Dida Inc. — M&A Activity 2016

Mar 29, 2016

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

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CHINA SHIPPING DEVELOPMENT COMPANY LIMITED 中海發展股份有限公司

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

(Stock Code: 1138)

ANNOUNCEMENT

VERY SUBSTANTIAL ACQUISITION: ACQUISITION OF 100% EQUITY INTERESTS IN DALIAN OCEAN AND

MAJOR TRANSACTION:

DISPOSAL OF 100% EQUITY INTERESTS IN CS BULK AND

CONTINUING CONNECTED TRANSACTIONS

Financial Advisor of CS Development

Independent Financial Adviser of CS Development

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The Proposed Transactions

We refer to the announcement of the Company dated 11 Demcember 2015 in relation to (1) the Framework Agreement, the Compensation Agreement and the Proposed Transactions contemplated thereunder, namely the Dalian Ocean Acquisition and the CS Bulk Disposal; and (2) the proposed CS Restructuring, under which certain subsidiaries and affiliated companies of CS Development would be injected into CS Bulk prior to the completion of the CS Bulk Disposal.

The Board hereby announces that on 29 March 2016, the Company entered into (1) the Asset Transfer Agreement with COSCO Company and COSCO Bulk which has superseded and replaced the Framework Agreement; and (2) the Compensation Agreement II with COSCO Company which has superseded and replaced the Compensation Agreement, pursuant to which the parties have agreed that:

1. the Dalian Ocean Consideration is RMB6,628,455,200, and the CS Bulk Consideration is RMB5,392,221,600.

2. during the Compensation Period, the Actual Net Profits shall not be less than the Estimated Net Profits of Dalian Ocean which shall be RMB819 million as determined by COSCO Company.

Lease Framework Agreement

On 29 March 2016, CS Development entered into the Lease Framework Agreement with China Shipping, which sets out the basis upon which members of the Group (including Dalian Ocean) will continue to provide China Shipping Group and its associates (and for the purpose of this agreement including COSCO Group and its associates) with property and land use right leasing services and receive such services from China Shipping Group and its associates upon completion of the Proposed Transactions.

The Listing Rules Implications

A. Transactions in connection with the Asset Transfer Agreement

As the highest applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) of the Dalian Ocean Acquisition exceeds 100%, the Dalian Ocean Acquisition constitutes a very substantial acquisition of the Company and is subject to the requirements of reporting, announcement, circular and shareholder’s approval under Chapter 14 of the Listing Rules.

As the highest applicable percentage ratio of the CS Bulk Disposal is more than 25% but less than 75%, the CS Bulk Disposal constitutes a major transaction of the Company and is subject to the requirements of reporting, announcement, circular and shareholders’ approval under Chapter 14 of the Listing Rules.

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As the Proposed Transactions are conducted in the context of a restructuring which involves China Shipping and COSCO Company, the Company voluntarily deems the Proposed Transactions as connected transactions of the Company within the meaning of Chapter 14A of the Listing Rules, and China Shipping and its associates will voluntarily abstain from voting on the resolutions in respect of the Proposed Transactions at the AGM.

In relation to the Proposed Transactions, the Company has formed an Independent Board Committee to advise the Independent Shareholders and has appointed TC Capital Asia Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in accordance with the Listing Rules.

B. Transactions in connection with the Lease Framework Agreement

In respect of the provision and receipt of property and land use right leasing services under the Lease Framework Agreement, as the respective applicable percentage ratio is expected to be more than 0.1% but less than 5% on an annual basis, the Lease Framework Agreement and the proposed annual caps are subject to the requirements of reporting and announcement, but exempt from the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

It is expected that a circular containing, among other things, details of the Proposed Transactions, the recommendations from the Independent Board Committee to the Independent Shareholders in respect of the Proposed Transactions, the advice of the Independent Financial Advisor to the Independent Board Committee and the Independent Shareholders in respect of the Proposed Transactions, will be dispatched to the Shareholders on or before 18 April 2016. WARNING The relevant transactions are subject to a number of conditions precedent including the Independent Shareholders’ approval and approvals from the relevant regulatory authorities, which may or may not be fulfilled. Shareholders and potential investors of CS Development are advised to exercise caution when they deal in or intend to deal in the Shares or other securities (if any) of CS Development.

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I. INTRODUCTION

We refer to the announcement of the Company dated 11 Demcember 2015 in relation to (1) the Framework Agreement, the Compensation Agreement and the Proposed Transactions contemplated thereunder, namely the Dalian Ocean Acquisition and the CS Bulk Disposal; and (2) the proposed CS Restructuring, under which certain subsidiaries and affiliated companies of CS Development will be injected into CS Bulk prior to the completion of the CS Bulk Disposal.

As at the date of this announcement, the CS Restructuring has been completed, except that the Hong Kong Hai Bao Shipping Co., Limited is still going through a procedure for the transfer of equity interests which is expected to complete before the completion of the CS Bulk Disposal.

On 29 March 2016, the Company entered into (1) the Asset Transfer Agreement which has superseded and replaced the Framework Agreement; (2) the Compensation Agreement II which has superseded and replaced the Compensation Agreement. Details of such agreements are set out below.

II. ASSET TRANSFER AGREEMENT

A. Principal Terms and Amendments

Date: 29 March 2016

Parties: CS Development COSCO Company and COSCO Bulk

Consideration:

The Dalian Ocean Consideration is RMB6,628,455,200, and the CS Bulk Consideration is RMB5,392,221,600.

According to the Valuation Reports, the Appraised Value of Dalian Ocean is RMB6,628.4552 million, and the Appraised Value of CS Bulk is RMB5,392.2216 million. The Consideration is determined based on such Appraised Values after considering other relevant factors. A summary of the Valuation Reports will be included in the circular in connection with the Proposed Transactions.

The Valuation Reports will be filed with the competent authority and the Consideration shall be adjusted based on the results of such filing. Any adjustment to the Consideration will be disclosed in the circular in connection with the Proposed Transactions.

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The Dalian Ocean Consideration payable by CS Development under the Dalian Ocean Acquisition is intended to be partially offset by the CS Bulk Consideration payable by COSCO Company under the CS Bulk Disposal, and the balance is intended to be settled in cash within 30 business days of the date on which all the conditions precedent are satisfied or otherwise waived by both parties.

Conditions precedent:

As at the date of this announcement, the transformation of DO Company into Dalian Ocean has been completed, and the CS Restructuring has also almost been completed. The parties have agreed that completion of the Proposed Transactions is conditional upon fulfilment of the following:

• (1) the Valuation Reports having been filed with the competent authority;

• (2) COSCO Company and China Shipping having settled all the debts repayble by CS Bulk and its subsidiaries to the Group before the Closing Date (inclusive) according to the requirements under the Asset Transfer Agreement;

As at the date of this announcement, the total amount of debts owned to CS Development and its wholly-owned subsidiary incurred by CS Bulk and its subsidiaries as a result of the CS Restructuring is approximately RMB5,999.13 million (including RMB4,233,364,590.14, US$5 and HK$2,104,607,290), which will be settled by COSCO Company and/or its designated wholly-owned subsidiaries;

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As at the date of this announcement, the total amount of debts incurred by CS Bulk and its subsidiaries as a result of the non-operating funds financing from the Group to CS Bulk and its subsidiaries is approximately RMB11,668.63 million (including RMB6,261,344,338.44, US$386,714,730.29 and HK$3,444,300,104.55), which will be settled by China Shipping and/or their designated connected person(s). COSCO Company has undertaken to be jointly and severally liable for the settlement with China Shipping;

• (3) no material adverse change having occurred to the business, operations, assets, liabilities, etc. of the Target Companies since the Reference Date;

• (4) the Independent Shareholders of CS Development having passed resolutions to approve the Proposed Transactions;

• (5) the competent internal decision-making departments of COSCO Company and the Target Companies having approved the Proposed Transactions;

• (6) all approvals by the relevant regulatory authorities in relation to the Proposed Transactions, including but not limited to, the approvals from the competent state-owned assets supervisory institution and the MOFCOM, having been obtained and such regulatory approvals not having been revoked before the Closing Date; and

• (7) no material breach of the terms of the Asset Transfer Agreement having occurred, and the declarations, representations and warranties given by CS Development, COSCO Company and COSCO Bulk as set out therein remaining effective.

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Save for the aforesaid terms, the major terms of the Asset Transfer Agreement and the Framework Agreement are consistent. Details are as follows:

Subject Matter:

• (1) CS Development has agreed to acquire and COSCO Company has agreed to dispose of 100% equity interests in Dalian Ocean.

• (2) CS Development has agreed to dispose of and COSCO Company has agreed to acquire (by itself or through COSCO Bulk) 100% equity interests in CS Bulk.

Completion:

The Proposed Transactions will be completed on the Closing Date.

Upon completion of the Proposed Transactions, Dalian Ocean will become a wholly-owned subsidiary of CS Development and its financial results will be consolidated into the financial statements of CS Development Group; CS Bulk will cease to be a subsidiary of CS Development and its financial results will no longer be consolidated into the financial statements of CS Development Group.

Other principal terms:

• (1) During the transition period from the Reference Date to the Closing Audit Date , CS Development is entitled to all the increase in the equity of Dalian Ocean due to profit-making or any other reason; all the decrease in the equity of Dalian Ocean due to loss-making or any other reason will be borne by COSCO Company, and COSCO Company shall compensate CS Development in equivalent cash.

• (2) During the transition period from the Reference Date to the Closing Audit Date, all the increase in the equity of CS Bulk due to profit-making or any other reason will be retained by CS Development, and COSCO Company or COSCO Bulk shall pay for such increase to CS Development in equivalent cash; all the decrease in equity of CS Bulk due to loss-making or any other reason will be borne by CS Development, and CS Development shall compensate COSCO Company or COSCO Bulk in equivalent cash.

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B. Financial Effects of the CS Bulk Disposal

As at 31 December 2015, the equity attributable to owners of CS Bulk was approximately RMB4,327.44 million. As a result, CS Development is expected to accrue a gain of approximately RMB821.64 million under the CS Bulk Disposal. CS Development will recognise such gain under the CS Bulk Disposal in its consolidated income statement as at the Closing Date.

The proceeds from the CS Bulk Disposal will be applied to offset part of the Dalian Ocean Consideration.

C. Reasons for and Benefits of the Proposed Transactions

It is intended that CS Development will be, through the Proposed Transactions, built into a listed platform of professional oil and gas transportation to enhance its overall profitability, thereby enhancing the interests of all the Shareholders. The Proposed Transactions will push forward the achievement of such strategic goals on the following aspects:

• (1) to create a large energy transportation fleet with a global leading position. Following the Proposed Transactions, CS Development will build a specialised crude oil and refined oil transportation fleet and is expected to become a global leader in the oil transportation market in terms of transportation capacities;

• (2) to enhance the international competitiveness of CS Development and gradually realise the global layout;

• (3) to further strengthen the leading position in the domestic oil transportation market, further enhance the competitiveness in all relevant market segments and effectively enhance the sustainable and stable profitability while improving the counter-cycle capabilities;

• (4) to achieve a strong alliance between the two major players of transportation of liquefied natural gas (LNG) imported by China, lock in long-term and stable revenues and effectively counter cyclical fluctuations in the oil transportation market;

• (5) to coordinate and centralise the procurement of all relevant resources and fully utilise the existing resources, significantly enhance the bargaining power for various cost items while improving the efficiency of resource utilisation, and effectively reduce procurement costs;

• (6) to fully optimise the utilisation of human resources, fully compensate the insufficiency in the tanker crew and satisfy the demand for future expansion of the fleet scale as well as the strategic need for a global route layout; besides, gradually enhance the competitiveness of staff in terms of internationalisation and specialties; and

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• (7) to broaden and release the financial resources of CS Development and enhance its overall profitability through the disposal of bulk shipping business against the background of the significant imbalance between the supply and demand of global bulk shipping which has led to a gradual decline in the BDI and CCBFI indices in the past five years and a historical low level of the BDI index in 2016.

As such, the Directors (excluding the Independent Non-executive Directors who will give their opinions based on the recommendations of the Independent Financial Adviser) consider that the Proposed Transactions under the Asset Transfer Agreement are entered into after arm’s length negotiations and based on normal commercial terms, and therefore terms of such transactions are fair and reasonable and in the interests of the Company and its shareholders as a whole.

III. COMPENSATION AGREEMENT II

A. Principal Terms and Amendments

Date: 29 March 2016 Parties: CS

CS Development COSCO Company

Subject Company: Compensation:

Dalian Ocean

COSCO Company, in accordance with the relevant PRC laws and regulations concerning valuations based on the income approach and pursuant to the Compensation Agreement II, undertakes that:

During the Compensation Period, the Actual Net Profits shall not be less than the Estimated Net Profits of Dalian Ocean which shall be determined by COSCO Company. Based on the net profit forecast set out in the Valuation Reports, COSCO Company has determined that the accumulative Estimated Net Profit for the three years from 2016 to 2018 shall be RMB819 million.

The Valuation Reports will be filed with the competent authority and the Estimated Net Profit shall be adjusted based on the results of such filing. Any adjustment to the Estimate Net Profit will be disclosed in the circular in connection with the Proposed Transactions.

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Save for the aforesaid terms, the major terms of the Compensation Agreement II and the Compensation Agreement are consistent. Details are as follows.

Method of Compensation:

(1) If the accumulative Actual Net Profit of Dalian Ocean for the Compensation Period is lower than its accumulative Estimated Net Profit for the corresponding period, COSCO Company shall compensate CS Development for the shortfall in cash. The amount of compensation payable by COSCO Company in cash will be determined based on the Compensation Agreement II and the following formula:

Compensation payable in cash = accumulative Estimated Net Profit of Dalian Ocean for the Compensation Period - accumulative Actual Net Profit of Dalian Ocean for the Compensation Period

• (2) If compensation has been paid by COSCO Company in equivalent cash for all the decrease in the equity of Dalian Ocean due to loss-making during the transition period pursuant to the Asset Transfer Agreement, such amount should be deducted from the compensation amount payable by COSCO Company due to the shortfall calculated according to the Compensation Agreement II.

• (3) Upon the end of the Compensation Period, CS Development will perform an impairment assessment of Dalian Ocean. If the impairment amount on Dalian Ocean at the end of the Compensation Period is greater than the amount of cash compensation paid by COSCO Company for the Compensation Period, COSCO Company shall provide additional compensation. The amount of such additional compensation in cash will be determined based on the Compensation Agreement II and the following formula:

Additional compensation amount = the impairment amount of Dalian Ocean at the end of the period - the amount of cash compensation paid by COSCO Company

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Conditions precedent:

The effectiveness of the Compensation Agreement II is conditional upon the fulfilment of the following:

• (1) The Independent Shareholders of CS Development passing resolutions to approve the Compensation Agreement II;

• (2) The competent internal decision-making departments of COSCO Company approving the Compensation Agreement II; and

• (3) Condition precedents in the Asset Transfer Agreement having been fulfil or waived.

Termination:

If Asset Transfer Agreement is cancelled or terminated, the Compensation Agreement II shall be cancelled or terminated at the same time.

IV. LEASE FRAMEWORK AGREEMENT

On 29 March 2016, CS Development entered into the Lease Framework Agreement with China Shipping, which sets out the basis upon which members of the Group (including Dalian Ocean) will continue to provide China Shipping Group and its associates (and for the purpose of this agreement, including COSCO Group and its associates) with property and land use right leasing services and receive such services from China Shipping Group and its associates upon completion of the Proposed Transactions.

A. Principal Terms

Date: 29 March 2016 Parties: CS Development China Shipping

Subject matters:

Based on the following principles, CS Development agrees to provide China Shipping Group and its associates (and for the purpose of this agreement including COSCO Group and its associates) with property and land use right leasing services and receive property and land use right leasing services from China Shipping Group and its associates.

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The properties and land use right leased by the Group will be mainly used as office premises, and the properties and land use right leased by the China Shipping Group and its associates will be mainly used as office premises and plants.

Pricing:

The rent must be fair and reasonable and determined with reference to the prevailing market fair price, i.e. the price charged by an independent third party for similar services provided in the same region on normal commercial terms during its ordinary course of business on the basis of arm’s length negotiation.

Term:

For an initial period of three years commencing from 1 January 2016 to 31 December 2018 (inclusive).

Subject to the relevant provisions under the Listing Rules, CS Development and China Shipping may renew the Lease Framework Agreement on terms and conditions agreed upon by both parties within three months before the expiration of the Term.

B. Historical Figures

Set out below are the respective historical transaction amounts for the provision and receipt of property and land use right leasing services by the Group and Dalian Ocean to/from China Shipping Group and its associates (for the purpose of this agreement, including COSCO Group and its associates) for each of the three years ended 31 December 2015:

	For the year	For the year	For the year
	ended	ended	ended
	31 December	31 December	31 December
	2013	2014	2015
	RMB million	RMB million	RMB million
Provision of property and land use
right leasing services	22.44	22.44	27.56
Receipt of property and land use
right leasing services	24.10	23.20	23.50

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C. Proposed Annual Caps

Under the Lease Framework Agreement, for each of the three years ending 31 December 2018, the proposed annual caps with respect to the property and land use right leasing services under the Lease Framework Agreement shall not exceed the following amounts:

	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2016	2017	2018
	RMB million	RMB million	RMB million
Provision of property and land use
right leasing services	30.00	32.00	35.00
Receipt of property and land use
right leasing services	28.00	30.00	32.00

D. Basis of the Proposed Annual Caps

The proposed annual caps are determined by the Directors with reference to (i) the previsous property and land use right leasing transactions and transaction amounts between the Group (including Dalian Ocean)and China Shipping Group and its associates (and for the purpose of this agreement, including COSCO Group and its associates); (ii) the estimated aggregate annual rental payable under the specific lease agreements during the term; and (iii) a reasonable buffer to cater for possible increases in the number of leases and the amount of rent payable or receivable.

E. Internal Control and Pricing Policy

In order to ensure the terms provided by China Shipping are no less favourable than that offered by independent third parties, the Company has adopted the following measures:

• (1) the rent under the Lease Framework Agreement will be negotiated on arm’s length basis and with reference to the prevailing market prices of the similar properties or land in similar locations. Such rent shall not be less favorable than the average rent charged or paid by other independent third parties;

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• (2) the Company will monitor the continuing connected transactions in accordance with the procedures set forth in the Company’s internal control manual on continuing connected transactions. The relevant personnel of the business department of the Group will review and assess whether the relevant continuing connected transactions are conducted in accordance with the terms of the Lease Framework Agreement before entering each specific leasing agreement, and the price charged for a specific transaction is fair and reasonable and in accordance with the aforesaid pricing policy;

• (3) the Company’s external auditors will conduct an annual review on the pricing and the annual caps of the continuing connected transactions;

• (4) the Independent Non-executive Directors will conduct an annual review on the implementation and enforcement of the continuing connected transactions.

F. Benefits of and Reasons for the Lease Framework Agreement

The Company has agreed to lease such properties and land use right from China Shipping Group and its associates, mainly because the Group has a continuous demand for such kind of properties and land use right to be used as office premises in the upcoming three years, and the rent to be charged by China Shipping Group and its associates is competitive. The Company has agreed to lease such properties to China Shipping Group and its associates, mainly because China Shipping Group and its associates have a continuous demand for such kind of properties and land use right to be used as office premises and plants in the upcoming three years, and the rent that China Shipping Group and its associates are willing to pay is competitive.

In addition, the Directors consider that the Lease Framework Agreement can set up a framework and streamline the leasing procedures in respect of the leased properties between members of the Group and China Shipping Group (and its associates). The Lease Framework Agreement will also provide a basis on which the Company will comply with the relevant reporting, announcement and annual review requirements (to the extent applicable) in compliance with the Listing Rules and thereby enhancing administrative efficiency and saving costs for the Company in complying with such requirements.

The Board (including the Independent Non-executive Directors) considers that: (i) the terms of the Lease Framework Agreement are fair and reasonable and on normal commercial terms; (ii) the lease transactions are entered into in the ordinary and usual course of business of the Group; (iii) entering into the Lease Framework Agreement is in the interest of the Company and its Shareholders as a whole; and (iv) the proposed annual caps (including the basis of determination thereof) are fair and reasonable.

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V. THE LISTING RULES IMPLICATIONS

A. Transactions in relation with the Asset Transfer Agreement

As the highest applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) of the Dalian Ocean Acquisition exceeds 100%, the Dalian Ocean Acquisition constitutes a very substantial acquisition of the Company and is subject to the requirements of reporting, announcement, circular and shareholder’s approval under Chapter 14 of the Listing Rules.

As the highest applicable percentage ratio of the CS Bulk Disposal is more than 25% but less than 75%, the CS Bulk Disposal constitutes a major transaction of the Company and is subject to the requirements of reporting, announcement, circular and shareholders’ approval under Chapter 14 of the Listing Rules.

As stated in the Announcement, the Proposed Transactions are conducted in the context of the restructuring which involves the COSCO Company and China Shipping as well as certain of their respective group member companies (including the Company) selling and acquiring certain assets and equity interests among themselves (including the Proposed Transactions) (the “Group Restructuring”). The Proposed Transactions are not conditional upon other transactions under the Group Restructuring. Therefore, the Company voluntarily considers the Proposed Transactions as connected transactions (as defined under Chapter 14A of the Listing Rules) of the Company, and China Shipping and its associates will voluntarily abstain from voting on the resolutions with respect to the Proposed Transactions.

In relation to the Proposed Transactions, the Company has formed an independent board committee to advise the Independent Shareholders and has appointed TC Capital Asia Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in accordance with the Listing Rules.

Given that Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Ding Nong, Mr. Yu Zenggang, Mr. Yang Jigui, Mr. Han Jun and Mr. Qiu Guoxuan, all being executive Directors of the Company, hold positions in entities connected with its parent company, they have abstained from voting on the relevant Board resolutions approving the Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions thereunder due to potential conflict of interests.

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B. Transactions in relation to the Lease Framework Agreement

As of the date of this announcement, China Shipping Group is the controlling shareholder of CS Development and holds 38.12% of its equity interest, and is therefore a connected person of CS Development under Chapter 14A of the Listing Rules. Therefore, the transactions under the Lease Framework Agreement constitute continuing connected tranactions of the Company.

In respect of the provision and receipt of property and land use right leasing services under the Lease Framework Agreement, as the respective applicable percentage ratio is expected to be more than 0.1% but less than 5% on an annual basis, the Lease Framework Agreement and the proposed annual caps are subject to the requirements of reporting and announcement, but exempt from the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

Given that Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Ding Nong, Mr. Yu Zenggang, Mr. Yang Jigui, Mr. Han Jun and Mr. Qiu Guoxuan, all being executive Directors of the Company, hold positions in entities connected with its parent company, they have a material interest in the Lease Framework Agreement and have abstained from voting on the relevant Board resolutions.

VI. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

As stated in the Announcement, the Valuation Reports are prepared based on the cost approach and income approach. Therefore, the Valuation Reports of the Target Companies will be regarded as profit forecasts under Rule 14.61 of the Listing Rules. The Company has applied for and the Stock Exchange has granted a waiver from strict compliance with the requirements on profit forecast under Rules 14.62, Rule 14.66(2), 14A.68(7) and Rule 14A.70(13) of the Listing Rules regarding the Valuation Reports for the Proposed Transactions. For details, please see “III. FRAMEWORK AGREEMENT - C. Waiver In Relation to the Valuation Reports” in the Announcement.

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VI. INFORMATION ON THE PARTIES

A. CS Development

The Company is principally engaged in the business of transportation of product oil, crude oil, coal and iron ore in the coastal areas of China and other areas in the world, and transportation of LNG imported by China.

B. COSCO Company

COSCO Company is principally engaged in the business of container shipping, dry bulk shipping, tanker transportation, logistics terminals, ship repairing and building, financial services and trade.

C. COSCO Bulk

COSCO Bulk is principally engaged in the business of dry bulk shipping.

D. Dalian Ocean

Dalian Ocean is principally engaged in tanker shipping business which provides oil and gas shipping services covering oil tanker shipping, LNG shipping and LPG shipping, etc. As at 31 December 2015, it owned 29 oil tanker with 6.60 million deadweight tons. The predecessor of Dalian Ocean is DO Company and is a wholly state-owned enterprise incorporated in the PRC. It completed transformation into a company with limited liability on 24 December 2015.

Based on the audited consolidated financial statements of Dalian Ocean for the year ended 31 December 2015 prepared in accordance with the HKFRS, the consolidated net assets of Dalian Ocean as at 31 December 2015 were RMB6,109.59 million. The audited consolidated net profits (both before and after tax) of Dalian Ocean for the two years ended 31 December 2014 and 31 December 2015 prepared in accordance with the HKFRS are set out as follows:

				For the financial	For the financial	For the financial
					year ended	year ended
				**31 **	December 2014	31 December 2015
					RMB million	RMB million
Consolidated	net	profits	before tax		-317.95	816.46
Consolidated	net	profits	after tax		-403.91	808.14

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E. CS Bulk

CS Bulk is principally engaged in the bulk shipping business.

Based on the audited consolidated financial statements of CS Bulk for the year ended 31 December 2015 prepared in accordance with the PRC GAAP, the consolidated net assets of CS Bulk as at 31 December 2015 were RMB4,949.19 million. Having considered the financial impact of the CS Restructuring, the restated audited consolidated net profits (both before and after tax) of CS Bulk for the two years ended 31 December 2014 and 31 December 2015 prepared in accordance with the PRC GAAP are set out below:

				For the financial	For the financial
				year ended 31	year ended 31
				December 2014	December 2015
				RMB million	RMB million
Consolidated	net	profits	before tax	205.18	-1,512.42
Consolidated	net	profits	after tax	278.13	-1,473.61

VII.INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, which comprises Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng (all of whom are Independent Non-executive Directors), has been formed to advise and provide recommendations to the Independent Shareholders on the Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions as contemplated thereunder.

In addition, CS Development has appointed TC Capital Asia Limited as the Independent Financial Adviser to make recommendations to the Independent Board Committee and the Independent Shareholders as to whether the terms of the Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions as contemplated thereunder are fair and reasonable, and are in the interests of CS Development and its Shareholders as a whole.

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VIII. DISPATCH OF CIRCULAR

CS Development will dispatch a circular in accordance with the requirements under the Listing Rules, which will contain, among other things:

• (1) the notice of the AGM, whereby seeking the approval by the Independent Shareholders of (i) the Asset Transfer Agreement; (ii) the Compensation Agreement II and the transactions as contemplated thereunder;

• (2) letters of opinions from the Independent Financial Advisor to the Independent Board Committee and the Independent Shareholders; and

• (3) letters from the Independent Board Committee to the Independent Shareholders.

Subject to review by the Stock Exchange, the circular will be dispatched to the Shareholders as soon as practicable. It is expected that the circular will be dispatched on or before 18 April 2016 to allow ample time for CS Development to prepare necessary information for inclusion in the circular to be issued in relation to the Proposed Transactions. Shareholders and potential investors should refer to the circular for further details of the relevant transactions.

WARNING

The relevant transactions are subject to a number of conditions precedent including the Independent Shareholders’ approval and approvals from the relevant regulatory authorities, which may or may not be fulfilled. Shareholders and potential investors of CS Development are advised to exercise caution when they deal in or intend to deal in the Shares or other securities (if any) of CS Development.

DEFINITIONS

“Announcement”

“Actual Net Profits”

the announcement of the Company dated 11 December 2015 in relation to (1) the Framework Agreement and Compensation Agreement and the Proposed Transactions thereunder; and (2) the CS Restructuring the audited net profits attributable to equity holders after netting off non-occurring gains/losses as set out in the annual consolidated statements of Dalian Ocean for the Compensation Period

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“AGM”

• “Appraised Value”

• “Asset Transfer Agreement”

• “associate(s)”

• “Board”

• “China Shipping”

• “China Shipping Group”

• “Closing Audit Date”

• “Closing Date”

• “CS Bulk”

• “CS Bulk Consideration”

• the annual general meeting proposed to be convened by CS Development for the purpose of approving, among other things, the resolutions in respect of the Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions as contemplated thereunder

• the appraised value of Target Assets as of the Reference Date which are set out in the Valuation Reports

• the asset acquisition and disposal agreement in relation to the Proposed Transactions dated 29 March 2016 between the CS Development, COSCO Company and COSCO Bulk to supersede and replace the Framework Agreement

• has the meanings as ascribed thereto under the Listing Rules

• the Board of CS Development

• China Shipping (Group) Limited, a state-owned enterprise in the PRC, and the controlling shareholder of CS Development

• China Shipping and its subsidiaries

• if the Closing Date is before or on 15th (inclusive) of a month, it refers to the end of the month preceding the Closing Date; if the Closing date is after the 15th (exclusive) of a month, it refers to the end of the month of the Closing Date

• the date on which the Consideration has been fully paid according to the Asset Transfer Agreement

• China Shipping Bulk Carrier Co., Limited, a company incorporated in PRC with limited liability, and a wholly-owned subsidiary of CS Development

• the total price payable by COSCO Company in respect of the CS Bulk Disposal

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• “CS Bulk Disposal” the disposal by CS Development of 100% equity interests in CS Bulk to COSCO Company or COSCO Bulk

• “CS Development” or “Company”

• China Shipping Development Company Limited, a joint stock limited company incorporated in the PRC, the H shares of which are listed on the Stock Exchange (Stock Code: 1138) and the A shares of which are listed on the Shanghai Stock Exchange (Stock Code: 600026), and a direct non-wholly-owned subsidiary of China Shipping

• “CS Development Group” or “Group”

• CS Development and its subsidiaries

• “CS Restructuring”

• in respect of CS Bulk Disposal, the restructuring whereby CS Development has undergone a series of restructuring of its bulk shipping assets, and has injected certain subsidiaries and affiliated companies of CS Development into CS Bulk prior to the completion of CS Bulk Disposal. For details, please refer to the Announcement

• “Compensation Agreement”

• a profit forecast compensation agreement dated 11 December 2015 entered into between CS Development and COSCO Company providing that the Actual Net Profit of Dalian Ocean shall not be lower than Estimated Net Profit for the Compensation Period, which has been superseded and replaced by the Compensation Agreement II as of the date of this announcement

• “Compensation Agreement II”

• the agreement dated 29 March 2016 between CS Development and COSCO Company to supersede and replace the Compensation Agreement

• “Compensation Period”

• the period which lasts from the year in which the Dalian Ocean Acquisition completes to the end of the third accounting year thereafter (the year in which the Dalian Ocean Acquisition completes is the first accounting year), i.e. the compensation periods will be the year 2016, the year 2017 and the year 2018 if Dalian Ocean Acquisition completes during the year 2016;

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• “Consideration”

• the Dalian Ocean Consideration and the CS Bulk Consideration

• “controlling shareholder”

• has the meanings as ascribed thereto under the Listing Rules

• “COSCO Bulk ”

• China COSCO Bulk Shipping (Group) Co., Ltd, a company incorporated in PRC with limited liability and a wholly-owned subsidiary of COSCO Company

• “COSCO Company”

• China Ocean Shipping (Group) Company, a state-owned enterprise in the PRC, and the controlling shareholder of Dalian Ocean

• “COSCO Group”

• COSCO Company and its subsidiaries

• “Dalian Ocean”

• Dalian Ocean Shipping Company Limited, a company with limited liability transformed from DO Company, a direct wholly-owned subsidiary of COSCO Company.

• “Dalian Ocean Acquisition”

• the acquisition of 100% equity interests of Dalian Ocean from COSCO Company by CS Development

• “Dalian Ocean Consideration”

• the total price payable by CS Development for the Dalian Ocean Acquisition

• “Director(s)” the director(s) of CS Development

• “DO Company”

• Dalian Ocean Shipping Company, a wholly state-owned enterprise incorporated in the PRC , and a direct wholly-owned subsidiary of COSCO Company. It was transformed into Dalian Ocean on 24 December 2015

• “Estimated Net Profits”

• an estimate of the net profits of Dalian Ocean for the Compensation Period made by COSCO Company which is based on and no lower than the net profit forecast set out in the Valuation Reports to be filed with the competent authority

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• “Framework Agreement”

• an agreement dated 11 December 2015 entered into between CS Development and COSCO Company in relation to the Proposed Transactions, which has been superseded and replaced by the Asset Transfer Agreement as of the date of this announcement

“HK$”

• HK$, the lawful currency of Hong Kong

• “HKFRS”

• Hong Kong Financial Reporting Standards

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “Independent Board Committee”

• an independent board committee, which comprises Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng, all of whom are Independent Non-executive Directors, to advise and provide recommendations to the Independent Shareholders on the Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions contemplated thereunder

• “Independent Financial Adviser”

• TC Capital Asia Limited, a licensed corporation under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities and an independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions contemplated thereunder.

• “Independent the independent non-executive Directors of CS Non-executive Development Directors”

• “Independent Shareholders”

• the shareholders of CS Development who may vote on the resolutions in respect of the Asset Transfer Agreement, the Compensation Agreement II and the Proposed Transactions contemplated thereunder at the AGM under the Listing Rules (excluding China Shipping and its associates)

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“Lease Framework the property lease framework agreement entered Agreement” between CS Development and China Shipping on 29 March 2016 “Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange “MOFCOM” the Ministry of Commerce of the PRC (中華人民共和國 商務部) “PRC” or “China” the People’s Republic of China, which shall, for the purpose of this announcement, exclude Hong Kong, the Macau Special Administrative Region and Taiwan “PRC GAAP” PRC Generally Accepted Accounting Principles “Proposed the transactions contemplated under the Asset Transfer Transactions” Agreement, i.e. the Dalian Ocean Acquisition and the CS Bulk Disposal “Reference Date” 31 December 2015 “RMB” Renminbi, the lawful currency of the PRC “Share(s)” the share(s) of CS Development “Shareholder(s)” the shareholder(s) of CS Development “State Council” the State Council of the PRC (中華人民共和國國務院) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Assets” 100% equity interests in Dalian Ocean and 100% equity interests in CS Bulk “Target Companies” Dalian Ocean and CS Bulk “US$” US$, the lawful currency of United States of America “Valuation Report(s)” The valuation reports on Dalian Ocean and CS Bulk that were issued on 8 March 2016 by the Valuer and will be filed with the competent authority

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“Valuer”

China Tong Cheng Assets Appraisals Co., Ltd., an independent third party of the Purchaser, the Vendor and the Target Companies

By order of the Board China Shipping Development Company Limited Mr. Xu Lirong Chairman

Shanghai, the PRC 29 March 2016

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Ding Nong, Mr. Yu Zenggang, Mr. Yang Jigui, Mr. Han Jun and Mr. Qiu Guoxuan as executive Directors, Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng as Independent Non-executive Directors.

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