits of entering into the Financial Services Agreement

Pursuant to the Financial Services Agreement, COSCO Finance and CS Finance will provide the Company and its subsidiaries with certain financial services, including (i) deposit services, (ii) loan services, (iii) clearing services, (iv) foreign exchange services, and (v) any other services that COSCO Finance and CS Finance can engage in as permitted by the CBRC, during the three years ending 31 December 2019.

The Existing Financial Services Agreements and the Existing CS Finance Financial Services Agreement will expire on 31 December 2016. As such, the Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, on 25 August 2016, the Company (for itself and on behalf of its subsidiaries) and COSCO SHIPPING (for itself and on behalf of its subsidiaries) entered into the Financial Services Agreement in relation to the provision of the aforementioned services, which is similar to that of the transactions under the Existing Financial Services Agreement and Existing CS Financial Services Agreement, for a term of three years from 1 January 2017 to 31 December 2019.

We note from the announcement of the Company dated 29 August 2013 and the circular of the Company dated 19 September 2013 that the Company entered into the Existing Financial Services Agreement with COSCO Finance on 29 August 2013. We also note that the Existing CS Finance Financial Services Agreement was entered into between the Company and CS Finance on 30 March 2016. The Existing Financial Services Agreement and the Existing CS Finance Financial Services Agreement, the transactions contemplated thereunder, and the relevant existing annual caps were approved by the then Independent Shareholders of the Company. As discussed with the management of the Company, the entering into the Financial Services Agreement is for the purpose to regulate the financial services to be provided by COSCO Finance and CS Finance to the Company and its subsidiaries in the coming three years upon the expiry of the Existing Financial Services Agreement and the Existing CS Finance Financial Services Agreement. We are of the view that the entering into the Financial Services Agreement falls within the ordinary and usual course of business of the Company.

As noted from the letter from the board in the Circular, we understand that the operations of COSCO Finance and CS Finance are subject to the guidelines and requirements issued by the PBOC and the supervision of the CBRC. To the best of the Directors’ knowledge and belief, COSCO Finance and CS Finance have been in compliance with all the major financial services rules and regulations and have sound internal control systems. As intra-group service providers, COSCO Finance and CS Finance generally have better and more efficient communications with the Company and its subsidiaries compared with independent banks and financial institutions. COSCO Finance and CS Finance can provide financial services, including the foreign exchange deposits and lending services, based on the approval issued by the CBRC. The Company and its subsidiaries may negotiate more favourable terms with COSCO Finance and CS Finance compared with other independent commercial banks.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition, Independent Shareholders are advised to take note that, on 25 August 2016, COSCO SHIPPING Ports (an indirect subsidiary of the Company) (for itself and on behalf of its subsidiaries) and COSCO Finance entered into the COSCO SHIPPING Ports Financial Services Agreement, the principal terms of which are substantially the same as the Financial Services Agreement. The transactions contemplated under the COSCO SHIPPING Ports Financial Services Agreement and the proposed annual caps are proposed to be covered by the Financial Services Agreement. The COSCO SHIPPING Ports Financial Services Agreement will take effect upon obtaining approvals from the independent shareholders of COSCO SHIPPING Ports.

As discussed with the management of the Company, we understand that COSCO Finance and CS Finance have been in cooperation with the Company and its subsidiaries for many years, allowing both COSCO Finance and CS Finance to possess a clear and in-depth record of the Company and its subsidiaries’ credit profile. As such, the Company and its subsidiaries can negotiate more favourable terms with COSCO Finance and CS Finance as compared to other independent commercial banks and financial institutions, which may help the Company and its subsidiaries to reduce its finance costs and improve its efficiency on handling relevant financial services. Further, we agree with the management of the Company that both of COSCO Finance and CS Finance have a better understanding of the Company and its subsidiaries’ needs and may provide more suitable financial services and of more favourable terms to the Company and its subsidiaries. We consider such relationship shall be in the interests of the Company and the Shareholders as a whole.

We have reviewed the information relating to COSCO Finance and CS Finance provided by the Company, including but not limited to, its financial information for the year ended 31 December 2015 and the six months ended 30 June 2016, non-performing asset ratio, non-performing loan ratio and capital adequacy ratio. In addition, we have reviewed the deposit services record as allowed by CBRC for the year ended 31 December 2015 and the six months ended 30 June 2016.

As discussed with the management of the Company, the entering into the Financial Services Agreement is for the purpose of regulating the financial services to be provided by COSCO Finance and CS Finance to the Company and its subsidiaries in the coming three years upon the expiry of the Existing Financial Services Agreements and the Existing CS Finance Financial Services Agreement. Furthermore, we note that the Financial Services Agreement stipulates risk control measures to protect the Company’s interests and ensure COSCO Finance and CS Finance to be in compliance with the standards as set out by the CBRC and other relevant rules and regulations. We agree with the management of the Company that the financial assets of the Company and its subsidiaries maintained by COSCO Finance and CS Finance shall be regulated according to the relevant rules and regulations as applied to other independent commercial banks and financial institutions. We have reviewed the policies mutually agreed by the Company, COSCO Finance and CS Finance in relation to the risk control measures. We consider the Company and its subsidiaries’ financial assets shall be properly safeguarded by the relevant standards, rules and regulations. In addition, we have discussed with the management of the Company, and reviewed the relevant internal control manual that, the Company must obtain at least three quotes from, apart from its connected parties, third party commercial banks and other financial institutions about the interest rates for deposits in the same or nearby area for the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

same type of services for provision of similar financial services, to compare with the interest rates for deposits and handling fees provided by COSCO Finance or CS Finance. We have also reviewed relevant information provided by the Company and we noted that the Company followed such internal guidance which the institution offered the most favourable terms had been chosen.

In conclusion, we are of the view that entering into the Financial Services Agreement falls within the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole.

Proposed annual caps for the continuing connected transactions in relation to the deposit services to be provided by COSCO Finance and CS Finance to the Company and its subsidiaries under the Financial Services Agreement (the “Proposed Deposit Annual Caps”)

In respect of the Proposed Deposit Annual Caps, we understand that the basis of determination for such annual caps were determined with reference to (i) the historical transactions amounts, (ii) the strategies of the capital management of the Company, and (iii) the expected positive development in the shipping market.

As stated above, the Company expects that the Company and its subsidiaries to place deposits with COSCO Finance and CS Finance with a maximum daily outstanding balance (including accrued interest and handling fee) of RMB29 billion, RMB31 billion and RMB33 billion for three years ending 31 December 2019, respectively.

As mentioned above, we note that the historical maximum daily outstanding balance of deposits (including accrued interest and handling fee) to be placed by the Company and its subsidiaries with COSCO Finance and CS Finance has reached as high as 70.7% of the existing annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016.

In order to assess the fairness and reasonableness of the Proposed Deposit Annual Caps, we have discussed with the management of the Company in respect of the possible deposits to be placed by the Company and its subsidiaries with COSCO Finance and CS Finance during the term of the Financial Services Agreement. Thus, we understand from the management of the Company that the Proposed Deposit Annual Caps have made reference to the historical cash flow and levels of deposit, current business development plans, financial needs, anticipated cash flow and expected growth in the business of the Company and its subsidiaries. In addition, we also noted that the Proposed Deposit Annual Caps are approximately 55.5% to 76.9% higher than the annual caps set under the Existing Financial Services Agreement and the Existing CS Finance Financial Services Agreement, and we have also discussed with the management of the Company and reviewed relevant forecasts and projections provided by the Company regarding their view of the shipping market for the next three years. We have reviewed including, but not limited to, the Company’s forecast of number of vessels, estimated fuel usage, and the volume of port services in the following three years which indicate an increase in demand of shipping services. Company also believes that the new shipping routes planned after their recent asset restructure exercise shall enable them to benefit from the anticipated recovery in the world economy. As such, we are of the view that the Company’s anticipation of a positive development in the shipping market leading to an increase in business volume is a fair and reasonable

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

assumption. In addition, Company’s potential capital management strategies is also expected to lead to an increase in cash available at the Company level. Therefore, there will be an increase in the estimated deposit amount to be placed with COSCO Finance and CS Finance. In light of the above, we are of the view that the increment of the Proposed Deposit Annual Caps is reasonable for the Company and its subsidiaries during the term of the Financial Services Agreement.

In conclusion, we consider the Proposed Deposit Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Major terms of the Master Vessel Services Agreement

(2) COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates)
(i) vessel lubricants;
(ii) vessel fuel;
(iii) vessel materials and related repairing services;
(iv) vessel safety management and technical consultancy services for vessel;
(v) paint for vessel and maintenance of paint;
(vi) vessel repairing and conversion services;
(vii) vessel parts;
(viii) radio communication equipment reservation, repairing and installation;
(ix) provision and repairing of vessel equipment services;
(x) shipbuilding supervision technology services;
(xi) brokerage services in respect of vessel trade and vessel insurance and brokerage services; and
(xii) other vessels-related services.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing policy:

The services fees charged under the Master Vessel Services Agreement will be determined with reference to the prevailing market price, being the price charged by independent third party service providers providing similar types of services in their ordinary course of business in the same or nearby service area and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness.

To ensure that the pricing policies under the Master Vessel Services Agreement are complied with:

(i) in respect of fuel purchases, prices will be determined based on (i) the market prices quoted by the two major suppliers in the tax-paid onshore marine bunker market, China Marine Bunker (Petrochina) Co., Ltd., whose equity interest is held as to 50% by each of COSCO and PetroChina, and China Shipping & Sinopec Suppliers Co., Ltd., whose equity interest is held as to 50% by each of China Shipping and Sinopec, in respect of tax-paid onshore fuel purchases; and (ii) the benchmark prices quoted on Platts in respect of offshore fuel and tax exempt onshore fuel purchases.
(ii) in respect of other transactions, the Company will strictly comply with the supply and purchase management procedures, and reference will be made to the pricing guidance issued by the relevant industry association or quotations from third parties will be solicited as comparison to ensure that the terms offered to or by the independent third parties are not more favourable to the Group than those offered to or by COSCO Shipping Group under the Master Vessel Services Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Historical transaction amounts:

	For the year	For the year	For the Six	Annual cap for
	ended	ended	months ended	the year ending
	31 December	31 December	30 June	31 December
	2014(1)	2015(1)	2016(2)	2016
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of vessel
services from the
COSCO Group under
the Existing Master
Vessel Services
Agreement	10,750,465	6,768,610	1,517,911	29,000,000
Provision of vessel
services to the
COSCO Group under
the Existing Master
Vessel Services
Agreement	17,352	20,518	13,622	140,000
Note(s):

(1) these amounts were determined in accordance with HKFRSs

(2) these amounts were determined in accordance with PRC GAAP

As far as the Directors are aware, the annual caps for the year ending 31 December 2016 had not been exceeded as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps and basis of determination for annual caps:

	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of vessel services from
the COSCO SHIPPING Group	30,000,000	31,000,000	32,000,000
Provision of vessel services to
the COSCO SHIPPING Group	140,000	160,000	180,000

The aggregated historical purchase of vessel services from the COSCO Group has reached as high as 40.6% of the existing annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016.

The aggregated historical provision of vessel services to the COSCO Group has reached as high as 15.8% of the existing annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016.

The proposed annual caps for the purchase of vessel services increase by approximately 3.2% to 3.3% year-on-year during the three years ending 31 December 2019.

The proposed annual caps for the provision of vessel services increase by approximately 12.5% to 14.3% year-on-year during the three years ending 31 December 2019.

6. Reasons for and benefits of entering into the Master Vessel Services Agreement

Pursuant to the Master Vessel Services Agreement, the Group and the COSCO SHIPPING Group will provide each other with relevant vessel services that are necessary for each other’s business operation, including vessel lubricants, vessel fuel, vessel materials and related repairing services, vessel safety management and technical consultancy services for vessel, paint for vessel and maintenance of paint, vessel repairing and conversion services, vessel parts, radio communication

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

equipment reservation, repairing and installation, provision and repairing of vessel equipment services, shipbuilding supervision technology services, brokerage services in respect of vessel trade and vessel insurance and brokerage services, and other vessel-related services, with a term of three years ending 31 December 2019.

The Existing Master Vessel Services Agreement will expire on 31 December 2016. As such, the Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, the Company (for itself and on behalf of its subsidiaries and/or associates) and COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates) entered into the Master Vessel Services Agreement in relation to the provision of the aforementioned services, which is similar to that of the transactions under the Existing Master Vessel Services Agreement, for a term of three years from 1 January 2017 to 31 December 2019.

We note from the announcement of the Company dated 29 August 2013 and the circular of the Company dated 19 September 2013 that the Company entered into the Existing Master Vessel Services Agreement with COSCO on 29 August 2013. The Existing Master Vessel Services Agreement, the transactions contemplated thereunder, and the relevant existing annual caps were approved by the then Independent Shareholders of the Company. As discussed with the management of the Company, entering into the Master Vessel Services Agreement is for the purpose to regulate the vessel services to be mutually provided by the Group and the COSCO SHIPPING Group in the coming three years upon the expiry of the Existing Master Services Agreement. We are of the view that entering into the Master Vessel Services Agreement falls within the ordinary and usual course of business of the Group.

We have discussed with the management of the Company and obtained the Group’s relevant internal control manual and samples of existing supply of vessel services contracts, in particular, for the purchase of fuel, we noted that internal guidance states that the Company should obtain quotes from the two major suppliers in the tax-paid onshore marine market, namely China Marine Bunker (Petrochina) Co., Ltd., and China Shipping & Sinopec for the purchase of tax-paid onshore fuel which we were advised by the management of the Company that China Marine Bunker (Petrochina) Co., Ltd., and China Shipping & Sinopec Suppliers Co., Ltd together supply majority of onshore fuel which the fuel price set by them is commonly adopted by the onshore market. In respect of offshore fuel and tax exempt onshore fuel purchases, the internal guidance states that the Company follows the benchmark prices quoted on Platts, which is known as one of the leading independent providers of information and benchmark prices for the commodities and energy markets. In respect of other transactions under the Master Vessel Services Agreement, the Group must obtain at least three quotes from other independent suppliers or reference being made to the pricing guidance issued by the relevant industry associations when comparing the terms of the supply of vessel services contracts. We also note that,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

from the samples of existing supply of vessel services contracts, the Company followed the relevant procedures of its internal control manual and the contract price under such samples is more favourable when compare to the quotes from other independent suppliers for transactions, other than purchase of fuel, under the Master Vessel Services Agreement.

Certain subsidiaries of the Company also operate the business of providing materials, parts and repair services to the Group’s self-operated vessels in certain domestics and overseas areas. Provision of such services to the COSCO SHIPPING Group in such areas will enhance the business scope and reduce the operation costs of the Group.

As discussed with the management of the Company, the purchase and provision of vessel services from the COSCO SHIPPING Group will be able to compensate the Group’s insufficiency in the abovementioned areas and reduce the operation costs of each of the two parties. The management of the Company believes that through the Master Vessel Services Agreement, the Group can leverage on the expertise and scale of the vessel services and may be able to negotiate more favourable terms compared with other independent service providers.

In conclusion, we are of the view that the entering into the Master Vessel Services Agreement with COSCO SHIPPING is in the interests of the Group and the Shareholders as a whole.

Proposed annual caps for the continuing connected transactions in relation to the purchase of vessel services from the COSCO SHIPPING Group (the “Proposed Vessel Service Purchase Annual Caps”)

In respect of the Proposed Vessel Service Purchase Annual Caps, we understand that the basis of determination for such annual caps were determined by reference to (i) the historical transactions amounts, (ii) potential oil price increase and usage of oil in the future, (iii) exchange rate fluctuation of RMB against the US dollar, and (iv) the expected growth in the level of operations of the Group.

As mentioned above, the aggregated historical purchase of vessel services from the COSCO Group had reached as high as 40.6% of the existing annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016. The Proposed Vessel Service Purchase Annual Caps increase by approximately 3.2% to 3.3% year-on-year during the three years ending 31 December 2019.

In order to assess the fairness and reasonableness of the Proposed Vessel Service Purchase Annual Caps, we have reviewed and discussed the relevant calculations with the management of the Company including, but not limited to, the Company’s estimated number of vessels in service, fuel usage, anticipated increase in business volume resulting from the expansion of their route network as well as their internal forecast of exchange rates of RMB against the US Dollar in the next three years. Further, we understand from them that the assumptions made to determine the Proposed Vessel Service Purchase Annual Caps also comprises, inter alia, the anticipated demands of vessel services from the Group and the buffer to cater for the possible fluctuations in service charges and/or demands of the vessel service during the three years ending 31 December 2019.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As discussed with the management of the Company, the Proposed Vessel Service Purchase Annual Caps increase by approximately 3.2% to 3.3% year-on-year during the three years ending 31 December 2019 due to the management’s anticipation of the potential increase in the number of vessels as well as higher business volume resulting from the asset restructuring. We also understand from the management of the Company that they will expand their current route network in the next three years in order to reach more destinations, resulting in an expected business growth. Moreover, the management of the Company took into consideration the fluctuations in exchange rates in the future. We have reviewed the relevant industry data provided by the Company and we consider such increase to be in line with the industry trend, hence, we are of the view that the proposed annual caps with 3.2% to 3.3% increment to be fair and reasonable.

In addition, we understand from the management of the Company that the amount for purchase of fuel and lubricants by the Group accounted for over 80% of the existing annual caps under the Existing Master Vessel Services Agreement. It is expected that such phenomenon shall apply to the three years ending 31 December 2019. The management of the Company has also taken into account the possibility of a large increase in fuel price. We consider such anticipation to be prudent and the assumptions and estimation in this regard is fair and reasonable.

In conclusion, we consider the Proposed Vessel Service Purchase Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Proposed annual caps for the continuing connected transactions in relation to the provision of vessel services to the COSCO SHIPPING Group (the “Proposed Vessel Service Provision Annual Caps”)

In respect of the Proposed Vessel Service Provision Annual Caps, we understand that the basis of determination for such annual caps were determined by reference to (i) the historical transactions amounts, (ii) the exchange rate fluctuation of RMB against the US dollar, (iii) the expected growth in the level of operations of the Group, and (iv) the expected increase in service charges due to the expected increase in demand for materials and parts, vessel repairs and other vessel services from the COSCO SHIPPING Group.

The aggregated historical provision of vessel services to the COSCO Group has reached as high as 15.8% of the existing annual cap for the two years ended 31 December 2015 and the six months ended 30 June 2016. The Proposed Vessel Service Provision Annual Caps increase by approximately 12.5% to 14.3% year-on-year during the three years ending 31 December 2019.

In order to assess the fairness and reasonableness of the Proposed Vessel Service Provision Annual Caps, we have discussed the relevant calculations with the management of the Company and understand from them that the Proposed Vessel Service Provision Annual Caps were arrived at mainly based on, inter alia, the anticipated demands of vessel services from the COSCO SHIPPING Group and the buffer to cater for the possible fluctuations in service charges and/or demands of the vessel service during the three years ending 31 December 2019.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understood from the management of the Company that in determining the proposed annual caps, consideration had been given to the expected increase in service charges due to the expected increase in demand for materials and parts, vessel repairs and others vessel services from the COSCO SHIPPING Group. Thus the Proposed Vessel Service Provision Annual Caps increase by approximately 12.5% to 14.3% year-on-year during the three years ending 31 December 2019, which is mainly due to the anticipated increasing demand from the COSCO SHIPPING Group in the future. In addition, the management of the Company has also factored in the potential inflation in the raw materials and labour cost when determining the proposed annual caps. We have reviewed relevant internal projection materials provided by the Company. We are of the view that the proposed annual caps as well as the increase of 12.5% to 14.3% are fair and reasonable.

In conclusion, we consider the Proposed Vessel Service Provision Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Major terms of the Master Port Services Agreement

Parties:

(1) the Company (for itself and on behalf of its subsidiaries and/or associates); and
(2) COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates)

Nature of transaction:

The provision by the COSCO SHIPPING Group to the Group of the following:

(i) containers and goods loading and unloading at port;
(ii) container port and shipping services;
(iii) port concession arrangements;
(iv) leasing and electricity supply in relation to port coastline and port land; and
(v) other port-related and ancillary services.

Pricing policy:

The services fees charged under the Master Port Services Agreement will be determined with reference to the prevailing market price, being the price charged by independent third party service providers providing similar types of services in their ordinary course of business in the same or nearby service area and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Historical transaction amounts:

	For the year	For the year	For the six	Annual cap for
	ended	ended	months ended	the year ending
	31 December	31 December	30 June	31 December
	2014(1)	2015(1)	2016(2)	2016
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of services
from the COSCO
Group under the
Existing Master Port
Services Agreement	901,570	754,767	425,048	1,250,000

Note(s):

(1) these amounts were determined in accordance with HKFRSs

(2) this amount was determined in accordance with PRC GAAP

As far as the Directors are aware, the annual cap for the year ending 31 December 2016 had not been exceeded as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps and basis of determination for annual caps:

	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Purchase of services from the COSCO
SHIPPING Group	3,600,000	4,000,000	4,500,000

The historical purchase of services from the COSCO Group reached as high as 72.1% of the annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016.

The proposed annual caps for the purchase of port services increase by approximately 11.1% to 12.5% year-on-year during the three years ending 31 December 2019.

10. Reasons for entering into the Master Port Services Agreement

Pursuant to the Master Port Services Agreement, the COSCO SHIPPING Group will provide the Group with relevant port services that are necessary for each other’s business operation, including containers and goods loading and unloading at port, container port and shipping services, port concession arrangements, leasing and electricity supply in relation to port coastline and port land, and other port-related and ancillary services, with a term of three years ending 31 December 2019.

The Existing Master Port Services Agreement will expire on 31 December 2016. As such, the Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, the Company (for itself and on behalf of its subsidiaries and associates) and COSCO SHIPPING (for itself and on behalf of its subsidiaries and associates) entered into the Master Port Services Agreement in relation to the provision of the aforementioned services, which is similar to that of the transactions under the Existing Master Port Services Agreement, for a term of three years from 1 January 2017 to 31 December 2019.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the announcement of the Company dated 29 August 2013 and the circular of the Company dated 18 September 2013 that the Company entered into the Existing Master Port Services Agreement with COSCO on 29 August 2013. The Existing Master Port Services Agreement, the transactions contemplated thereunder, and the relevant existing annual caps were approved by the then Independent Shareholders of the Company. As discussed with the management of the Company, the entering into the Master Port Services Agreement is for the purpose of regulating the port services to be provided by the COSCO SHIPPING Group to the Group in the coming three years upon the expiry of the Existing Master Port Services Agreement. We are of the view that the entering into the Master Port Services Agreement with COSCO SHIPPING falls within the ordinary and usual course of business of the Group.

As discussed with the management of the Company, the Directors consider the Master Port Services Agreement to be consistent with the business and commercial objectives of the Group. Port services at terminals are provided by terminal operators. The port services being covered by the Master Port Services Agreement principally represent port services, such as container handling, storage and loading and unloading, provided by the COSCO SHIPPING Group at its owned and operated terminals. In light of the good relationship between COSCO SHIPPING and the Group, the Group had negotiated more favourable terms with COSCO SHIPPING compared with other suppliers historically and is expected to be able to continue to negotiate more favourable terms with COSCO SHIPPING compared with other suppliers.

We have discussed with the management of the Company and obtained the Group’s relevant internal control manual and samples of existing purchase of port services contracts. For offshore port services, the Group’s internal control manual states that the Group must obtain at least three quotes from, apart from its connected parties, other independent suppliers when comparing the terms of the offshore port services and, to the best of the management’s endeavour, they will conduct market research to identify the industry’s service fee. We also note from the samples of existing offshore port services contracts that the Company followed the relevant procedures of its internal control manual and the contract price under such samples is more favourable when compare to the quotes from other independent suppliers. However, we understand from the discussion with the management of the Company that they will also consider factors such as efficiency of operation of ports, service levels and effectiveness of communication of the service providers, while price offered being the predominant factor, for selecting the most ideal supplier. For onshore port services, we further understand from the discussion with the management that the Group will centralise purchase to obtain discount rates and pricing will be based on the reference rates published by the Ministry of Transport of the PRC, which the onshore market commonly relies on.

As discussed with the management of the Company, the purchase of port services from the COSCO SHIPPING Group can compensate the Group’s insufficiency in the above mentioned areas and reduce the operation costs of the Company. The management of the Company believes that through the Master Port Services Agreement, the Group can leverage on the expertise and scale of the port services and may be able to negotiate more favourable terms compared with other independent service providers.

In conclusion, we are of the view that the entering into the Master Port Services Agreement is in the interests of the Group and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps for the continuing connected transactions in relation to the purchase of services from the COSCO SHIPPING Group (the “Proposed Purchase of Port Services Annual Caps”)

In respect of the Proposed Port Service Purchase Annual Caps, we understand that the basis of determination for such annual caps were determined by reference to (i) the historical transactions amounts, (ii) general inflation, (iii) exchange rate fluctuations, and (iv) the expected increase in the provision of port services to the Group in relation to the ports of COSCO SHIPPING, including the ports in Long Beach, California, Los Angeles and Seattle of the United States of America and the port in Piraeus, Greece which was recently acquired.

As mentioned above, the aggregated historical purchase of port services from the COSCO Group reached as high as 72.1% of the existing annual cap during the two years ended 31 December 2015 and the six months ended 30 June 2016. The Proposed Purchase of Port Services Annual Caps increase by approximately 11.1% to 12.5% year-on-year during the three years ending 31 December 2019.

In order to assess the fairness and reasonableness of the Proposed Purchase of Port Services Annual Caps, we have reviewed and discussed the relevant calculations with the management of the Company and understand from them that the Proposed Purchase of Port Services Annual Caps are arrived at mainly based on, inter alia, the anticipated demands of port services from the Group and the buffer to cater for the possible fluctuations in service charges and/or demands of the port service as well as the anticipated market price for port services during the three years ending 31 December 2019.

As discussed with the management of the Company, the Proposed Purchase of Port Services Annual Caps increase by approximately 11.1% to 12.5% year-on-year during the three years ending 31 December 2019 and it is due to the management’s anticipation of the expected growth in the business of the Group, in particular, the expected growth for the ports in Seattle and Los Angeles of the United States of America, and recent acquisition of Piraeus Port Authority in Piraeus, Greece. The synergy from the asset restructuring will lead to an expected increase in the number of vessels as well as higher business volume related to the usage of the port services. Thus it is also noted that the management of the Company is expecting the Proposed Purchase of Port Services Annual Caps to increase by approximately 11.1% to 12.5% year-on-year during the three years ending 31 December 2019 due to the anticipated increasing demand from the COSCO SHIPPING Group in the future, and hence, they are also forecasting an increasing trend in the demand for port services in the next three financial years.

In addition, management of the Company has also factored in the potential inflation in labour cost when determining such proposed annual caps. We have reviewed relevant internal projection materials provided by the Company and we are of the view that the proposed annual caps as well as the annual increase of 11.1% to 12.5% are fair and reasonable.

In conclusion, we consider the Proposed Purchase of Port Services Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

12. Major terms of the Master Vessel and Container Asset Services Agreement

Parties:

(1) the Company (for itself and on behalf of its subsidiaries and/or associates); and
(2) COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates)

Nature of transaction:

The COSCO SHIPPING Group shall provide the following services to the Group:

(i) charter and leasing of vessels and containers owned and operated by members of the COSCO SHIPPING Group; and
(ii) manufacture of containers.

Pricing policy:

To ensure that the pricing policies under the Master Vessel and Container Asset Services Agreement are complied with:

(1) In respect of the leasing of vessels, the Company will (i) regularly conduct market research to gauge the leasing rates in the vessel leasing market; and (ii) refer to the pricing and estimates on the various types of vessels of China Shipping Group in the report prepared by Drewry Shipping Consultant Ltd. (a summary of which is disclosed in the Restructuring Circular).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(2) In respect of the leasing of containers, based on the specific requirements of the Company, quotations will be solicited from the panel of approved suppliers of the Company (which currently comprises at least 13 independent third party suppliers and 1 supplier within the COSCO Shipping Group), and selection will be primarily based on pricing, and considering other factors such as principal terms offered.
(3) In respect of the manufacture of containers, the Group will solicit quotations in the open market normally from each of the four principal container manufacturers in the PRC, and selection shall be based on price, delivery schedule, delivery services and quality of containers based on historical transactions.

Historical transaction amounts:

The table below sets forth the historical transaction amounts of the leasing of containers and vessels payable by the Group to the COSCO SHIPPING Group for the six months ended 30 June 2016:

For the six months ended 30 June 2016[(1)] (RMB’000) Aggregate amount payable by the Group in respect of leasing of vessels and containers 3,075,432

Note:

(1) this amount was determined in accordance with PRC GAAP

Proposed annual caps and basis of determination for annual caps:

	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2017	2018	2019
	(RMB’000)	(RMB’000)	(RMB’000)
Aggregate amount payable by the Group to the
COSCO SHIPPING Group in respect of
leasing of vessels and containers as well as
manufacture and sale of containers	15,000,000	18,000,000	25,000,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The above proposed annual caps in respect of leasing of vessels and containers were determined with reference to (i) the proposed annual caps for the leasing of vessels and containers from the CSCL Group to the Group under the Lease Agreement which was approved at the extraordinary general meeting of the Company held on 1 February 2016, (ii) the expected transaction amount in the coming three years in respect of other vessel and container leasing transactions between COSCO Container Lines Co., Ltd and COSCO SHIPPING and its subsidiaries, (iii) fluctuations in the exchange rate of RMB against the US dollar, (iv) fluctuations in rents in the vessel and container markets, and (v) the expansion of the business scale of the Group.

13. Reasons for entering into the Master Vessel and Container Asset Services Agreement

Pursuant to the Master Vessel and Container Services Asset Agreement, the Group will charter and lease vessels and containers owned by members of the COSCO SHIPPING Group and members of the COSCO SHIPPING Group will provide container manufacturing services to the Group, with a term of three years ending 31 December 2019.

Independent Shareholders are advised to take note that the transactions contemplated under the Lease Agreement and the proposed annual caps in respect of the charter and lease of vessels and containers from the CSCL Group by the Group for the two years ending 31 December 2018 are proposed to be covered by the Master Vessel Container Asset Services Agreement. In addition, the Lease Agreement will expire on 31 December 2018. As such, the Company intends to enter into the Master Vessel and Container Asset Services Agreement to meet the expected shipment demand and the potential increase in demand from the business expansion in the foreseeable future. Therefore, on 14 September 2016, the Company and the COSCO SHIPPING entered into the Master Vessel and Container Asset Services Agreement, in relation to the provision of the charter and lease (excluding finance leasing) vessels and containers owned or operated by CSCL to the Company and its subsidiaries and associates services which were originally covered by the Lease Agreement for the years ending 31 December 2017 and 31 December 2018, and the Master Vessel and Container Asset Services Agreement also includes the provision of service for manufacturing of containers, for a term of three years from 1 January 2017 to 31 December 2019.

Furthermore, we note from the announcement of the Company dated 11 December 2015 and the circular of the Company dated 31 December 2015 that the Company entered into the Lease Agreement with CSCL on 11 December 2015. The Lease Agreement, the transactions contemplated thereunder, and the relevant existing annual caps were approved by the then Independent Shareholders of the Company. As discussed with the management of the Company, the entering into the Master Vessel and Container Asset Services Agreement is for the purpose to regulate the Group’s chartering and leasing of vessel and container from the COSCO SHIPPING Group and the COSCO SHIPPING Group’s provision of containers manufacturing services to the Group in the coming three years. We are of the view that the entering into the Master Vessel and Container Asset Services Agreement falls within the ordinary and usual course of business of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As discussed with the management of the Company, they believe that the Master Vessel and Container Asset Services Agreement is in line with the business and commercial objective of the Company. In view of the rapid expanding and development of both the international and domestic container transportation market, improving shipping route network layout as well as good corporate brand and creditworthiness of the COSCO SHIPPING Group, the management of the Company also believes that the continuing long-term collaboration in respect of the vessel and container asset leasing and container manufacturing service between the Group and the COSCO SHIPPING Group would decrease operating costs and achieve advantages complementation, as well as achieve synergies in the domestic and international shipping market.

We have further discussed with the management of the Company and obtained the Group’s relevant internal control manual and samples of existing contracts for the leasing of containers. The Group’s internal control manual states that the Group must obtain quotes from at least 13 independent third party suppliers and 1 supplier within the COSCO Shipping Group, and selection will be primarily based on pricing when comparing the terms of the leasing of containers. In case of chartering and leasing of vessels, the management of the Company advised that their internal policy has set forth a similar procedure to ensure that the underlying price is of market terms and price level. However, we understood from our discussion with the management of the Company that, it is often difficult to obtain independent quotations of vessels that are of similar specifications as market comparables. As such, the management of the Company believes that it is reasonable to rely on Drewry Shipping Consultant Ltd’s, an industry expert, consultancy report as part of their internal control and corporate governance. We also note from the samples of the aforementioned contracts that the Company followed the relevant procedures of its internal control manual and the contract price for charter and lease of vessels and containers under such samples is more favourable when compare to the quotes from other independent suppliers for leasing of containers. Furthermore, it is also noted that the manufacture of containers is a service which was not previously included as part of the Lease Agreement. Hence, there is no precedent record on the price quotes against independent manufacturer but we understood from the discussion with management of the Company that they will adopt the same methodology and follow the same corporate governance guidance as set forth in the internal control policy on price negotiation which they will solicit quotation in the open market normally from each of the four principal container manufacturers in the PRC, and selection shall be based on price, delivery schedule, delivery services and quality of containers based on historical transactions. In addition, we agree with the management of the Company that entering into the Master Vessel and Container Asset Services Agreement allows the Company to save operating costs, and thus adopt a more flexible operation approach to meet the potential recovery of the container shipping industry.

In conclusion, we are of the view that the entering into the Master Vessel and Container Asset Services Agreement with COSCO SHIPPING is in the interests of the Group and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps for the continuing connected transactions in relation to aggregate amount payable by the Group to the COSCO SHIPPING Group in respect of the leasing of vessels and containers as well as manufacture of containers (the “Proposed Vessel and Container Asset Services Annual Caps”)

In respect of the proposed annual caps of chartering and leasing of vessels and containers, we understand that the basis of determination for such annual caps were determined by reference to (i) the proposed annual caps for the leasing of vessels and containers from the CSCL Group to the Group under the Lease Agreement which was approved at the extraordinary general meeting of the Company held on 1 February 2016, (ii) the expected transaction amount in the coming three years in respect of other vessel and container leasing transactions between COSCO Container Lines Co., Ltd. and COSCO SHIPPING and its subsidiaries, (iii) fluctuations in the exchange rate of RMB against the US dollar, (iv) fluctuations in rents in the vessel and container markets, and (v) the expansion of the business scale of the Group.

In respect of the proposed annual caps of manufacture and sale of containers, we understand that the basis of determination for such annual caps were determined with reference to the expected amount in the coming three years in respect of transactions for the manufacture of new containers between COSCO Container Lines Co., Ltd and subsidiaries of COSCO SHIPPING.

As discussed with the management of the Company, we noticed that the estimated aggregated amount payable by the Group to the COSCO SHIPPING Group in respect of leasing of vessels and containers as well as manufacture and sale of containers were determined based on the following five components: (i) Lease Agreement with CSCL in regards to vessel leasing and the Company’s estimation of leasing of vessels from CSCL for 2019, (ii) Lease Agreement with CSCL in regards to container leasing and the Company’s estimation of leasing of containers from CSCL for 2019, (iii) estimated costs of container manufacturing, (iv) other costs related to vessel leasing between the Company and CSCL, and (v) a buffer to provide flexibility to the Company’s business operation given the management’s expectation in the recovery in shipping industry.

In order to assess the fairness and reasonableness of the Proposed Vessel and Container Asset Services Annual Caps, we have reviewed the Lease Agreement which has a similar nature of transactions as the transactions included in the Master Vessel and Container Asset Services Agreement. We noted that its annual caps have been determined after arm’s length negotiation between the parties with reference to (i) the market vessel chartering standards for other vessel chartering business of similar tonnage vessels and similar tenor, (ii) estimated market fluctuation in terms of chartering rates, and (iii) prevailing market rates determined by Drewry Shipping Consultant Ltd., an independent shipping consultant jointly engaged by CSCL and the Company. In addition, the Company took into consideration the annual caps set in the Leasing Agreement as well as anticipated increase in the number of vessels to be leased in order to determine the annual cap for vessel leasing up to 2019. Furthermore, we have discussed and reviewed the relevant calculations and assumptions made by the management of the Company regarding the aforementioned five factors. We have discussed the assumptions made by the management of the Company in regard to the Proposed Vessel and Container Asset Services Annual Caps and reviewed the calculations in relation to the aforementioned five components to derive at the Proposed Vessel and Container Asset Services Annual Caps. Furthermore, we understand that the Proposed Vessel and Container Asset Services Annual Caps also include the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

anticipated increase in leasing of containers from Florens Container Holdings Limited and Dong Fang International Asset Management Limited. The anticipated increase in orders for leasing and manufacturing containers are for the purpose to meet the expected increase in demand arises from the recovery in the container shipping industry and the recent asset restructure within the COSCO Group during the three years ending 31 December 2019.

We have further discussed with the management of the Company and we noted that they consider the Master Vessel and Container Asset Services Agreement to be able to provide flexibility to the Company’s business operation as it enables the Company to react timely to the potential recovery of demand for container shipping by being able to chartering and leasing of additional vessels and containers. Further, the management is also of the view that it is important to be able to manufacture containers to meet the expected demand arises from the recovery of the container shipping industry.

In addition, we understand from the discussion with the management of the Company that the Proposed Vessel and Container Asset Services Annual Caps increase by approximately 20.0% to 38.9% year-on-year during the three years ending 31 December 2019. We have acknowledged that such increment is higher than usual and we have discussed with the management regarding such estimated increment. We understood from the management and advise the Independent Shareholders that the increments are mainly due to two reasons: (i) new vessels are expected to be in service during the financial year ending 2019. However, we have been advised that the specifications of these vessels are new to the market thus there are no appropriate comparables to be used as estimates of the market price at the moment; and (ii) the Company expects the operating costs and business volume to be increasing due to the recent asset restructure and anticipated recovery of world economy as well as the shipping industry, which were discussed separately in the above sections. Therefore, it might potentially lead to increase in chartering rates of vessel, leasing rates and cost of manufacturing containers.

In conclusion, we consider the Proposed Vessel and Container Asset Services Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

In relation to the Non-exempt Continuing Connected Transactions, we have considered the above principal factors and reasons and, in particular, having taken into account the followings in arriving at our opinion:

(a) the entering into the Financial Services Agreement with COSCO SHIPPING falls within the ordinary and usual course of business of the Group and it is in the interest of the Group and the Shareholders as a whole;
(b) the Proposed Deposit Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole;
(c) the entering into the Master Vessel Services Agreement with COSCO SHIPPING falls within the ordinary and usual course of business of the Group and it is in the interest of the Group and the Shareholders as a whole;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(d) the Proposed Vessel Service Purchase Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole;
(e) the Proposed Vessel Service Provision Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole;
(f) the entering into the Master Port Services Agreement with COSCO SHIPPING falls within the ordinary and usual course of business of the Group and it is in the interest of the Group and the Shareholders as a whole;
(g) the Proposed Purchase of Port Services Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole;
(h) the entering into the Master Vessel and Container Asset Services Agreement with COSCO SHIPPING falls within the ordinary and usual course of business of the Group and it is in the interest of the Group and the Shareholders as a whole;
(i) the Proposed Vessel and Container Asset Services Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole;

Having considered the above, we are of the view that the Agreements were entered into in the ordinary and usual course of business of the Group on normal commercial terms, and the terms of the Agreements and the respective proposed annual caps in relation to the Non-exempt Continuing Connected Transactions are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Accordingly, we advise the Independent Board Committee to recommend, and we recommend the Independent Shareholders, to vote in favour of the resolutions in relation to the Non-exempt Continuing Connected Transactions to be proposed at the EGM.

Yours faithfully, For and on behalf of

Platinum Securities Company Limited

Liu Chee Ming Li Lan Managing Director Director and Co-head of Corporate Finance

Both Mr. Liu Chee Ming and Mr. Li Lan are licensed persons registered with the Securities and Futures Commission and as responsible officers of Platinum Securities Company Limited to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO. Mr. Liu Chee Ming and Mr. Li Lan have over thirty two years and ten years of experience in corporate finance industry, respectively.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. CONSOLIDATED FINANCIAL STATEMENTS

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

The audited consolidated financial statements of the Group for the year ended 31 December 2015 (the “ 2015 Financial Statements ”) are set out from pages 128 to 248 in the Annual Report 2015 of the Company, which was published on 27 April 2016. The Annual Report 2015 is also posted on the Company’s website http://en.chinacosco.com. Please also see below a quick link to the Annual Report 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0427/LTN20160427454.pdf

The audited consolidated financial statements of the Group for the year ended 31 December 2014 (the “ 2014 Financial Statements ”) are set out from pages 125 to 245 in the Annual Report 2014 of the Company, which was published on 21 April 2015. The Annual Report 2014 is also posted on the Company’s website http://en.chinacosco.com. Please also see below a quick link to the Annual Report 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0421/LTN20150421388.pdf

The audited consolidated financial statements of the Group for the year ended 31 December 2013 (the “ 2013 Financial Statements ”) are set out from pages 130 to 259 in the Annual Report 2013 of the Company, which was published on 29 April 2014. The Annual Report 2013 is also posted on the Company’s website http://en.chinacosco.com. Please also see below a quick link to the Annual Report 2013:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0429/LTN20140429508.pdf

The 2015 Financial Statements, the 2014 Financial Statements and the 2013 Financial Statements (but not any other part of the annual reports of the Company in which they appear) are incorporated by reference into this circular and form part of this circular.

2. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Through the China COSCO Asset Restructuring, the Company will strengthen its competitive position as the No. 4 container liner in the world in terms of capacity.

With the enlarged fleet as a result of entering into the Leasing Agreement, the Company will be able to provide a full range of container shipping services, which is expected to generate a significant amount of synergy through network optimization, reduced costs, improved overall operating efficiency, among others.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

3. FINANCIAL EFFECTS

The deposits to be placed with COSCO Finance and CS Finance under the Financial Services Agreement for each of the three years ending 31 December 2019 are expected to not exceed RMB29,000,000,000, RMB31,000,000,000 and RMB33,000,000,000 respectively, and the Company expects that the interest income to be earned from the deposits will be affected by the level of interest rates. However, taking into account the prevailing interest rates for deposits in the PRC, the potential interest income to be earned from the deposit services for the three years ending 31 December 2019 is expected to represent an insignificant portion of the Group’s earnings and assets. As such, the Company anticipates that such potential interest income to be earned from the deposit services under the Financial Services Agreement for the three years ending 31 December 2019 will not have any material impact on the Group’s earnings, assets and liabilities.

4. INDEBTEDNESS OF THE GROUP

As at 31 August 2016, being the latest practicable date for the purpose of preparing this statement of indebtedness prior to the printing of this circular, the Group had total borrowings of approximately RMB61,134 million. Details of the total indebtedness are summarised below:

	The Group
	RMB million
Bank loans - secured	13,238
Bank loans - unsecured	26,589
Loans from COSCO Finance - unsecured	1,949
Loans from CS Finance - unsecured	101
Finance lease obligations - secured	491
Notes - unsecured	17,522
Loans from non-controlling shareholders of subsidiaries - unsecured	1,244
Total	61,134

Apart from notes with carrying amounts of RMB6,691 million and RMB2,007 million which were guaranteed by an irrevocable standby letter of credit issued by Bank of China Limited, Beijing Branch and the Company respectively, all other borrowings were unguaranteed.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Pledge of assets

As at the close of business on 31 August 2016, the Group pledged the following assets for obtaining financing arrangements from banks:

(i) property, plant and equipment with total carrying amounts of approximately RMB22,148 million;
(ii) two vessels with total carrying amounts of approximately RMB595 million under finance lease arrangements;
(iii) assignment of the charter, rental income and earnings, requisition compensation, insurance relating to certain container vessels;
(iv) shares of certain subsidiaries; and
(v) restricted bank deposits with total carrying amounts of approximately RMB283 million.

Contingent liabilities and financial guarantee

The Group was also involved in a number of claims and lawsuits, including but not limited to, the claims and lawsuits arising from damage to vessels during transportation, damage to goods, delay in delivery, collision of vessels, early termination of vessel chartering contracts and nonpayment of fees of one of its terminal. As at 31 August 2016, the Group was unable to ascertain the likelihood and amounts of the above mentioned claims. However, based on the information available to the Group, the Directors are of the opinion that the related claims amounts should not be material to the Group as a whole. For details of the claims as at the Latest Practicable Date, please refer to the paragraph headed “5. Litigation” in Appendix III to this circular.

Disclaimer

Save as disclosed above and apart from intra-group liabilities and normal trade payables in the ordinary course of business of the Group, as at 31 August 2016, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, term loans, other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptance (other than normal trade bills), acceptance credits, hire purchase commitments, mortgages, charges or other material contingent liabilities or guarantees.

5. WORKING CAPITAL

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

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APPENDIX II BIOGRAPHIES OF PROPOSED DIRECTORS AND SUPERVISOR

Biographical details of the candidates proposed to be appointed as Directors and Supervisor are set out as follows:

DIRECTORS

Mr. Wang Haimin (王海民)

Mr. Wang Haimin, aged 44, is currently a deputy general manager of the Company, a director of COSCO SHIPPING, a general manager and the deputy party secretary of COSCON, and a director of COSCO SHIPPING Ports. He previously served as the head of planning and cooperation department of the strategic planning division, the deputy general manager of the corporation planning division and the general manager of the strategy and development division of COSCON. He was also the general manager of the transportation division of COSCO, the deputy general manager of COSCO SHIPPING Ports, and the deputy general manager of COSCON (person in charge). Mr. Wang has nearly 20 years of experience in corporate management in the shipping industry. Mr. Wang has extensive experience in container shipping, operation of terminal and enterprise management. He graduated from Fudan University with a master degree in business administration and is an engineer.

Mr. Zhang Wei (張為)

Mr. Zhang Wei, aged 43, is currently a deputy general manager of the Company and a director of COSCON. Mr. Zhang has been the vice chairman of the board of directors, an executive director and the general manager of COSCO SHIPPING Ports since April 2016. He previously served as executive deputy general manager of the American trade division of COSCON, deputy general manager of the American Branch of COSCON, the general manager of the strategy and development division of COSCON, the general manager of the transportation division, general manager of the operating management division and executive deputy director of the integration management office of COSCO/ the Company. Mr. Zhang Wei has over 20 years of work experience in the shipping industry. Mr. Zhang has extensive work experience in container shipping, strategic planning and enterprise management. He graduated from Fudan University with a master degree in management and is an engineer.

Mr. Feng Boming (馮波鳴)

Mr. Feng Boming, aged 46, is currently the general manager of the strategic and corporate management department of COSCO SHIPPING and a director of CSCL, COSCO SHIPPING Bulk Co., Ltd. (中遠海運散貨運輸有限公司), COSCO SHIPPING (Hong Kong) Co., Ltd. (中遠海運(香港)有限公司), COSCO SHIPPING Financial Holding Co., Ltd. (中遠海運金融控股有限公司) and Piraeus Port Authority S.A., all of which are subsidiaries of COSCO SHIPPING. He served as manager of the commercial section of the ministry of trade protection of COSCON, the general manager of COSCO Container Hong Kong Mercury Co., Ltd., the general manager of the management and administration department of COSCO Holdings (Hong Kong) Co., Ltd. (中遠控股香港), the general manager of COSCO International Freight (Wuhan) Co., Ltd. (武漢中遠國際貨運有限公司)/COSCO Logistics (Wuhan) Co., Ltd. (武漢中遠物流有限公司) and supervisor of the strategic management

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APPENDIX II BIOGRAPHIES OF PROPOSED DIRECTORS AND SUPERVISOR

implementation office of COSCO/the Company. Mr. Feng has over 20 years of work experience in the shipping industry. Mr. Feng has extensive experience in enterprise strategy management, business management, container shipping and management. He graduated from University of Hong Kong with a master of business administration degree and is an economist.

Mr. Zhang Wei (張煒)

Mr. Zhang Wei, aged 50, is currently the deputy general manager of operation and management department of COSCO SHIPPING (person in charge) and a director of COSCO SHIPPING Bulk Co., Ltd. (中遠海運散貨運輸有限公司) (a subsidiary of COSCO SHIPPING) . Mr. Zhang previously served as a deputy general manager of Asia-Pacific trade area and manager of Australia-New Zealand operation department of COSCON, deputy general manager of European trade area of COSCON, deputy general manager of the enterprise information development department of COSCON, deputy general manager of Florens Container Holdings Limited (previously a subsidiary of the Company) and executive vice-president of Piraeus Container Terminal S.A. (a subsidiary of the Company). Mr. Zhang has nearly 30 years of work experience in shipping enterprises and has extensive experience in container transportation marketing management and terminal operation management. Mr. Zhang graduated from Shanghai Maritime University with a master degree in business administration and is an engineer.

Mr. Chen Dong (陳冬)

Mr. Chen Dong, aged 41, is currently the general manager of financial management department of COSCO SHIPPING and a director of COSCO SHIPPING Bulk Co., Ltd. (中遠海運散貨運輸有限公司) (a subsidiary of COSCO SHIPPING) . Mr. Chen previously served as the deputy head of risk control section under the planning and finance department of China Shipping, deputy head of the finance section under planning and finance department of China Shipping, senior manager of finance and taxation management office of China Shipping, assistant to the general manager of the finance department of China Shipping and the deputy general manager of the finance department of China Shipping. Mr. Chen has nearly 20 years of work experience in shipping enterprises and has extensive experience in risks control, taxation management and finance. Mr. Chen graduated from Shanghai University of Finance and Economics with a master degree in economics and is a senior accountant.

Mr. Ma Jianhua (馬建華)

Mr. Ma Jianhua, aged 54, is currently the secretary of the CPC committee of China COSCO and a supervisor of China COSCO. He was the deputy head of the human resources and labor department and the research officer of the Ministry of Transport of the PRC and was also the deputy secretary of the CPC committee and the leader of the discipline inspection team of Shenzhen Maritime Safety Administration. Mr. Ma also assumed various positions such as the deputy director of the general office and the deputy secretary of Chongqing municipality of the PRC, the party secretary and the deputy general manager of COSCO Logistics Co., Ltd, the party secretary and the deputy general

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APPENDIX II BIOGRAPHIES OF PROPOSED DIRECTORS AND SUPERVISOR

manager of COSCO Shipbuilding Industry Company Limited. Mr. Ma has extensive experience in transportation and logistics management, human resources management and modern corporate governance, etc. Mr. Ma graduated from Central Party School of the CPC majoring in economics and management and is a senior engineer.

A service contract is proposed to be entered into between the Company and each of Mr. Wang Haimin, Mr. Zhang Wei (張為), Mr. Feng Boming, Mr. Zhang Wei (張煒), Mr. Chen Dong and Mr. Ma Jianhua. Each of Mr. Wang Haimin, Mr. Zhang Wei (張為), Mr. Feng Boming, Mr. Zhang Wei (張煒), Mr. Chen Dong and Mr. Ma Jianhua will not receive remuneration from the Company for being Directors, but the expenses incurred in connection with their discharge of duties as Directors will be borne by the Company. Each of Mr. Wang Haimin, Mr. Zhang Wei (張煒), Mr. Feng Boming, Mr. Zhang Wei (張為), Mr. Chen Dong and Mr. Ma Jianhua is proposed to be appointed for a term commencing from the date of passing of the relevant resolution at the EGM and ending on the expiration of the term of the fourth session of the Board and will be subject to retirement and re-election at the annual general meetings of the Company in accordance with the Articles of Association.

Save as disclosed above, as at the Latest Practicable Date, each of Mr. Wang Haimin, Mr. Zhang Wei (張為), Mr. Feng Boming, Mr. Zhang Wei (張煒), Mr. Chen Dong and Mr. Ma Jianhua (i) did not hold any position with any other member of the Group; (ii) did not have any relationship with any Directors, senior management of the Company or substantial or controlling Shareholders; (iii) had not held any directorship in any other listed companies in the past three years; and (iv) did not have any interest, deemed interest or short position in any Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

Save as disclosed above, as at the Latest Practicable Date, there was no other information relating to Mr. Wang Haimin, Mr. Zhang Wei (張為), Mr. Feng Boming, Mr. Zhang Wei (張煒), Mr. Chen Dong and Mr. Ma Jianhua that is required to be disclosed pursuant to Rule 13.51(2) of the Hong Kong Listing Rules and no other matter in relation to their proposed appointment that needs to be brought to the attention of the Shareholders.

SUPERVISOR

Mr. Hao Wenyi (郝文義)

Mr. Hao Wenyi, aged 53, is currently a supervisor of COSCO SHIPPING and the deputy chief of the disciplinary team of the communist party committee and head of audit and supervision department of COSCO SHIPPING. Mr. Hao previously served as the deputy department head of the general department of the general office, office supervisor and supervisor of the office of the head of the supervision department under the CPC Central Commission for Discipline Inspection, deputy chief of the disciplinary team of the communist party committee, the head of the audit and supervision department and secretary to discipline inspection work committee for overseas enterprises of China Shipping. Mr. Hao has more than 20 years of work experience in the discipline inspection and has been awarded personal second-class merit by the Ministry of Personnel and collective second-class merit

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APPENDIX II BIOGRAPHIES OF PROPOSED DIRECTORS AND SUPERVISOR

by the supervision department under the CPC Central Commission for Discipline Inspection. Mr. Hao graduated from the economics postgraduate course of Beijing Administrative College (北京市委黨校) and is a senior political scientist.

A service contract is proposed be entered into between the Company and Mr. Hao Wenyi. Mr. Hao Wenyi will not receive any remuneration from the Company for being a Supervisor, but the expenses incurred in connection with the discharge of his duties as a Supervisor will be borne by the Company. Mr. Hao Wenyi is proposed to be appointed for a period commencing from the date of passing of the relevant resolution at the EGM and ending on the expiration of the term of the fourth session of the supervisory committee of the Company.

Save as disclosed above, as at the Latest Practicable Date, Mr. Hao Wenyi (i) did not hold any other position in any member of the Group; (ii) did not have any relationship with any Directors, senior management of the Company or substantial or controlling Shareholders; (iii) had not held any directorship in any other listed companies in the past three years; and (iv) did not have any interest, deemed interest or short position in any Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

Save as disclosed above, as at the Latest Practicable Date, there was no other information relating to Mr. Hao Wenyi that is required to be disclosed pursuant to Rule 13.51(2) of the Hong Kong Listing Rules and no other matter in relation to thier proposed appointment that needs to be brought to the attention of the Shareholders.

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GENERAL INFORMATION

APPENDIX III

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 circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors’ and Supervisors interests or short positions in the Shares

Save as disclosed in this section, as at the Latest Practicable Date, none of the Directors, Supervisors and chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of Part XV of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) as set out in Appendix 10 to the Hong Kong Listing Rules to be notified to the Company and the Stock Exchange.

(i) Long positions in the Shares, underlying Shares and debentures of the Company:

					Approximate
					percentage of
				Approximate	total issued
			Number of H	percentage of	share capital
		Nature of	Shares of the	total issued H	of the
Name of Director	Capacity	interests	Company	share capital	Company
FAN HSU Lai Tai, Rita	Beneficial	Personal	10,000	0.0004%	0.00010%
	owner
Peter Guy BOWIE	Beneficial	Personal	15,000	0.0006%	0.00015%
	owner
WAN Min	Beneficial	Personal	2,500	0.00010%	0.00002%
	owner

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GENERAL INFORMATION

APPENDIX III

						Approximate
						percentage of
					Approximate	total issued
				Number of A	percentage of	share capital
			Nature of	Shares of the	total issued A	of the
Name	of Director	Capacity	interests	Company	share capital	Company
WAN	Min	Beneficial	Personal	35,000	0.0005%	0.00034%
		owner
		Beneficial	Family	12,000	0.00016%	0.00012%
		owner

(ii) Long positions in shares, underlying shares and debentures of associated corporations of the Company:

				Number of	Percentage of
Name of associated	Name of		Nature of	ordinary	total issued
corporation	Director	Capacity	interests	shares	share capital
COSCO Corporation	SUN	Beneficial	Personal	600,000	0.030%
(Singapore) Limited	Yueying	owner
COSCO SHIPPING Ports	KWONG	Beneficial	Personal	250,000	0.008%
Limited	Che Keung,	owner
	Gordon

(iii) Long positions in the underlying shares of equity derivatives of the Company:

A share appreciation rights plan (the “Share Appreciation Rights Plan”) was adopted by the Company, which was designed to align the interests of Directors, Supervisors and senior management of the Company with the Company’s operating results and the Company’s share value. The issuance of share appreciation rights does not involve any issuance of new shares.

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APPENDIX III

GENERAL INFORMATION

As at the Latest Practicable Date, the share appreciation rights held by the Directors and Supervisors are set at below:

				Approximate
				percentage of
				issued share
				capital of
			Outstanding	H Shares as at
			share	the Latest
Name of		Nature of	appreciation	Practicable
Director/Supervisor	Capacity	interests	rights	Date	Note
WAN Min	Beneficial	Personal	260,000	0.010%	(1)
	owner
SUN Yueying	Beneficial	Personal	580,000	0.022%	(1)
	owner
SUN Jiakang	Beneficial	Personal	480,000	0.019%	(1)
	owner
YE Weilong	Beneficial	Personal	480,000	0.019%	(1)
	owner
FU Xiangyang	Beneficial	Personal	85,000	0.003%	(1)
	owner
MA Jianhua	Beneficial	Personal	480,000	0.019%	(1)
	owner
GAO Ping	Beneficial	Personal	85,000	0.003%	(1)
	owner

Note:

(1) The share appreciation rights were granted by the Company in units with each unit representing one H Share pursuant to the Share Appreciation Rights Plan. At each of the last day of the third, fourth, fifth and sixth anniversary of the date of grant (i.e. 4 June 2007), the total number of the share appreciation rights exercisable shall not exceed 25%, 50%, 75% and 100%, respectively, of each of the total share appreciation rights granted. The share appreciation rights are exercisable at HK$9.540 per unit according to its terms between 4 June 2009 and 3 June 2017.

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

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GENERAL INFORMATION

APPENDIX III

(b) Competing Interests

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or proposed Directors nor their respective close associates had any interest in any business, which competes or may compete, either directly or indirectly, with the business of the Company or any of its subsidiaries.

(c) Directors’ Interests in Assets of the Company or any of its subsidiaries

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or Supervisors nor their respective associates had any direct or indirect interests in any assets which have been acquired, disposed of or leased to, or which are proposed to be acquired, disposed of or leased to, the Company or any of its subsidiaries since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Company and its subsidiaries were made up.

(d) Directors’ Interests in Contracts of the Company and its subsidiaries

As at the Latest Practicable Date, none of the Directors or Supervisors is materially interested in any contract or arrangement, which was significant in relation to the business of the Company and its subsidiaries.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or Supervisors had entered or proposed to enter into a service contract with Company or any of its subsidiaries which will not expire or is not determinable within one year without payment of compensation (other than statutory compensation).

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company and its subsidiaries since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Company and its subsidiaries were made up.

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GENERAL INFORMATION

APPENDIX III

5. LITIGATION

Particulars of the litigation or claims of material importance pending or threatened against the Company or its subsidiaries as at the Latest Practicable Date as set out as follows:

		Other				Expected
		parties		Brief	Amount	liabilities and		Judgment and	Execution of
Plaintiff	Defendant	involved	Nature	description	involved	amount involved	Status	effects	judgment
COSCO	URAL	Nil	Litigation	Containership	RMB105	Nil	Court of first	The first-instance	Upon the
Container Lines	Container		in respect	Zhenhe collided	million		instance held a	judgment decided	expiration of the
Company	Carrier		of vessel	with MOL			hearing in 2014	that we bear 20%	litigation period,
Limited	S.A.		collision	MANEUVER in			according to	collision liability	both parties did
				the waters			procedures. On 21	and the	not make any
				nearby Hong			December 2014,	counterparty bear	appeal; the first
				Kong on 22			the court of first	80% thereof.	instance judgment
				February 2012			instance made a		was effective, and
				which caused			first-instance		both parties shall
				serious			judgment on		perform their
				damages to our			liabilities caused		respective
				ship and cargos			by collision		payment
							which became		obligation
							final and effective		presided by the
							upon expiry of		court according to
							the litigation		the first-instance
							period. The court		judgment.
							of first instance
							also held a
							hearing relating
							to liabilities
							caused by damage
							of cargos
							seperately and
							have not yet
							made the
							judgment.
Shanghai Puhai	Shanghai	Shanghai	Litigation	Disputes	RMB	N/A	Ongoing litigation	N/A	N/A
Shipping Liners	Hong	Inchon		relating to	60,000,000
Co., Ltd.	Sheng	International		damages caused
	Gang	Ferry Co.,		by vessel
	TaiShipping	Ltd. (上海		collision
	Co., Ltd.	仁川國際
	(上海鴻盛	獨輪有限
	港泰海運	公司)
	有限公司)

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APPENDIX III

GENERAL INFORMATION

		Other				Expected
		parties		Brief	Amount	liabilities and		Judgment and	Execution of
Plaintiff	Defendant	involved	Nature	description	involved	amount involved	Status	effects	judgment
the Intermediate	China	Nil	Litigation	In November	RMB	N/A	Ongoing litigation N/A		N/A
Court of	Shipping			2015, CSCL	22,295,395.1
Shanghai	Container			received a bill
Railway	Lines			of indictment
Transport (上海	Lianyungang			served by the
鐵路運輸中級法	Company			Intermediate
院)	Limited			Court of
				Shanghai
				Railway
				Transport (上海
				鐵路運輸中級法
				院) claiming
				that CSCL
				Lianyungang
				and its two
				responsible
				staff were
				charged with
				suspected
				evasion of
				railway freight
				totaling
				RMB22,295,395.1.

6. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company and its subsidiaries within the two years immediately preceding the Latest Practicable Date:

(a) the equity transfer agreement dated 11 December 2015 entered into between the Company as seller and COSCO as purchaser in relation to the disposal of 100% equity interests in COSCO Bulk;
(b) the sale and purchase agreements dated 11 December 2015 entered into between members of the Group as purchaser and members of the China Shipping Group as seller in relation to the acquisition of equity interests in (1) China Shipping Container Lines Dalian Co., Ltd., (2) China Shipping Container Lines Tianjin Co., Ltd., (3) China Shipping Container Lines Qingdao Company Limited, (4) China Shipping Container Lines Shanghai Co., Ltd., (5) China Shipping Container Lines Xiamen Co., Ltd., (6) China Shipping Container Lines Guangzhou Co., Ltd., (7) China Shipping Container Lines Shenzhen Co., Ltd., (8) China Shipping Container Lines Hainan Company Limited, (9) China Shipping Container Lines Yingkou Company Limited, (10) China Shipping Container Lines Qinhuangdao Company Limited, (11) China Shipping Container Lines Lianyungang Company Limited, (12) China Shipping Container Lines Longkou Company Limited, (13) China Shipping Container Lines Zhejiang Company Limited, (14) China Shipping Container Lines Jiangsu Company Limited, (15) China Shipping Container Lines Quanzhou Company Limited, (16) China Shipping Container Lines Fuzhou Company Limited, (17) China Shipping Container Lines Shantou City Company Limited, (18) China Shipping Container Lines Zhongshan Company Limited, (19) China Shipping Container Lines Fangchenggang Company Limited, (20) China Shipping Container Lines Zhanjiang Company Limited, (21) China Shipping

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APPENDIX III

GENERAL INFORMATION

Container Lines Jiangmen Company Limited, (22) China Shipping Container Lines Dongguan City Company Limited, (23) China Shipping Container Lines (Dalian) Data Processing Co., Ltd., (24) Shanghai Puhai Shipping Liners Co., Ltd, (25) China Shipping (Yangpu) Refrigeration Storage & Transportation Co., Ltd., (26) Dalian Vanguard International Logistics Co., Ltd., (27) Jinzhou Port Container and Railway Logistics Limited, (28) Angang Vehicle Transportation Co., Ltd., (29) China Shipping Container Lines Agency (Shenzhen) Co., Ltd. and (30) Universal Logistics (Shenzhen) Co., Ltd.;
(c) the sale and purchase agreements dated 11 December 2015 entered into between members of the Group as purchaser and members of the China Shipping Group as seller in relation to the acquisition of equity interests in Universal Logistics (Shenzhen) Co., Ltd., Golden Sea Shipping Pte. Ltd. and China Shipping Container Lines (Hongkong) Agency Co., Limited;
(d) the sale and purchase agreement dated 11 December 2015 entered into between COSCO SHIPPING Ports as seller and China Shipping Container Lines (Hong Kong) Co., Limited as purchaser in relation to the disposal of all the issued shares of Florens Container Holdings Limited;
(e) the sale and purchase agreement dated 11 December 2015 entered into between COSCO SHIPPING Ports as purchaser and CSCL and China Shipping (Hong Kong) Holdings Co., Limited as seller in relation to the acquisition of all the issued shares of China Shipping Ports Development Co., Limited; and
(f) the Lease Agreement.

7. EXPERT

The following is the qualification of the professional adviser who has given its opinion or advice which is contained in this circular:

Name Qualification Platinum Securities a licensed corporation under the SFO to carry out Type 1 Company Limited (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, Platinum Securities did not have any shareholding in the Company or any of its subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company or any of its subsidiaries.

Platinum Securities has given and has not withdrawn its consent to the issue of this circular with the inclusion herein of its letter of advice and references to its names and its advice in the form and context in which they appear.

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GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, Platinum Securities did not have any direct or indirect interests in any assets which have been acquired, disposed of or leased to, or which are proposed to be acquired, disposed of by or leased to, the Company or any of its subsidiaries since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Company and its subsidiaries were made up.

8. MISCELLANEOUS

(1) The company secretary of the Company is Dr. GUO Huawei who is a senior economist.
(2) The registered office of the Company is located at 2nd Floor, 12 Yuanhang Business Centre, Central Boulevard and East Seven Road Junction, Tianjin Airport Economic Zone, Tianjin, the PRC. The head office and principal place of business of the Company in Hong Kong is located at 49/F, COSCO Tower, 183 Queen’s Road Central, Hong Kong.
(3) The Hong Kong H share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited located at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

9. DOCUMENTS FOR INSPECTION

A copy of the following documents will be made available for inspection during normal business hours at the Company’s principal place of business at 49th Floor, 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 memorandum and articles of association of the Company;
(b) the material contracts referred to in the paragraph headed “6. Material Contracts” in this appendix;
(c) the Master Agreements;
(d) the Trademark Licence Agreement;
(e) the written consent from Platinum Securities referred to in the paragraph headed “7. Expert” in this appendix;
(f) the letter from the Independent Financial Adviser dated the date of this circular setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Non-Exempt Continuing Connected Transactions;
(g) the annual reports of the Company for the years ended 31 December 2014 and 2015; and
(h) this circular.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, making 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.

==> picture [76 x 62] intentionally omitted <==

中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

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

(Stock Code: 1919)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “ EGM ”) of China COSCO Holdings Company Limited (the “ Company ”) will be held at Conference Room, 47th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong and Ocean Hall, 5th Floor, Shanghai Ocean Hotel, No.1171, Dong Da Ming Road, Shanghai, People’s Republic of China on Friday, 16 December 2016 at 2:00 p.m. for the purposes of considering and, if thought fit, passing (with or without modifications) the following resolutions as ordinary resolutions of the Company.

Unless otherwise defined herein, the terms used in this notice of EGM shall have the same meaning as those defined in the Company’s circular dated 29 October 2016 (the “ Circular ”).

ORDINARY RESOLUTIONS

1. (i) “ THAT :

(a) the form and substance of the Master General Services Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the purchase of general services from COSCO SHIPPING and its subsidiaries and associates under the Master General Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the expected amount receivable for the provision of general services to COSCO SHIPPING and its subsidiaries and associates under the Master General Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved; and

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(d) the execution of the Master General Services Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master General Services Agreement and the transactions contemplated under it.”

(ii) “ THAT :

(a) the form and substance of the Master Vessel Services Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the purchase of vessel services from COSCO SHIPPING and its subsidiaries and associates under the Master Vessel Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the expected amount receivable for the provision of vessel services to COSCO SHIPPING and its subsidiaries and associates under the Master Vessel Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved; and
(d) the execution of the Master Vessel Services Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master Vessel Services Agreement and the transactions contemplated under it.”

(iii) “ THAT :

(a) the form and substance of the Master Container Services Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the purchase of services from COSCO SHIPPING and its subsidiaries and associates under the Master Container Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the expected amount receivable for the provision of services to COSCO SHIPPING and its subsidiaries and associates under the Master Container Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved; and
(d) the execution of the Master Container Services Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master Container Services Agreement and the transactions contemplated under it.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(iv) “ THAT :
(a) the form and substance of the Master Seamen Leasing Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the purchase of services from COSCO SHIPPING and its subsidiaries and associates under the Master Seamen Leasing Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the expected amount receivable for the provision of services to COSCO SHIPPING and its subsidiaries and associates under the Master Seamen Leasing Agreement for the three financial years ending on 31 December 2019 be and are hereby approved; and
(d) the execution of the Master Seamen Leasing Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master Seamen Leasing Agreement and the transactions contemplated under it.”
(v) “ THAT :
(a) the form and substance of the Freight Forwarding Master Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the purchase of services from COSCO SHIPPING and its subsidiaries and associates under the Freight Forwarding Master Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the expected amount receivable for the provision of services to COSCO SHIPPING and its subsidiaries and associates under the Freight Forwarding Master Agreement for the three financial years ending on 31 December 2019 be and are hereby approved; and
(d) the execution of the Freight Forwarding Master Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Freight Forwarding Master Agreement and the transactions contemplated under it.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(vi) “ THAT :
(a) the form and substance of the Master Port Services Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the purchase of services from COSCO SHIPPING and its subsidiaries and associates under the Master Port Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the execution of the Master Port Services Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master Port Services Agreement and the transactions contemplated under it.”

(vii) “ THAT :

(a) the form and substance of the Master Premises Leasing Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected rent and other fees and charges payable to COSCO SHIPPING and its subsidiaries and associates under the Master Premises Leasing Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the expected rent and other fees and charges receivable from COSCO SHIPPING and its subsidiaries and associates under the Master Premises Leasing Agreement for the three financial years ending on 31 December 2019 be and are hereby approved; and
(d) the execution of the Master Premises Leasing Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master Premises Leasing Agreement and the transactions contemplated under it.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(viii) “ THAT :

(a) the form and substance of the Financial Services Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the maximum daily outstanding balance of deposits (including accrued interest and handling fee) to be placed by the Company and its subsidiaries with COSCO Finance and CS Finance under the Financial Services Agreement for the three years ending 31 December 2019 be and are hereby approved;
(c) the proposed annual caps, being the maximum daily outstanding balance of loans (including accrued interest and handling fee) to be granted by COSCO Finance and CS Finance to the Company and its subsidiaries under the Financial Services Agreement for the three years ending 31 December 2019 be and are hereby approved;
(d) the execution of the Financial Services Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Financial Services Agreement and the transactions contemplated under it.”

(ix) “ THAT :

(a) the form and substance of the Master Vessel and Container Asset Services Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps, being the expected amount payable for the provision of services in relation to leasing of vessels and containers and sale of containers by COSCO SHIPPING and its subsidiaries and associates under the Master Vessel and Container Asset Services Agreement for the three financial years ending on 31 December 2019 be and are hereby approved;
(c) the execution of the Master Vessel and Container Asset Services Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Master Vessel and Container Asset Services Agreement and the transactions contemplated under it.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(x) To consider and, if thought fit, approve the Trademark Licence Agreement:

“ THAT :

  - (a) the form and substance of the Trademark Licence Agreement and the transactions contemplated under it be and are hereby approved, ratified and confirmed;

  - (b) the execution of the Trademark Licence Agreement by any director of the Company be and is hereby approved, ratified and confirmed, and the directors of the Company be and are hereby authorized to take steps as they consider necessary, desirable or expedient in connection with the Trademark Licence Agreement and the transactions contemplated under it.”

(i) To elect Mr. Wang Haimin as executive Director for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the Board and to authorize the Board to enter into service contract and/or appointment letter with Mr. Wang Haimin subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.
(ii) To elect Mr. Zhang Wei (張為) as executive Director for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the Board and to authorize the Board to enter into service contract and/or appointment letter with Mr. Zhang Wei subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.
(iii) To elect Mr. Feng Boming as non-executive Director for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the Board and to authorize the Board to enter into service contract and/or appointment letter with Mr. Feng Boming subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.
(iv) To elect Mr. Zhang Wei (張煒) as non-executive Director for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the Board and to authorize the Board to enter into service contract and/or appointment letter with Mr. Zhang Wei subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(v) To elect Mr. Chen Dong as non-executive Director for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the Board and to authorize the Board to to enter into service contract and/or appointment letter with Mr. Chen Dong subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.
(vi) To elect Mr. Ma Jianhua as non-executive Director for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the Board and to authorize the Board to enter into service contract and/or appointment letter with Mr. Ma Jianhua subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.
To elect Mr. Hao Wenyi as a Supervisor of the Company for a period commencing from the conclusion of the EGM and ending on the expiration of the term of the fourth session of the supervisory committee of the Company and to authorize the Board to enter into service contract and/or appointment letter with the newly elected Supervisor subject to such terms and conditions as the Board shall think fit and to do all such acts and things to give effect to such matters.

By Order of the Board China COSCO Holdings Company Limited GUO Huawei Company Secretary

Shanghai, the People’s Republic of China 29 October 2016

Notes:

For more information relating to the resolutions number 1(i) to 1(x), please refer to the announcement of the Company dated 14 September 2016 and the Circular.
For more information relating to the resolutions number 2(i) to 2(vi) and 3, please refer to the announcements of the Company dated 25 August 2016 and 28 October 2016 and the Circular.
Pursuant to Rule 13.39(4) of the Hong Kong Listing Rules, votes of the Shareholders at the EGM shall be taken by poll.
A Shareholder entitled to attend and vote at the EGM may appoint one or more proxies to attend and vote in his stead. A proxy needs not to be a Shareholder.
The instrument appointing a proxy must be in writing under the hand of a Shareholder or his attorney duly authorized in writing. If the Shareholder is a corporation, that instrument must be either under its common seal or under the hand of its director(s) or duly authorized attorney(s). If that instrument is signed by an attorney of the Shareholder, the power of attorney authorizing that attorney to sign or other authorization document must be notarized.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

In order to be valid, the form of proxy together with the power of attorney or other authorization document (if any) must be deposited at the H share registrar of the Company, Computershare Hong Kong Investor Services Limited (address: 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong) for holders of H shares as soon as possible and in any event not less than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of a form of proxy will not preclude a Shareholder from attending and voting in person at the EGM if he so wishes.
The H share registrar of members of the Company will be closed from Thursday, 17 November 2016 to Friday, 16 December 2016, both days inclusive, during which period no transfer of the H shares of the Company will be effected. Shareholders whose names appear on the register of members of the Company on Wednesday, 16 November 2016 at 4:30 p.m. are entitled to attend and vote at the EGM. In order to attend and vote at the EGM, all transfer documents accompanied by relevant share certificates must be lodged with the H share registrar of the Company, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Wednesday, 16 November 2016.
Shareholders who intend to attend the EGM in person or by proxy should return the reply slip to the H share registrar of the Company, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for holders of H shares not later than 20 days before the date of the EGM, i.e. Friday, 25 November 2016.
Shareholders or their proxies attending the EGM shall produce their identity documents. If the attending Shareholder is a corporate, its legal representative or person authorized by the board or other decision making authority shall present a copy of the relevant resolution of the board or other decision-making authority in order to attend the EGM.
As at the date hereof, the directors of the Company are Mr. WAN Min[2] (Chairman), Mr. HUANG Xiaowen[1] (Vice Chairman), Ms. SUN Yueying[2] , Mr. SUN Jiakang[1] , Mr. YE Weilong[1] , Mr. WANG Yuhang[2] , Mr. XU Zunwu[1] , Dr. FAN HSU Lai Tai, Rita[3] , Mr. KWONG Che Keung, Gordon[3] , Mr. Peter Guy BOWIE[3] and Mr. YANG, Liang Yee Philip[3] .
1 Executive Director
2 Non-executive Director
3 Independent non-executive Director

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AI assistant

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

50267_rns_2016-10-28_334127bf-6b15-4ec2-aafe-68ee09e8f42f.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS PROPOSED APPOINTMENT OF DIRECTORS AND SUPERVISOR AND NOTICE OF EGM

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

(Stock Code: 1919)

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS AND PROPOSED APPOINTMENT OF DIRECTORS AND SUPERVISOR

INTRODUCTION

LETTER FROM THE BOARD

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

1. MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

(1) Financial Services Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Historical transaction amounts:

LETTER FROM THE BOARD

Proposed annual caps and basis of determination for annual caps:

Deposit Services

Loan Services

LETTER FROM THE BOARD

Reasons for entering into the Financial Services Agreement:

(2) Master Vessel Services Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Historical transaction amounts:

Proposed annual caps and basis of determination for annual caps:

LETTER FROM THE BOARD

Reasons for entering into the Master Vessel Services Agreement:

(3) Master Port Services Agreement:

LETTER FROM THE BOARD

Historical transaction amounts:

Proposed annual caps and basis of determination for annual caps:

LETTER FROM THE BOARD

Reasons for entering into the Master Port Services Agreement

(4) Master Vessel and Container Asset Services Agreement

Parties:

Nature of transaction:

LETTER FROM THE BOARD

Historical transaction amounts:

LETTER FROM THE BOARD

Proposed annual caps and basis of determination for annual caps:

Reasons for entering into the Master Vessel and Container Asset Services Agreement

LETTER FROM THE BOARD

2. INTERNAL CONTROL PROCEDURES

LETTER FROM THE BOARD

3. DIRECTORS’ CONFIRMATION

4. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

LETTER FROM THE BOARD

5. REQUIREMENTS UNDER THE SHANGHAI LISTING RULES

6. INFORMATION ON THE RELEVANT PARTIES TO THE CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE BOARD

PROPOSED APPOINTMENT OF DIRECTORS

PROPOSED APPOINTMENT OF SUPERVISOR

EGM

LETTER FROM THE BOARD

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

中國遠洋控股股份有限公司 China COSCO Holdings Company Limited[*]

(Stock Code: 1919)

To the Independent Shareholders

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PLATINUM Securities Company Limited

MAJOR TRASACTION AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of the Continuing Connected Transactions

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