Dida Inc. — Proxy Solicitation & Information Statement 2001

Apr 24, 2001

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)

ONGOING CONNECTED TRANSACTIONS

SUMMARY Further to the Company's announcement dated 3 April, 2001 in connection with the Acquisition Agreement, the Revised Services Agreement and the issue of A Shares dated 3 April, 2001, the Directors wish to announce further details of the Ongoing Connected Transactions. China Shipping is presently beneficially interested in 1,680,000,000 State-owned domestic shares of the Company, representing approximately 56.45 per cent. of the current issued share capital of the Company. Pursuant to the Listing Rules, the transactions contemplated under the Revised Services Agreement will constitute connected transactions for the Company. The Directors believe that strict compliance with the disclosure/shareholders' approval requirement in respect of the Ongoing Connected Transactions would be impractical and unduly onerous on the part of the Company as they are of a regular and continuing nature. Accordingly, the Company has made an application to the Stock Exchange for a waiver from the announcement/ shareholders' approval requirements, under the Listing Rules in respect of the Ongoing Connected Transactions for each of the three financial years ending 31 December 2003. The Revised Services Agreement is subject to, amongst other things, the approval of the Independent Shareholders at the EGM. The Independent Board Committee has been appointed to advise the Independent Shareholders on whether or not the terms under the Acquisition Agreement and the Revised Services Agreement are in the interests of the Company and are fair and reasonable so far as the Independent Shareholders are concerned. The Independent Financial Adviser has been appointed to advise the Independent Board Committee in respect of the terms of the Acquisition Agreement, the Revised Services Agreement and the Ongoing Connected Transactions.

I. BACKGROUND INFORMATION

As disclosed in the Company's announcement dated 3 April, 2001, the Company has conditionally entered into the Acquisition Agreement with Guangzhou Maritime for the acquisition of the Tankers. The Company has also, conditional upon completion of the Acquisition Agreement, entered into the Revised Services Agreement with China Shipping for a term of 10 years pursuant to which the China Shipping Group will provide to the Tankers, as well as other vessels owned by the Company, certain Agreed Supplies for their ongoing operations.

As China Shipping is presently beneficially interested in 1,680,000,000 State-owned domestic shares of the Company, representing approximately 56.45 per cent. of the existing issued share capital of the Company, the transactions under the Revised Services Agreement will constitute connected transactions for the Company under the Listing Rules.

The Ongoing Connected Transactions have been arrived at after arm's length negotiation and are based on normal commercial terms. They will be conducted in the ordinary and usual course of businesses of the Company and its counter-parties; and on normal commercial terms determined on an arm's length basis. The Directors (including the Independent Directors) consider the terms of the Ongoing Connected Transactions to be fair and reasonable so far as the Independent Shareholders are concerned. The Directors also consider it to be in the interests of the Company to engage such transactions as they will facilitate the smooth operation of the Group's business after Completion.

II. TERMS OF THE REVISED SERVICES AGREEMENT

Provision of the Agreed Supplies

Upon the commencement of the Revised Services Agreement, China Shipping shall provide (or procure other members of the China Shipping Group to provide) to the Company the Agreed Supplies in such quantities and in such manner as may be agreed between the Company and China Shipping from time to time, provided that the quantity of Agreed Supplies in 2001 shall be not less than that as previously agreed.

The Company shall notify China Shipping of its actual requirement of each of the Agreed Supplies for each month no later than the 18th day of the preceding month.

China Shipping agrees that the Company shall have the right to choose to have the Agreed Supplies to be provided by any third party by giving notice to China Shipping no later than the 18th day of the preceding month.

No Agreed Supplies shall be terminated by China Shipping unless the Company has confirmed in writing that it shall be able to source such supply from a third party on terms satisfactory to the Company. Subject to such provision, either party may terminate the provision or acceptance of an Agreed Supply by serving a termination notice on the other, the period of such notice shall not be less than the pre-agreed minimum period in respect of that Agreed Supply. Such termination of any Agreed Supply shall have no effect on the provision of any other Agreed Supplies.

Undertakings

China Shipping undertakes to the Company that it shall, inter alia:

(a) provide, or procure any member of the China Shipping Group to provide, any Agreed Supply on terms no less favourable than those on which such the Agreed Supply is provided to any third party; and

(b) grant to the Company an exclusive right of first refusal over other members of the China Shipping Group and any third party in respect of the supply of any of the Agreed Supplies.

Quality and Standard

To ensure that the Agreed Supplies are of a quality and standard acceptable to the Company, China Shipping shall:

(a) ensure that the quality and standard of each of the Agreed Supplies attains the relevant PRC quality standards or international quality standards as from time to time required by the Company; and

(b) upon the request of the Company, issue a warranty confirming that each of the materials supplied under the Agreed Supply is of a quality and form suitable for the Tankers and other vessels belonging to the Company.

Fees

The fees for the Agreed Supplies will be determined by reference to the State Price. If a State Price is not available for any of the Agreed Supplies, reference will be made to its market price. Where there is no market price, a price based on the actual book cost incurred by the China Shipping Group for providing the Agreed Supplies will be referred to. If the actual book cost cannot be ascertained, a price agreed by the parties as being fair and reasonable will be adopted. The aggregate fee for the Agreed Supplies will depend on the quantity of the Agreed Supplies provided to the Company.

The market price for an Agreed Supply shall be determined by reference to the lower of the following:

(a) the price that would be charged by a third party making a supply similar to that Agreed Supply in the vicinity of Shanghai Municipality, where applicable (or where there are more than one such party, the average of the prices that would be charged by such parties); and

(b) the price charged by China Shipping (or any member of the China Shipping Group, as the case may be) making that Agreed Supply to an independent third party on a previous occasion (if any).

Fees for the Agreed Supply shall be paid on a monthly basis, no later than fifteen days following the end of the calendar month during which the Agreed Supply was provided.

Conditions

The Revised Services Agreement is conditional upon completion of the Acquisition Agreement and approval of the Independent Shareholders at the EGM.

The Revised Services Agreement will take effect from the Completion Date upon which the Services Agreement, to provide shipping materials and services to all vessels owned by the Group, excluding the Tankers acquired in the Acquisition, will be terminated. In respect of the connected transactions under the Services Agreement, a waiver from the relevant requirements under Chapter 14 of the Listing Rules has previously been granted by the Stock Exchange.

III. BENEFITS OF THE CONNECTED TRANSACTIONS UNDER THE REVISED SERVICES AGREEMENT

The Revised Services Agreement is essential to the operation of the shipping business of the Group as it will provide the necessary supporting services and shipping supplies to all the vessels owned by the Company, including the Tankers.

IV. DISCLOSURE REQUIREMENT AND WAIVER SOUGHT

Under Chapter 14 of the Listing Rules, the Ongoing Connected Transactions will constitute connected transactions of the Company which would normally require disclosure by way of press announcement and/or prior approval of the Independent Shareholders in an extraordinary general meeting each time as such transaction occurs.

The Directors estimate that the aggregate fee of the Agreed Supplies for the financial year immediately following completion of the Acquisition Agreement will be approximately RMB995,570,000 (approximately HK$930,439,252).

The Directors believe that strict compliance with the disclosure/shareholders' approval requirement in respect of the Ongoing Connection Transactions would be impractical and unduly onerous on the part of the Company as they are of a regular and continuing nature. Therefore, in respect of the Ongoing Connected Transactions for each of the three financial years ending 31 December 2003, the Company has obtained from the Stock Exchange a waiver from the announcement/ shareholders' approval requirements as required under the Listing Rules on conditions that:

(a) the Ongoing Connected Transactions shall be:

(i) entered into in the usual and ordinary course of business of the Company;

(ii) entered into on normal commercial terms; and

(iii) fair and reasonable so far as the Shareholders are concerned;

(b) the Independent Shareholders approve the Revised Services Agreement and the Ongoing Connected Transactions at the EGM;

(c) the Ongoing Connected Transactions for each financial year up to 31 December, 2003 will not exceed the relevant annual caps set forth below:

Annual Cap

Based on the Group's

turnover for

the relevant year

Types of materials to be provided by

China Shipping Group to the Company

1. Supply of lubricating oil, fresh water, raw materials, 18.1%

bunker oil, materials for the supply of mechanical

and electrical engineering services, materials for

ship utilities and materials for repairs and maintenance

of vessels and life boats

1. Materials for whitewashing of and oily water treatment for vessels 0.2%

Types of services to be provided by

China Shipping Group to the Company

1. Crew hiring services 4.3%

2. Installation, repairs and maintenance of 0.7%

telecommunication and navigational services

1. Drydocking and repairs services 6.3%

2. Accommodation, lodging, employee transportation and 0.2%

shipping navigational services

Annual Cap

Based on the Group's turnover

for the relevant year

1. Medical services 0.6%

2. Miscellaneous management services (provision of education 1.9%

and training, rental of office premises, maritime services,

safety services, fire-prevention services, file and data

management services and motor vehicle transportation)

1. Agency services (charterparty and goods delivery) 0.8%

Notes:

Considerations that the Company has taken into account in arriving at the above annual caps include:

a. an increase in the number of tankers, including the proposed acquisition of the Tankers;

b. the enormous increase of international petroleum prices; and

c. the aggregate amount of fees involved in the hiring of crew for the Tankers.

(d) details of the Ongoing Connected Transactions as described in Rule 14.25(1)(A) to (D) of the Listing Rules will be disclosed in the Company's annual report and accounts for the year in question;

(e) the independent non-executive Directors shall review the Ongoing Connected Transactions annually and confirm in the Company's annual report and accounts for the year in question that the relevant Ongoing Connected Transactions have been entered into:

(i) by the Company in the ordinary and usual course of its business;

(ii) either (aa) on normal commercial terms; or (bb) on terms no less favourable than those available from/to independent third parties; or (cc) where there is no available comparison for the purpose of determining whether (aa) or (bb) is satisfied, on terms that are fair and reasonable so far as the shareholders of the Company are concerned; and

(iii) either (aa) in accordance with the terms of the agreement governing each such transaction or (bb) (where there is no such agreement) on terms no less favourable than terms available from/to independent third parties;

(f) the auditors of the Company shall review annually the Ongoing Connected Transactions, details of which shall be set forth in the Company's annual report and accounts as referred to in paragraph (d) above and shall also confirm to the board of Directors in writing that the same transactions have:

(i) received the approval of the board of Directors;

(ii) been entered into (and any prices paid by the Company thereunder are) in accordance with the terms of the agreements governing such transactions; and

(iii) been conducted in the manner as stated in paragraph (e)(ii) above.

For the purpose of the above review by the auditors of the Company, China Shipping Group will undertake that it will provide the audiors with full access to its relevant accounting records.

In the event of any future amendments to the Listing Rules imposing more stringent requirements than as at the date of the proposed waiver application on transactions of the kind to which the Ongoing Connected Transactions belong including, but not limited to, a requirement that such transactions be made conditional on approval by the Independent Shareholders, the Company will take immediate steps to ensure compliance with such requirements within a reasonable period.

V. INFORMATION FOR THE SHAREHOLDERS

EGM will be convened to approve, inter alia, the Acquisition Agreement, the Revised Services Agreement and the Ongoing Connected Transactions.

In view of the interests of China Shipping and its associates in the transactions under the Acquisition Agreement and the Revised Services Agreement, they will abstain from voting at the EGM in these regards.

An Independent Board Committee has been appointed to advise the Independent Shareholders on whether or not the terms under the Acquisition Agreement, the Revised Services Agreement and the Ongoing Connected Transactions are in the interests of the Company and are fair and reasonable so far as the Independent Shareholders are concerned. The Independent Financial Adviser has been appointed to advise the Independent Board Committee in respect of the terms of the Acquisition Agreement and the Revised Services Agreement.

Circulars containing, among other things, information relating to the Acquisition Agreement and the Revised Services Agreement, the letter from the Independent Financial Adviser containing its advice to the Independent Board Committee in relation to the Acquisition Agreement, the Revised Services Agreement and the Ongoing Connected Transactions, the recommendation of the Independent Board Committee in these regards and a notice convening the EGM referred to above were despatched to the Shareholders earlier today. As referred to in pages 16 of the above circulars, the Company is now making the announcement in respect of the terms of the aforementioned waiver. The Company does not propose to issue further announcement on the subject.

VI. DEFINITIONS

"Acquisition Agreement" the sale of vessels agreement dated 3 April, 2001 between the Company and Guangzhou Maritime

"Agreed Supplies" the necessary supporting shipping materials and services to be provided to the Company by the China Shipping Group pursuant to the Revised Services Agreement

"China Shipping Group" China Shipping (Group) Company and its subsidiaries

"China Shipping" China Shipping (Group) Company, the controlling shareholder of the Company

"Company" China Shipping Development Company Limited

"Completion" completion of the Acquisition Agreement

"Directors" the directors of the Company

"EGM" the extraordinary general meeting of the Company to be held at 3:00 p.m. on 22 May, 2001

"Group" the Company and its subsidiaries

"Guangzhou Maritime" Guangzhou Maritime Transport (Group) Company Limited

"Hong Kong" Hong Kong Special Administrative Region of the PRC

"HK$" Hong Kong dollars, the lawful currency of Hong Kong

"Independent Board Committee" an independent committee of the board of Directors, comprising Mr. Zhang Qi and Mr. Shen Kangchen

"Independent Directors" independent Directors

"Independent Financial Adviser" DBS Asia Capital Limited, an investment adviser and a securities dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong), appointed as the independent financial adviser to the Independent Board Committee in relation to the Transactions

"Independent Shareholders" the shareholder(s) of the Company other than China Shipping and its associates

"Listing Rules" The Rules Governing the Listing of Securities on the Stock Exchange

"Ongoing Connected Transactions" the ongoing connected transactions contemplated under the Revised Services Agreement

"PRC" or "State" People's Republic of China

"Revised Services Agreement" the supply of shipping materials and services agreement dated 3 April, 2001 between the Company and China Shipping

"RMB" Renminbi, the lawful currency of the PRC

"Shareholders" the shareholders of the Company

"Services Agreement" the services agreement dated 19th March, 1998 between the Company and Shanghai Shipping (Group) Company

"State Price" the price stipulated from time to time by the relevant pricing authorities of the PRC national government or municipal government of Shanghai Municipality or any PRC governmental body

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"Tankers" 20 oil tankers to be acquired by the Company pursuant to the Acquisition Agreement

"Transactions" the acquisition of the Tankers by the Company pursuant to the Acquisition Agreement and the Ongoing Connected Transactions.

By Order of the Board

China Shipping Development Company Limited

LI KELIN

Chairman

Shanghai, the PRC, 23 April, 2001

"Please also refer to the published version of this announcement in the Hong Kong i-mail"