THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt about this circular, you should consult appropriate independent advisers.

If you have sold or transferred all your shares in China Shipping Development Company Limited, you should at once hand this circular and the enclosed proxy form to the purchaser or to the bank, stockbroker or other agent through whom the sale was affected for transmission to the purchaser.

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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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)

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION AND

PROVISION OF GUARANTEES TO SUBSIDIARIES

AND APPOINTMENT OF DIRECTORS AND NOTICE OF EXTRAORDINARY GENERAL MEETING

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

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TC Capital Asia Limited

A letter from the Board is set out on pages 7 to 23 of this circular.

A letter from the Independent Board Committee is set out on page 24 of this circular.

A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 25 to 39 of this circular.

A notice convening the EGM to be held at 2:00 p.m. on Monday, 28 December 2015 at 3rd Floor, Parkview Hotel, 555 Dingxiang Road, Pudong New Area, Shanghai, the People’s Republic of China is set out on pages N-1 to N-4 of this circular.

A proxy form for use at the EGM is enclosed. Whether or not you are able to attend the EGM, please complete and return the enclosed proxy form in accordance with the instructions printed thereon as soon as practicable and in any event by not less than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof (i) in case of holders of H Shares, to the Company’s Hong Kong branch share registrar, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre,183 Queen’s Road East, Wanchai, Hong Kong, (ii) in case of holders of A shares, to the Office of the Secretary to the Board of Directors of the Company at 7th Floor, 670 Dong Da Ming Road, Shanghai, the People’s Republic of China. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or at any adjourned meetings should you so wish.

A reply slip in relation to attendance of the EGM is enclosed. If you are eligible and intend to attend the EGM, please complete and return the enclosed reply slip in accordance with the instructions printed thereon on or before Tuesday, 8 December 2015.

12 November 2015

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . .	24
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . .	25
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	I-1
APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III — BIOGRAPHY OF THE PROPOSED DIRECTORS . . . . . . . . . . . . . .	III-1
NOTICE OF THE EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . .	N-1

— i —

DEFINITIONS

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

“2012 Announcement”
the announcement dated 15 October 2012 published by the Company in relation to, amongst other things, the Existing Financial Services Framework Agreement and the Existing Services Agreement
“2014 Announcement” the announcement dated 29 April 2014 published by the Company in relation to, amongst other things, the Existing Sea Crew Management Agreements

“Appointment of Directors” the appointment of (i) Mr. Yang Jigui as an executive Director and (ii) Mr. Teo Siong Seng as an independent non-executive Director, subject to the Shareholders’ approval at the EGM

“A Shares”

PRC-listed Domestic Shares in the share capital of the Company, with a par value of RMB1.00 each, which are subscribed for and traded in RMB and listed on the Shanghai Stock Exchange

“Agreed Supplies and Services” the necessary supporting shipping materials and services to be provided to the Company pursuant to the New Services Agreement
“associate” has the meaning ascribed thereto under the Listing Rules
“Board” the board of Directors
“CBRC”

China Banking Regulatory Commission

“China Shipping” 中國海運（集團）總公司 (China Shipping (Group) Company), a PRC state-owned enterprise and the controlling shareholder of the Company, is currently interested in approximately 38.34% of the issued share capital of the Company and owns 45% of CS Finance Company

“China Shipping Bulk” China Shipping Bulk Carrier Co., Ltd (中海散貨運輸有限公司), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of the Company

“China Shipping Group” China Shipping and its subsidiaries (excluding the Group)

“China Shipping International” China Shipping International Ship Management Co., Ltd (中海國際船舶管理有限公司), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of China Shipping

— 1 —

DEFINITIONS

“China Shipping Tanker”

China Shipping Tanker Co., Ltd (中海油輪運輸有限公司), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of the Company

“Company”

China Shipping Development Company Limited (中海發展股份有限公司) 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 and the A Shares of which are listed on the Shanghai Stock Exchange

“CS Bulk Guarantee”
the guarantee of not more than RMB600,000,000 (equivalent to approximately HK$730,440,000) to be provided by the Company within one year from the date of the Shareholders’ approval at the EGM to China Shipping Bulk in respect of its repayment obligations for commercial bank loans
“CSCL”
China Shipping Container Lines Company Limited (中海集裝箱運輸股份有限公司), a joint stock limited company established in the PRC whose H shares and A shares are listed on the Stock Exchange and the Shanghai Stock Exchange respectively, and in which China Shipping has approximately 45.20% shareholding interest
“CSD HK”
China Shipping Development (Hong Kong) Marine Co., Limited 中海發展(香港)航運有限公司, a direct wholly-owned subsidiary of the Company
“CSD HK Guarantee” the guarantee of not more than US$800,000,000 (equivalent to approximately HK$6,200,000,000) to be provided by the Company within one year from the date of the Shareholders’ approval at the EGM to CSD HK in respect of its repayment obligations for commercial bank loans
“CS Finance Company” China Shipping Finance Company Limited (中海集團財務有限責任公司), a limited liability company established by the Company, China Shipping, Guangzhou Maritime Transport, CSCL and CS Haisheng in the PRC pursuant to the investment agreement dated 13 February 2009
“CS Haisheng”
China Shipping Haisheng Co., Ltd (中海（海南）海盛船務股份有限公司), a joint stock limited company established in the PRC whose A shares are listed on the Shanghai Stock Exchange, and in which China Shipping has approximately 13.38% shareholding interest

— 2 —

DEFINITIONS

“CS Tanker Guarantee”

the guarantee of not more than RMB600,000,000 (equivalent to approximately HK$730,440,000) to be provided by the Company within one year from the date of the Shareholders’ approval at the EGM to China Shipping Tanker in respect of its repayment obligations for commercial bank loans

“dwt” deadweight tonnage
“Deposit Services” the deposit services to be provided by CS Finance Company to the Group under the New Financial Services Framework Agreement
“Directors” the directors of the Company
“Domestic Shares” domestic shares of RMB1.00 each in the registered capital of the Company
“EGM”
the extraordinary general meeting of the Shareholders to be convened on Monday, 28 December 2015 by the Company to consider and, if thought fit, to approve, among other things, the New Financial Services Framework Agreement, the New Services Agreement, the aggregate financial commitments under the Guarantees and the Appointment of Directors
“Existing Financial Services Framework Agreement”
“Existing Sea Crew Management Agreements”

the financial services framework agreement dated 15 October 2012 entered into between the Company and CS Finance Company, pursuant to which CS Finance Company will provide the Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; (iv) foreign exchange services and (v) other financial services as approved by CBRC the sea crew management agreements dated 29 April 2014 entered into between China Shipping International and each of China Shipping Bulk and China Shipping Tanker respectively, pursuant to which China Shipping International will provide sea crew management services to the Group

“Existing Services Agreement”

the agreement to supply supporting shipping materials and services dated 15 October 2012 between the Company and China Shipping

“Foreign Exchange Services”

the foreign exchange services to be provided by CS Finance Company to the Group under the New Financial Services Framework Agreement

“Group”

the Company and its existing subsidiaries

— 3 —

DEFINITIONS

“Guangzhou Maritime Transport” Guangzhou Maritime Transport (Group) Co. Ltd. (廣州海運（集團）有限公司), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of China Shipping “Guarantees” the CS Bulk Guarantee, the CS Tanker Guarantee and the CSD HK Guarantee “Guarantee Letter(s)” the individual guarantee letter(s) to be issued by the Company

the individual guarantee letter(s) to be issued by the Company to support China Shipping Bulk, China Shipping Tanker or CSD HK in obtaining commercial bank loans

“H Shares” H shares of par value RMB1.00 each in the share capital of the Company, being overseas listed foreign invested shares “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” Hong Kong Special Administrative Region of the PRC

“Independent Board Committee”

the committee of the Company comprising all independent non-executive Directors, namely Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi and Mr. Rui Meng established to make recommendation to the Independent Shareholders in relation to the transactions contemplated under the New Financial Services Framework Agreement and the New Services Agreement

“Independent Financial Adviser”

TC Capital Asia Limited, a licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed to make the relevant recommendation to the Independent Board Committee and the Independent Shareholders in relation to the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement

“Independent Shareholder(s)” “Latest Practicable Date”

“Listing Rules”

the Shareholders other than China Shipping and its associates

9 November 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein the Rules Governing the Listing of Securities on the Stock Exchange

— 4 —

DEFINITIONS

“New Financial Services the new financial services framework agreement dated 29 Framework Agreement” September 2015 entered into between the Company and CS Finance Company, pursuant to which CS Finance Company will provide the Group with a range of financial services including (i) Deposit Services; (ii) loan services; (iii) settlement services; (iv) Foreign Exchange Services and (v) other financial services as approved by CBRC “New Services Agreement” the agreement to supply supporting shipping materials and services dated 29 September 2015 between the Company and China Shipping

“PBC” People’s Bank of China (中國人民銀行) “PRC” the People’s Republic of China “Previous CS Bulk and CS the previous guarantee of not more than RMB1,000,000,000 Tanker Guarantee” (equivalent to approximately HK$1,217,400,000) which the Company committed to provide within one year from 30 June 2014 to 29 June 2015 (both dates inclusive) to China Shipping Bulk and China Shipping Tanker in respect of their repayment obligations for commercial bank loans
“Previous CSD HK Guarantee” the previous guarantee of not more than US$500,000,000 (equivalent to approximately HK$3,875,000,000) which the Company committed to provide within one year from the date of the Shareholder’s approval on 12 August 2014 to CSD HK in respect of its repayment obligations for offshore bank loans
“RMB” Renminbi Yuan, the lawful currency of the PRC “SFO” Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)
“Shareholders” the shareholders of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary” has the meaning ascribed thereto under the Listing Rules “%” per cent.

The exchange rate adopted in this circular for illustration purpose only is HK$1.2174 = RMB1.00 and HK$7.75 = USD1.00. Such conversion should not be construed as a representation that the currencies could actually be converted into HK$ at that rate or at all.

— 5 —

EXPECTED TIMETABLE

Date of despatch of this circular . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 12 November 2015 Last date for returning the reply slips for the EGM. . . . . . . . . . . . . . . . Tuesday, 8 December 2015 Latest time for lodging proxy forms for the EGM . . . . . . 2:00 p.m. on Sunday, 27 December 2015 Time and date of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . 2:00 p.m. on Monday, 28 December 2015

— 6 —

LETTER FROM THE BOARD

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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)

Executive Directors: Xu Lirong (Chairman) Zhang Guofa Huang Xiaowen Ding Nong Yu Zenggang Han Jun Qiu Guoxuan

Registered Office Room A-1015, No. 188 Ye Sheng Road China (Shanghai) Pilot Free Trade Zone People’s Republic of China

Principal place of business in Hong Kong: 20/F, Alexandra House 18 Chater Road Central, Hong Kong

Independent Non-Executive Directors:

Wang Wusheng Ruan Yongping Ip Sing Chi Rui Meng

12 November 2015

To the Shareholders

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION AND

PROVISION OF GUARANTEES TO SUBSIDIARIES AND APPOINTMENT OF DIRECTORS

1. INTRODUCTION

Reference is made to the announcements of the Company dated 29 September 2015 in respect of (a) the Company entering into the New Financial Services Framework Agreement and the New Services Agreement; and (b) the appointment of Mr. Yang Jigui as an executive Director and Mr. Teo Siong Seng as an independent non-executive Director of the Company, respectively. Reference is also made to the announcement of the Company dated 27 March 2015 and published on the Shanghai Stock Exchange in respect of the proposed provision of Guarantees in favour of China Shipping Bulk, China Shipping Tanker and CSD HK, all of which are wholly-owned subsidiaries of the Company.

— 7 —

LETTER FROM THE BOARD

The purpose of this circular is to provide the Shareholders with further information on (i) the terms of the New Financial Services Framework Agreement and the New Services Agreement; (ii) the Guarantees; and (iii) the Appointment of Directors and to convene the EGM to seek the approval of the Shareholders with respect to, among other things, these agreements, aggregate financial commitments under the guarantees and the appointment.

Reference is made to the announcements of the Company dated 7 August 2015 and 9 November 2015 in relation to certain material matters contemplated by China Shipping which will involve material asset restructuring of the Company. To the extent the material asset restructuring impacts on the proposed transactions under the New Financial Services Framework Agreement and the New Services Agreement, the Company will comply with the Listing Rules as and when appropriate.

2. THE NEW FINANCIAL SERVICES FRAMEWORK AGREEMENT AND THE NEW SERVICES AGREEMENT

BACKGROUND INFORMATION

In respect of the New Financial Services Framework Agreement

As disclosed in the Company’s 2012 Announcement, the Company entered into the Existing Financial Services Framework Agreement with CS Finance Company pursuant to which CS Finance Company may provide the Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; (iv) foreign exchange services; and (v) other financial services as approved by CBRC. The term of the Existing Financial Services Framework Agreement will expire on 31 December 2015.

On 29 September 2015, the Company entered into the New Financial Services Framework Agreement with CS Finance Company pursuant to which CS Finance Company will (subject to Independent Shareholders’ approval) continue to provide the Group with similar services provided for in the Existing Financial Services Framework Agreement for a further three years ending 31 December 2018.

In respect of the New Services Agreement

As disclosed in the Company’s 2012 Announcement, the Company entered into the Existing Services Agreement with China Shipping pursuant to which China Shipping agreed to provide necessary supporting shipping materials and services for the on-going operations of the oil transportation business and dry bulk cargo transportation business including dry-docking and repair services, supply of lubricating oil, fresh water, raw materials, bunker oil as well as other services for the ongoing operations for all vessels owned or bareboats chartered by the Group. The term of the Existing Services Agreement will expire on 31 December 2015.

In addition, as disclosed in the Company’s 2014 Announcement, each of China Shipping Bulk and China Shipping Tanker entered into the Existing Sea Crew Management Agreements with China Shipping International respectively in respect of the provision of sea crew management services by China Shipping International to the Group. The term of the Existing Sea Crew Management Agreements will expire on 31 December 2015.

— 8 —

LETTER FROM THE BOARD

To secure (subject to Independent Shareholders’ approval) the Agreed Supplies and Services which include similar services provided for in the Existing Services Agreement and the Existing Sea Crew Management Agreements, on 29 September 2015, the Company entered into the New Services Agreement with China Shipping for a further three years ending 31 December 2018.

THE NEW FINANCIAL SERVICES FRAMEWORK AGREEMENT

Date: 29 September 2015 Parties: CS Finance Company (as provider of services) The Company (as recipient of services)

Pricing Policy

Under the New Financial Services Framework Agreement:

(i) Deposit Services: CS Finance Company may accept deposits from the Group at interest rates not lower, and thus no less favourable, than (a) the lower limit of the relevant rates stipulated by PBC for similar type of deposits; (b) the interest rates offered by any independent third party for similar type of deposits to the Group; or (c) the interest rates at which CS Finance Company accepts from any independent third party for similar type of deposits;
(ii) Loan services: CS Finance Company may provide loans to the Group at interest rates not higher than the upper limit of the relevant rates stipulated by PBC for similar type of loan; and the terms to be offered by CS Finance Company shall be more favourable than the terms offered by any independent third party to the Group for similar type of loan and the terms offered by CS Finance Company to any independent third party with the same credit rating for similar type of loan;
(iii) Settlement services: The fees charged by CS Finance Company for the provision of settlement services to the Group shall not be higher, and thus no less favourable, than the fees charged by any independent third party for similar type of services at the time;
(iv) Foreign Exchange Services: The fees charged by CS Finance Company for the provision of Foreign Exchange Services, which mainly comprise buying, selling and exchanging currencies at spot or forward prices, shall not be higher, and thus no less favourable, than the fees charged by any independent third party for similar type of services at the time; and
(v) Other financial services: The fees charged by CS Finance Company for the provision of other financial services such as provision of letter of credit, entrusted loans, financial advisory, performance guarantee and other related services, to the Group shall not be higher, and thus no less favourable, than (a) the upper limit (if applicable) of the fees stipulated by PBC to be charged for similar type of services; (b) the fees charged by any independent third party for similar type of services on the Group; or (c) the fees charged by CS Finance Company for similar type of services on any independent third party with the same credit rating.

— 9 —

LETTER FROM THE BOARD

To ensure sufficient protection of the Shareholders’ interest, the Company will adopt the following internal control procedures in connection with its utilization of the financial services provided by CS Finance Company:

(i) Before the Group places any deposits, enters into any loan agreements or foreign exchange agreements with CS Finance Company, the Company will obtain at least three quotations from the independent financial institutions for similar type of services (for instance, in respect of loan services, a loan of the same duration or the same nature).
(ii) In respect of services with transaction amounts less than RMB1 million, quotations of such services together with the offer from CS Finance Company will forthwith be disclosed to the chief financial officer of the Company for review and approval.
(iii) In respect of services with transaction amounts equal to or more than RMB1 million, quotations of such services together with the offer from CS Finance Company will forthwith be disclosed to the chief financial officer of the Company for review. The chief financial officer of the Company will then seek approval from the chief executive officer of the Company as appropriate on whether to accept CS Finance Company’s offer.
(iv) All borrowings from CS Finance Company will be conducted in accordance with the terms approved by the chief financial officer, the chief executive officer or the Board, as appropriate.
(v) The Company will report to the independent non-executive Directors every six months on:
a. the loan or credit facilities agreements entered into with CS Finance Company together with information on the comparable quotations obtained from the independent commercial banks; and
b. any changes in the credit ratings of CS Finance Company during the preceding six-month period.
(vi) The Company will monitor the status of the deposits on a monthly basis through the internet banking services provided by CS Finance Company.
(vii) A copy of every regulatory report submitted by CS Finance Company to the CBRC will be provided to the Company’s executive Directors, management team and auditors.
(viii) A copy of the financial statements of CS Finance Company for each month will be provided to the Company in the following month.

— 10 —

LETTER FROM THE BOARD

Annual Caps

The annual caps for the three years ending 31 December 2018 for the continuing connected transactions under the New Financial Services Framework Agreement are as follows:

		Proposed annual	Proposed annual	caps
		for the	year ending 31	December
		2016	2017	2018
		(RMB’000)	(RMB’000)	(RMB’000)
(1)	Maximum daily outstanding balance of
	deposits (including accrued interest and
	handling fee) to be placed by the Group
	with CS Finance Company	5,500,000	5,500,000	5,500,000
(2)	Maximum daily outstanding balance of
	loans (including accrued interest and
	handling fee) to be granted by CS
	Finance Company to the Group	7,000,000	7,000,000	7,000,000
		(USD’000)	(USD’000)	(USD’000)
(3)	Maximum amount of foreign exchange to
	be transacted during the year	600,000	600,000	600,000

In arriving at such annual caps, the Directors have considered the following factors:

(i) Historical Figures
(a) The historical figures of the maximum daily outstanding balance of deposits (including accrued interest and handling fee) placed by the Group with CS Finance Company for the two years ended 31 December 2014 and the six months ended 30 June 2015 were approximately RMB2,121,000,000 (approximately HK$2,582,000,000), RMB1,917,000,000 (approximately HK$2,334,000,000), and approximately RMB1,814,000,000 (approximately HK$2,208,000,000), respectively;
(b) The historical figures of the maximum daily outstanding balance of loans (including accrued interest and handling fee) granted by CS Finance Company to the Group for the two years ended 31 December 2014 and the six months ended 30 June 2015 were approximately RMB1,673,000,000 (approximately HK$2,037,000,000), approximately RMB2,436,000,000 (approximately HK$2,966,000,000), and approximately RMB1,423,000,000 (approximately HK$1,732,000,000), respectively; and
(c) The historical figures of the maximum amount of foreign exchange transacted for the two years ended 31 December 2014 and the six months ended 30 June 2015 were approximately USD152,800,000 (approximately HK$1,184,000,000), USD191,000,000 (approximately HK$1,480,000,000), and approximately USD12,000,000 (approximately HK$93,000,000), respectively.

— 11 —

LETTER FROM THE BOARD

(ii) Net Current Assets of the Group

In respect of the Deposit Services under the New Financial Services Framework Agreement, the Directors have also considered the net current assets of the Group as at 31 December 2013, 31 December 2014 and 30 June 2015, which were approximately RMB6,675.2 million, RMB5,168.7 million and RMB4,353.7 million respectively, without taking into account the current portion of interest-bearing borrowings, loans and bonds payable which will be refinanced when due. Further, as disclosed in the 2015 Interim Report, the Company has RMB23,979.2 million bank borrowings and RMB4,976.5 million corporate bonds payable outstanding as at 30 June 2015. Among them, bank loans of RMB4,213.7 million are payable within one year or on demand and corporate bonds will also incur interest payment annually, which will pose liquidity risk on the Company. The Company often required China Shipping to provide internal financial resources to finance the temporary liquidity demand and the Board believes that an annual cap of approximately RMB5,500 million will allow the Company to utilize its financial resources more flexibly. This approach in determining the annual cap is consistent with the determination of historical annual caps in respect of deposit services with CS Finance Company in the Existing Financial Services Framework Agreement. The Board believes that the Deposit Services will provide a financial flexibility to the Group to place its temporarily surplus cash.

(iii) Expected growth of international operations and capital needs of the Group

In respect of the Foreign Exchange Services under the New Financial Services Framework Agreement, the Director have also considered the Group’s expectation of capital needs for the period from now up to 31 December 2018 taking into account the expanding international operations of the Group. The shipping capacities for the three years ending 31 December 2018 are estimated to be approximately 17 million dwt, 18 million dwt and 19 million dwt respectively. With the expected growth of operations and the expected fleet expansion, the Group will require Foreign Exchange Services to convert revenue denominated in foreign currency (usually in US dollars) into RMB in order to fulfill its operational related requirements which may include bunkering, dry docking, payment of crew cost and wharfage charge. As such, the Board believes that the Group’s demand for Foreign Exchange Services will increase.

(iv) CS Finance Company’s financial ability

In considering CS Finance Company’s financial ability in the provision of the financial services, the Board has checked the continuing validity of the CS Finance Company’s licence issued by CBRC and considered a report prepared by CS Finance Company based on the relevant financial statements and the strategy and development plans of CS Finance Company.

In particular, the Board has looked at various key financial ratios of CS Finance Company including capital adequacy ratio and non-performing loan ratio when assessing CS Finance Company’s financial ability. Such capital adequacy ratio and non-performing loan ratio reviewed by the Board are both better than the standard stipulated by China Banking Regulatory Commission (中國銀行業監督管理委員會) for finance companies. As such, the Board believes that CS Finance Company has the financial capability in providing financial services to the Group.

— 12 —

LETTER FROM THE BOARD

Payment Terms

The payment terms are dependent on the type of financial services to be provided and are determined at the time when such financials services are provided. The Group expects such terms of payment to be consistent with market terms for the relevant type of financial services.

Term

Subject to the approval being obtained from the Independent Shareholders, the New Financial Services Framework Agreement will be effective from 1 January 2016 to 31 December 2018. Subject to compliance with the Listing Rules, the New Financial Services Framework Agreement will be automatically renewed for another three years from 1 January 2019 unless either party chooses not to.

Reasons for and benefits of entering into the New Financial Services Framework Agreement

CS Finance Company has been providing the various types of financial services to the Group since 2009. With the benefit of this long standing relationship, CS Finance Company understands well the financial conditions of the Group and will be able to cater the financial needs of the Group more efficiently.

In light of the unfavourable market conditions in the shipping business coupled with the tightening of credit policy in the PRC in general, the Board believes that securing deposit and loan services from CS Finance Company for the period from 1 January 2016 to the year ending 31 December 2018 would ensure availability of funds to the Group at reasonable costs and reduced working capital risks. The terms and conditions provided by CS Finance Company under the New Financial Services Framework Agreement to the Group are generally no less favourable than those provided by independent third parties.

Furthermore, the Group is not restricted under the New Financial Services Framework Agreement to approach, and in fact may choose, any bank or financial institution to satisfy its financial service needs. Its criteria in making the choice could be made on costs and quality of services. Therefore, the Group may, but is not obliged to, continue to use CS Finance Company’s services if the service quality provided continues to be competitive. Having such flexibility afforded under the New Financial Services Framework Agreement, the Group is able to better manage its current capital and cashflow position. In addition, it is also expected that CS Finance Company will provide more efficient foreign exchange and settlement services to the Group, as compared to independent third-party banks.

In light of the above circumstances, the Directors consider the terms of the New Financial Services Framework Agreement to be fair and reasonable so far as the Independent Shareholders are concerned and to be in the interest of the Company and its Shareholders as a whole.

— 13 —

LETTER FROM THE BOARD

THE NEW SERVICES AGREEMENT

Date: 29 September 2015 Parties: China Shipping (as provider of services) The Company (as recipient of services)

Agreed Supplies and Services to be provided

The Company has entered into the New Services Agreement with China Shipping pursuant to which China Shipping Group agreed to provide to the Group certain Agreed Supplies and Services for the ongoing operations for all vessels owned or bareboats chartered by the Group.

The Agreed Supplies and Services, to be provided for the vessels owned or bareboats chartered by the Group, include:

(1) supply of lubricating oil, fresh water, raw materials, bunker oil, mechanical and electrical engineering, supporting shipping materials and repairs and maintenance services for vessels and life boats;
(2) oil removal treatment, maintenance, telecommunication and navigational services;
(3) dry docking, repairs, special coating, technical improvements of vessels;
(4) management services of sea crew including manning services, allocation of sea crew members, provision of training programs and maintenance of electronic database of sea crew members;
(5) accommodation, lodging, medical services and transportation for employees;
(6) agency commissions incurred in connection with cargo space booking on visiting vessels, organizing onward distribution of freight and various logistic services;
(7) service fees on sale and purchase of vessels, accessories and other equipment; and
(8) miscellaneous management services.

Pricing Policy for the Agreed Supplies and Services

The fees for the Agreed Supplies and Services will be determined by reference to the prevailing market price of the Agreed Supplies and Services and a combination of other factors. The prevailing market price shall be determined by reference to the price chargeable by independent third parties for identical or similar type of supporting shipping material or service at the time in China or overseas (as the case may be) and the price charged to independent third parties by China Shipping in the most recent transaction of a similar nature.

— 14 —

LETTER FROM THE BOARD

In order to ensure the terms provided by China Shipping are no less favourable than that offered by independent third parties, the Company will provide a specifications list setting out the relevant requirements for each category of the Applied Supplies and Services and invite at least three service providers, which are on a “Qualified Supplier List”, to submit their quotations or proposals through which the Company can compare the terms of those quotations or proposals as a whole.

The quotations or proposals will then be reviewed and approved by the Independent Board Committee to ensure that the terms offered by China Shipping are no less favourable than those offered by other independent third parties. Moreover, the Company has established a team responsible for reviewing the actual transaction amounts between the Company and China Shipping Group periodically to ensure that the actual transaction amounts between the Company and the connected persons of the Company will not exceed the respective proposed annual caps.

In particular, in determining the prevailing market price as described above, the fees for each category of the Agreed Supplies and Services are also determined by reference to a number of factors as follows:

(i) in respect of (1) supply of shipping materials : by reference to the type and quantity of shipping materials required as costs of different types of shipping materials vary significantly, the time and location of delivery;
(ii) in respect of (2) and (3) maintenance and technical improvements of vessels: by reference to the level of technicality required for the particular maintenance or improvement work, the scale and scope of the proposed maintenance or improvement, the type of vessels involved, the type of materials and labour required for such maintenance or improvement work;
(iii) in respect of (4) management services of sea crew members and maintenance of electronic database : by reference to the capacity of vessels, the required number of sea crew members, the estimated working hours of the relevant employees taking into account the employees’ benefits and the minimum wage requirements under the applicable PRC laws and regulations, the cost of maintaining the electronic database;
(iv) in respect of (5) accommodation, medical and transportation services for sea crew members : by reference to the number of sea crew members involved, costs of accommodation, medical insurance and transportation provided;
(v) in respect of (6) agency commissions : by reference to the market standard of commission rate, type of vessels involved, value and volume of cargo involved; and
(vi) in respect of (7) service fees on sale and purchase of vessels : by reference to type and quantity of vessels, accessories and other equipment involved, estimated marketing expenses and the proposed sale targets.

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LETTER FROM THE BOARD

Annual Caps

The aggregate fees in any financial year for the Agreed Supplies and Services will depend on the types or quantity of the Agreed Supplies and Services provided to the Group. Pursuant to the New Services Agreement, the annual caps for the Agreed Supplies and Services are as follows:

Year ending 31 December Annual Cap 2016 RMB6,820,000,000 (approximately HK$8,302,668,000) 2017 RMB7,420,000,000 (approximately HK$9,033,108,000) 2018 RMB8,220,000,000 (approximately HK$10,007,028,000)

These annual caps have been determined based on the actual amounts paid by the Company to China Shipping in the last two financial years ended 31 December 2014 and the six months ended 30 June 2015 (in respect of the Existing Services Agreement) and the financial year ended 31 December 2014 and the six months ended 30 June 2015 (in respect of the Existing Sea Crew Management Agreements), management’s estimates of fleet operational costs over the next three years ending 31 December 2018 and management’s estimates of the market prices and other relevant market developments.

The increment of the annual caps for the three years have been determined based on the estimated increase in shipping capacity (as a result of the delivery of vessels already commissioned for construction as well as historical expansion trends of the Company) and the estimated increase in revenue as a result of the increase in shipping capacity. The historical annual growth rate of the Group’s shipping capacities from 2010 to 2013 constantly maintained at approximately 20%. During 2014 and 2015, the Company has disposed of and retrofitted vessels owned by the Group in order to take advantage of special subsidies from the PRC government. As a result, the growth rate of the Group’s shipping capacities in 2014 and 2015 slowed down. For the two years ended 31 December 2014 and the six months ended 30 June 2015, the shipping capacities of the Company were 17 million dwt, 17.6 million dwt and 16.9 million dwt respectively. However, based on the current order book of the Group, 22 vessels are commissioned for construction and are expected to be delivered over the next three years ending 31 December 2018. The shipping capacities for the three years ending 31 December 2018 are estimated to be approximately 17 million dwt, 18 million dwt and 19 million dwt respectively.

For the two years ended 31 December 2014 and the six months ended 30 June 2015, the amounts of Agreed Supplies and Services (except for the sea crew management services which are provided to the Group under the Existing Sea Crew Management Agreements, and not within the scope of service of the Existing Services Agreement) purchased from China Shipping Group were approximately RMB3,795,000,000 (approximately HK$4,620,000,000), approximately RMB4,124,000,000 (approximately HK$5,021,000,000), and approximately RMB1,128,000,000 (approximately HK$1,373,000,000), respectively.

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LETTER FROM THE BOARD

For the year ended 31 December 2014 and the six months ended 30 June 2015, the amounts of sea crew management services purchased from China Shipping Group pursuant to the Existing Sea Crew Management Agreements were approximately RMB1,197,000,000 (approximately HK$1,457,000,000) and approximately RMB592,000,000 (approximately HK$721,000,000) respectively.

Payment terms

Other than fees which cannot be ascertained at the time or such fees which are being disputed, all fees and charges for a particular calendar month where the Agreed Supplies and Services have been provided by China Shipping Group to the Group shall be determined by the last business day of such calendar month and shall be paid by the Group no later than the 15th day in the following calendar month.

Term

Subject to the approval being obtained from the Independent Shareholders, the New Services Agreement will be effective from 1 January 2016 to 31 December 2018.

Reasons for and benefits of entering into the New Services Agreement

China Shipping Group has been providing the necessary supporting shipping services and shipping materials to the Group since the Group’s establishment. The New Services Agreement is essential to the core businesses and operation of the Group as it will provide the necessary supporting shipping services and shipping supplies to all the vessels owned or bareboats chartered by the Group. The terms of and consideration payable under the New Services Agreement have been arrived at after arm’s length negotiation. The Board believes that securing the Agreed Supplies and Services from China Shipping Group, who is an experienced service provider in the shipping industry, will provide the Group with a stable and reliable supply of shipping materials and supporting services at competitive costs.

The Directors consider the terms of the New Services Agreement to be fair and reasonable so far as the Independent Shareholders are concerned and to be in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, China Shipping is interested in approximately 38.34% of the issued share capital of the Company and is therefore its controlling shareholder as defined under the Listing Rules. As such, China Shipping is a connected person of the Company within the meaning of the Listing Rules. CS Finance Company, 45% of which is owned by China Shipping, is an associate of China Shipping. Therefore the transactions pursuant to the New Financial Services Framework Agreement constitute continuing connected transactions for the Company.

The transactions pursuant to the New Services Agreement also constitute continuing connected transactions of the Company given such agreement was entered into with China Shipping.

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LETTER FROM THE BOARD

New Financial Services Framework Agreement

In respect of the provision of Deposit Services under the New Financial Services Framework Agreement, the placement of deposits by the Group with CS Finance Company constitutes a transaction under Chapter 14 of the Listing Rules. The applicable percentage ratios in connection with such placement of deposits are expected to be more than 25% but less than 75% on an annual basis. Therefore, such transactions constitute major and continuing connected transactions of the Company which are subject to the relevant major transaction requirements under Chapter 14 of the Listing Rules and the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

In respect of the provision of loan services under the New Financial Services Framework Agreement, pursuant to Rule 14A.90 of the Listing Rules, such transactions are exempt from all reporting, announcement and Independent Shareholders’ approval requirements. However, as the Company is required by the applicable PRC rules and regulations to seek the approval of its Shareholders with respect to such services, relevant resolution will be put to the Shareholders for voting in the EGM.

In respect of the provision of Foreign Exchange Services under the New Financial Services Framework Agreement, the applicable percentage ratios are expected to be more than 5% on an annual basis. Therefore, such transactions constitute continuing connected transactions of the Company which are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

In respect of settlement services and other financial services under the New Financial Services Framework Agreement, any future transaction that may take place between the Group and CS Finance Company in respect of such services is expected to be less than 0.1% based on the applicable percentage ratios. Accordingly, pursuant to Rule 14A.76(1)(a) of the Listing Rules, such transactions are exempt from all reporting, announcement and Independent Shareholders’ approval requirements. Should such transactions exceed the exemption threshold in the future, the Group will re-comply with the applicable Listing Rules.

New Services Agreement

In respect of the provision of the Agreed Supplies and Services by China Shipping to the Group, as the applicable percentage ratios are expected to be more than 5% on an annual basis, such transactions constitute continuing connected transactions of the Company which are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

China Shipping, the controlling shareholder of the Company, and its close associates, who are interested in approximately 38.34% of the issued share capital of the Company in aggregate, will abstain from voting at the EGM in relation to the Deposit Services, Loan Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement.

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LETTER FROM THE BOARD

The following Directors, Mr. Xu Lirong, Mr. Zhang Guofa, Mr. Huang Xiaowen, Mr. Ding Nong and Mr. Yu Zenggang, being the senior management of China Shipping, have a material interest in the transactions under the New Financial Services Framework Agreement and the New Services Agreement, and have abstained from voting on the relevant board resolutions.

The Independent Board Committee has been appointed to advise the Independent Shareholders, and the Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders, as to whether the terms of the Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement are fair and reasonable and whether such transactions are in the interests of the Company and its Shareholders as a whole and in respect of their respective annual caps.

4. PROVISION OF GUARANTEES TO SUBSIDIARIES

Reference is made to the announcement of the Company dated 27 March 2015 and published on the Shanghai Stock Exchange in respect of the proposed provision of Guarantees in favour of China Shipping Bulk, China Shipping Tanker and CSD HK, all of which are wholly-owned subsidiaries of the Company.

Reference is also made to the announcement and circular of the Company dated 30 June 2014 and 23 July 2014 respectively in connection with the Previous CS Bulk and CS Tanker Guarantees and the Previous CSD HK Guarantee. The Company will issue further Guarantee Letter(s) for the benefit of China Shipping Bulk, China Shipping Tanker and CSD HK, all of which are direct wholly-owned subsidiaries of the Company, to guarantee their respective repayment obligations for commercial bank loans.

FINANCIAL COMMITMENTS OF THE GUARANTEES

Pursuant to the resolutions passed at the fifth meeting of the Board held on 27 March 2015, the Board resolved that the Company shall provide the Guarantees in favour of China Shipping Bulk, China Shipping Tanker and CSD HK as follows:

(a) in respect of the CS Bulk Guarantee, the aggregate financial commitment of the Company shall not exceed RMB600,000,000 (equivalent to approximately HK$730,440,000);
(b) in respect of the CS Tanker Guarantee, the aggregate financial commitment of the Company shall not exceed RMB600,000,000 (equivalent to approximately HK$730,440,000); and
(c) in respect of the CSD HK Guarantee, the aggregate financial commitment of the Company shall not exceed US$800,000,000 (equivalent to approximately HK$6,200,000,000).

The aggregate financial commitments under the Guarantees shall be subject to the approval by the Shareholders at the EGM and shall be valid for one year from the date of the Shareholders’ approval. Individual Guarantee Letter(s) will be issued by the Company in respect of each loan subject to compliance with the applicable laws and listing rules.

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LETTER FROM THE BOARD

INFORMATION ON THE SUBSIDIARIES

China Shipping Bulk, China Shipping Tanker and CSD HK are direct wholly-owned subsidiaries of the Company.

The principal business of China Shipping Bulk is domestic coastal and international coal, iron ore and other dry bulk cargo transportation.

The principal business of China Shipping Tanker is domestic coastal and international transportation of crude oil and refined oil products.

The principal business of CSD HK is international oil and bulk cargo transportation and the management of the Company’s assets in Hong Kong.

REASONS FOR THE GUARANTEES

In view of the unfavourable market conditions, it is relatively difficult for China Shipping Bulk and China Shipping Tanker (which were only recently established in 2012 and 2013 respectively) to obtain financing from commercial banks at favourable rates. The Board is of the view that the CS Bulk Guarantee and the CS Tanker Guarantee will continue to allow CS Bulk and CS Tanker to secure funding at more favourable rates and maintain relatively lower financing costs from commercial banks. Having considered China Shipping Bulk’s and China Shipping Tanker’s access to funds from commercial banks, and that the Company’s provision of the CS Bulk Guarantee and the CS Tanker Guarantee will have no material adverse impact on the Group’s financial position as a whole, the Directors are of the view that the terms of the CS Bulk Guarantee and the CS Tanker Guarantee are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. As such, the Board resolved that the Company shall provide the CS Bulk Guarantee and the CS Tanker Guarantee for the benefit of China Shipping Bulk and China Shipping Tanker, respectively.

In view of the Group’s increasing demand for funding, the Board is of the view that the CSD HK Guarantee will continue to allow the Group to secure more funding and maintain relatively lower financing costs. Having considered CSD HK’s access to funds outside the PRC, and that the Company’s provision of the CSD HK Guarantee will have no material adverse impact on the Company’s financial position as a whole, the Directors are of the view that the terms of the CSD HK Guarantee are fair and reasonable and are in the interests of the Company and its shareholders as a whole. As such, the Board resolved that the Company shall provide the CSD HK Guarantee for the benefit of CSD HK.

ACCUMULATED AMOUNT OF EXTERNAL GUARANTEES

As at the Latest Practicable Date, the accumulated amount of external guarantees (not including the guarantees in favour of the Group’s subsidiaries) provided by the Group was approximately US$504,600,000 (equivalent to approximately HK$3,910,650,000) and RMB26,250,000 (equivalent to approximately HK$31,956,750). Such accumulated guarantees represent approximately 14.5%

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LETTER FROM THE BOARD

of the Company’s consolidated net assets as at 31 December 2014 (being the latest published audited financial statements of the Company). As at the Latest Practicable Date, save for the CS Bulk Guarantee, the CS Tanker Guarantee and the CSD HK Guarantee, the Company does not have any outstanding guarantee to support its subsidiaries obtaining bank loans.

As at the Latest Practicable Date, each of China Shipping Bulk and China Shipping Tanker has aggregate liabilities representing less than 70% of its total assets, but as CSD HK has aggregate liabilities representing more than 70% of its total assets, and the total amount of guarantee to be provided by the Company constitutes 10% or more of the Company’s consolidated net assets as at 31 December 2014 (being the latest published audited financial statements of the Company), the Company is required by the applicable PRC rules and regulations to seek the approval of its Shareholders at the general meeting of the Company with respect to the aggregate financial commitments under the Guarantees.

5. APPOINTMENT OF DIRECTORS

Reference is made to the Company’s announcements dated 29 September 2015 and 12 October 2015 where the Board announced its approval to appoint (i) Mr. Yang Jigui as an executive Director; and (ii) Mr. Teo Siong Seng as an independent non-executive Director, subject to the Shareholders’ approval at the EGM. Their respective appointments will take effect immediately after the Shareholders’ approval at the EGM. Particulars of Mr. Yang Jigui and Mr. Teo Siong Seng are set out in appendix III to this circular.

6. EGM

The EGM will be convened and held at 2:00 p.m. on Monday, 28 December 2015 at 3rd Floor, Parkview Hotel, 555 Dingxiang Road, Padong New Area, Shanghai, the People’s Republic of China to consider and, if thought fit, approve, among other things, the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement, the provision of the Agreed Supplies and Services under the New Services Agreement and their respective annual caps, the aggregate financial commitments under the Guarantees and the Appointment of Directors.

A notice convening the EGM to be held at 2:00 p.m. on Monday, 28 December 2015 at 3rd Floor, Parkview Hotel, 555 Dingxiang Road, Padong New Area, Shanghai, the People’s Republic of China is set out on pages N-1 to N-4 of this circular.

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LETTER FROM THE BOARD

to the Office of the Secretary to the Board of Directors of the Company at 7th Floor, 670 Dong Da Ming Road, Shanghai, the People’s Republic of China. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or at any adjourned meetings should you so wish.

7. CLOSURE OF H SHARE REGISTER OF MEMBERS OF THE COMPANY

The H share register of members of the Company will be closed from Saturday, 28 November 2015 to Monday, 28 December 2015 (both days inclusive), during which period no transfer of H Shares will be effected. Any holders of H Shares, whose names appear on the Company’s register of members at the close of business on Monday, 28 December 2015, are entitled to attend and vote at the EGM after completing the registration procedures for attending the EGM. For holders of H Shares, in order to be entitled to attend and vote at the EGM, their share transfer documents must be lodged with the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on Friday, 27 November 2015.

8. INDEPENDENT BOARD COMMITTEE

An Independent Board Committee comprising Messrs. Wang Wusheng, Ruan Yongping, Ip Sing Chi and Rui Meng has been formed to advise the Independent Shareholders in respect of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the provision of the Agreed Supplies and Services under the New Services Agreement and their respective annual caps . The Independent Financial Adviser has also been appointed for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the above transactions and annual caps.

9. INFORMATION ABOUT THE COMPANY AND CS FINANCE COMPANY AND CHINA SHIPPING

The business scope of the Company mainly involves coastal, ocean and Yangtze River cargo transportation, oil transportation, chartering, cargo agency and cargo transportation agency.

The business scope of CS Finance Company includes the provision of financial and financing advisory services, credit verification services and related consulting and agency services.

The business scope of China Shipping mainly involves import and export businesses, trading, coastal and ocean cargo transportation, dry bulk cargo transportation, supply of food for vessels, management of docks and other services in relation to the above.

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LETTER FROM THE BOARD

10. RECOMMENDATION

Having taken into account the advice of the Independent Financial Adviser as set out in pages 25 to 39 in this Circular, the Directors (including the independent non-executive Directors) consider that the terms of the Deposit Services, Foreign Exchange Services and the Agreed Supplies and Services and their respective annual caps to be fair and reasonable so far as the Independent Shareholders are concerned, on normal commercial terms and in the Company’s ordinary and usual course of business and in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend that all Independent Shareholders to vote in favour of the relevant resolutions set out in the notice of EGM.

The Directors (including the independent non-executive Directors) also consider that the resolutions to approve (i) the provision of loan services under the New Financial Services Framework Agreement; and (ii) the aggregate financial commitments under the Guarantees are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that the Shareholders to vote in favour of the relevant resolutions set out in the notice of EGM.

The Directors (including the independent non-executive Directors) also consider that the resolutions to approve the appointment of Mr. Yang Jigui as an executive Director and Mr. Teo Siong Seng as an independent non-executive Director are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that the Shareholders to vote in favour of the relevant resolutions set out in the notice of EGM.

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

Yours faithfully, China Shipping Development Company Limited Xu Lirong Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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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)

12 November 2015

To the Independent Shareholders

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

We have been appointed as the Independent Board Committee to advise you in connection with the provision of Deposit Services and Foreign Exchange Services pursuant to the New Financial Services Framework Agreement and the provision of the Agreed Supplies and Services pursuant to the New Services Agreement and their respective annual caps, details of which are set out in the Letter from the Board contained in the circular to the shareholders of the Company dated 12 November 2015 (the “ Circular ”), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

Having considered the provision of Deposit Services and Foreign Exchange Services pursuant to the New Financial Services Framework Agreement and the provision of the Agreed Supplies and Services pursuant to the New Services Agreement, and the opinion of the Independent Financial Adviser in relation thereto as set out on pages 25 to 39 of the Circular, we are of the opinion that the terms of the Deposit Services, Foreign Exchange Services and the Agreed Supplies and Services and their respective annual caps are fair and reasonable, on normal commercial terms and in the Company’s ordinary and usual course of business and are in the interests of the Company and the Shareholders as a whole. We therefore recommend that you vote in favour of the ordinary resolutions to be proposed at the EGM to approve such transactions and the respective annual caps.

Yours faithfully,

Wang Wusheng	Ruan Yongping	Ip Sing Chi	Rui Meng
Independent	Independent	Independent	Independent
non-executive	non-executive	non-executive	non-executive
Director	Director	Director	Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter of advice from TC Capital Asia Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement.

==> picture [163 x 58] intentionally omitted <==

12 November 2015

The Independent Board Committee and the Independent Shareholders

China Shipping Development Company Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement, the Agreed Supplies and Services under the New Services Agreement and the proposed annual caps for each of the transactions for the three financial years ending 31 December 2018 (the “ Annual Caps ”), details of which are set out in the letter from the Board (the “ Letter from the Board ”) in the circular of China Shipping Development Company Limited (the “ Company ”) to the Shareholders dated 12 November 2015 (the “ Circular ”), of which this letter forms part. Capitalized terms used in this letter have the same meanings as those defined in the Circular unless the context otherwise requires.

As at the Latest Practicable Date, China Shipping was interested in approximately 38.34% of the issued share capital of the Company and is therefore its controlling shareholder as defined under the Listing Rules. As such, China Shipping is a connected person of the Company within the meaning of the Listing Rules and the transactions pursuant to the New Services Agreement constitute continuing connected transactions of the Company. CS Finance Company, 45% of which is owned by China Shipping, is an associate of China Shipping. Therefore, the transactions pursuant to the New Financial Services Framework Agreement constitute continuing connected transactions for the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In respect of the provision of Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement, the applicable percentage ratios are expected to be more than 5% on an annual basis. Therefore, such transactions constitute continuing connected transactions of the Company which are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

We have been appointed by the Company to advise (i) the Independent Board Committee and the Independent Shareholders as to whether or not the terms of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement and the Annual Caps are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole; and (ii) whether the Independent Shareholders should vote in favour of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement, the Agreed Supplies and Services under the New Services Agreement and the Annual Caps.

As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to the independence of us. In the last two years, we have acted as an independent financial adviser to the then independent board committee and independent shareholders of the Company in relation to two occasions as detailed in the circulars of the Company dated 23 May 2014 and 12 September 2014 respectively. Given (i) our independent role in these two engagements; and (ii) our fees for these two engagements represented an insignificant percentage of our revenue, we consider these two engagements would not affect our independence to form our opinion in respect of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the New Services Agreement.

BASIS OF OPINION

In putting forth our recommendation, we have considered, amongst other things, (i) the New Financial Services Framework Agreement and the New Services Agreement; (ii) the annual report of the Company for the year ended 31 December 2014 (the “ 2014 Annual Report ”) and the interim report

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of the Company for the period ended 30 June 2015 (the 2015 Interim Report ”); and (iii) other information as set out in the Circular. We have also relied on all relevant information, opinions and facts supplied and representations made to us by the Directors and the representatives of the Company. We have also studied the relevant market information and trends of the related industry.

We have assumed that all such information, opinions, facts and representations, which have been provided to us by the Directors or the representatives of the Company, for which they are fully responsible, are true, accurate and complete in all respects. The Company has also confirmed to us that no material facts have been omitted from the information supplied and we have no reason to suspect that any material information has been withheld by the Company or is misleading.

We consider that we have sufficient information to reach an informed view and to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided by the Directors and the representatives of the Company, nor have we conducted any independent investigation into the business, affairs, operations, financial position or future prospects of each of the Group, China Shipping, China Shipping Group and CS Finance Company.

PRINCIPAL FACTORS AND REASONS

In formulating our opinion in respect of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement, the Agreed Supplies and Services and the Annual Caps, we have taken into account the following principal factors and reasons:

1. Background information of the parties to the New Financial Services Framework Agreement and the New Services Agreement

As stated in the Letter from the Board, the business scope of the Company mainly involves coastal, ocean and Yangtze River cargo transportation, oil transportation, chartering, cargo agency and cargo transportation agency.

As stated in the Letter from the Board, the business scope of China Shipping mainly involves import and export businesses, trading, coastal and ocean cargo transportation, dry bulk cargo transportation, supply of food for vessels, management of docks and other services in relation to the above.

As stated in the Letter from the Board, the business scope of CS Finance Company includes the provision of financial and financing advisory services, credit verification services and related consulting and agency services.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Deposit Services and the Foreign Exchange Services under the New Financial Services Framework Agreement

In arriving at our opinion on the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement, we have taken into consideration the following factors and reasons:

Background of the New Financial Services Framework Agreement

Principal terms of the New Financial Services Framework Agreement

The principal terms of the New Financial Services Framework Agreement have been set out in the Letter from the Board and are summarized below.

Date : 29 September 2015 Parties : (i) CS Finance Company (as provider of services); and (ii) The Company (as recipient of services) Subject matter : CS Finance Company may provide the Group with a range of financial services including: (i) deposit services; (ii) loan services; (iii) settlement services;

(iv) foreign exchange services, which mainly comprise buying, selling and exchanging currencies at spot or forward prices; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) other financial services as approved by CBRC such as provision of letter of credit, entrusted loans, financial advisory, performance guarantee and other related services.
Term : Subject to the approval being obtained from the Independent Shareholders, the New Financial Services Framework Agreement will be effective from 1 January 2016 to 31 December 2018. Subject to compliance with the Listing Rules, the New Financial Services Framework Agreement will be automatically renewed for another three years from 1 January 2019 unless either party chooses not to.
Payment terms : The payment terms are dependent on the type of financial services to be provided and are determined at the time when such financial services are provided. The Group expects such terms of payment to be consistent with market terms for the relevant type of financial services
Pricing policies : Details of the pricing policy of the New Financial Services Framework Agreement are set out in the Letter from the Board. Below is the pricing policy of the Deposit Services and the Foreign Exchange Services.
(i) CS Finance Company may accept deposits from the Group at interest rates not lower, and thus no less favourable, than (a) the lower limit of the relevant rates stipulated by PBC for similar type of deposits; (b) the interest rates offered by any independent third party for similar type of deposits to the Group; or (c) the interest rates at which CS Finance Company accepts from any independent third party for similar type of deposits; and
(ii) the fees charged by CS Finance Company for the provision of foreign exchange services shall not be higher, and thus no less favourable, than the fees charged by any independent third party for similar type of services at the time.

We have obtained and reviewed certain records such as (i) 2 deposit slips of CS Finance Company and compared the interest rates of deposit offered by CS Finance Company against the then rates stipulated by PBC for similar type of deposit; and (ii) 2 statements of foreign exchange services of the Company obtaining from CS Finance Company and compared the exchange rate

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

offered by CS Finance Company against the exchange rate offered by Bank of China. We note that the interests received from CS Finance Company for the deposit and the fees charged (expressed as difference in exchange rate offered) by CS Finance Company for the provision of foreign exchange services to the Group are no less favourable than that of independent third parties. We are of the view that the above pricing policies are fair and reasonable so far as the Independent Shareholders are concerned, as (i) the interests received for the deposit will be set at such rates not lower than the lower limits (as the case may be) set by PBC, an independent third party or such rates at which CS Finance Company provides to an independent third party, thus the more favourable rate will always prevail unless deemed not applicable; and (ii) the fees charged by CS Finance Company for the provision of foreign exchange services to the Group shall not be higher than the fees charged by any independent third party for similar type of services at the time, thus a no less favourable rate will prevail.

Reasons for and benefits of the provision of Deposit Services and Foreign Exchange Services by CS Finance Company to the Group under the New Financial Services Framework Agreemen t

Also, the New Financial Services Framework Agreement does not restrict the Group to financial services provided by third party and therefore offers an additional financing option to the Group and increases the financial flexibility of the Group. According to the Letter from the Board, its criteria in making the choice could be made on costs and quality of services. Therefore, the Group may, but is not obliged to, continue to use CS Finance Company’s services if the service quality provided continues to be competitive. Having such flexibility afforded under the New Financial Services Framework Agreement, the Group is able to better manage its current capital and cashflow position. In addition, it is also expected that CS Finance Company will provide more efficient foreign exchange settlement services to the Group, as compared to independent third-party.

Having taken into account the reasons set out above, we are of the view that the provision of Deposit Services and Foreign Exchange Services by CS Finance Company to the Group under the New Financial Services Framework is in the interest of the Company and its Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Annual caps and its basis of determination

A summary of the historical amount and proposed annual caps for the Deposit Services and the Foreign Exchange Services under the New Financial Services Framework Agreement for each of the two years ended 31 December 2014, the six months ended 30 June 2015, and for each of the three years ending 31 December 2018 are set out in the table below:

			Historical amount	Historical amount		Proposed annual	Proposed annual	caps
					2015
		2013	2014	(Jan-Jun)		2016	2017	2018
		(RMB’000)	(RMB’000)	(RMB’000)		(RMB’000)	(RMB’000)	(RMB’000)
(i)	Maximum daily
	outstanding balance
	of deposits (including
	accrued interest and
	handling fee) to be
	placed by the Group
	with CS Finance
	Company	2,121,000	1,917,000	1,814,000		5,500,000	5,500,000	5,500,000
		(USD’000)	(USD’000)	(USD’000)		(USD’000)	(USD’000)	(USD’000)
(ii)	Maximum amount of
	foreign exchange to
	be transacted during
	the year	152,800	191,000		12,000	600,000	600,000	600,000

As discussed with the management of the Company, the proposed annual caps of the Deposits Services are closely related to the net current assets of the Group while the proposed annual caps of the Foreign Exchange Services are closely related to the size of the business operations of the Group and its funding requirements over the next three years. The Company also considered CS Finance Company’s financial ability.

Basis of determination of the proposed annual caps for the Deposit Services

According to the 2015 Interim Report, the cash and cash equivalents of the Group as at 31 December 2014 and 30 June 2015 were approximately RMB2,449.2 million and RMB2,321.0 million respectively and net current liabilities were approximately RMB7,262.5 million and RMB3,349.1 million respectively. We understand that the net current liabilities as at 31 December 2014 and 30 June 2015 were mainly due to recognition of current portion of interest-bearing borrowings, loans and bonds payable of approximately RMB12,431.2 million and RMB7,702.8 million which will be refinanced when due. Without taking into account such amount, the net current assets as at 31 December 2014 and 30 June 2015 was approximately RMB5,168.7 million and RMB4,353.7 million, which is approximately the proposed annual cap for the three years ending 31 December 2018. Also, as disclosed in the 2015 Interim Report, the Company has approximately RMB23,979.2 million bank borrowings and approximately RMB4,976.5 million corporate bonds payable outstanding as at 30 June 2015. Among them, bank

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

loans of RMB4,213.7 million are payable within one year or on demand and corporate bonds also incur interest payment annually, which will pose liquidity risk on the Company. As discussed with the management of the Company, the Company often requires China Shipping to provide internal financial resources to finance the temporary liquidity demand and the management of the Company believes that an annual cap of approximately RMB5,500 million will allow the Company to utilize its financial resources more flexibly. In addition, this approach in determining the annual cap is consistent with the determination of historical annual caps in respect of deposit services with CS Finance Company in the Existing Financial Services Framework Agreement. We concur with the Directors’ view that the proposed annual caps for the maximum daily outstanding balance of deposits provide an option for the Group to flexibly manage its temporarily surplus cash.

Basis of determination of the proposed annual caps for the Foreign Exchange Services

The Group operates internationally and receives foreign currency in its normal operation. According to the 2014 Annual Report and the 2015 Interim Report, the Group’s overseas revenue for each of two years ended 31 December 2014 and the six months ended 30 June 2015 were approximately RMB6,445.1 million, RMB7,666.8 million and RMB3,588.5 million and accounted for approximately 56.8%, 62.5% and 61.8% of total revenue respectively. Also, based on the information provided by the Company, the Group’s shipping capacities for the three years ending 31 December 2018 are estimated to be approximately 17 million dwt, 18 million dwt and 19 million dwt respectively. Having considered the above, we are of the view that the Group’s oversea revenue will continue to increase which will increase the Group’s demand on the Foreign Exchange Services.

On the other hand, with the expected growth of operations and the expected fleet expansion, the Group will require the Foreign Exchange Services to convert revenue denominated in foreign currency (usually in US dollars) into RMB in order to fulfill its operational related requirements which may include bunkering, dry docking, payment of crew cost and wharfage charge. The management of the Company advised that around half of the operating costs are paid or payable in US dollars in the first half of 2015. Therefore, the management estimates that there will be a surplus of US dollars arising from operation. Considering the mismatch in the amount of foreign revenue and operating costs and the potential increase in both revenue and operating costs, we are of the view that the higher annual cap will benefit the Company to manage its surplus in US dollars with more flexibility.

As disclosed in the 2015 Interim Report, the Group will further strengthen its efforts in monitoring and studying exchange rate fluctuation. Firstly, the Group will strive to breakeven USD payables/receivables for its operations. Secondly, the Group will conscientiously analyse and compare available finance instruments for averting exchange rate risks, so as to hedge and lock in financial costs, and to effectively protect against risks caused by exchange rate fluctuation.

Given that the fees charged by CS Finance Company for the provision of Foreign Exchange Services will be no less favourable than the fees charged by independent third party, the Foreign Exchange Services will be beneficial to the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

CS Finance Company’s financial ability

In considering CS Finance Company’s financial ability in the provision of the relevant financial services, we have obtained the audited annual report of the CS Finance Company for the two years ended 31 December 2014 and management account of the CS Finance Company for the nine months ended 30 September 2015. According to the relevant financial statements, CS Finance Company recorded net assets of approximately RMB927.1 million, RMB1,082.1 million and RMB1,114.2 million as at 31 December 2013, 31 December 2014 and 30 September 2015 respectively. We have also checked the continuing validity of the CS Finance Company’s license issued by CBRC and reviewed the report prepared by CS Finance Company which summarise the current situation of CS Finance Company. According to the report, capital adequacy ratios of CS Finance Company were approximately 16.73% as at 31 December 2014 and approximately 14.48% as at 31 December 2013, both were better than the standard of 10% for finance companies as required by China Banking Regulatory Commission (中國銀行業監督管理委員會). Non-performing asset ratios of CS Finance Company were both zero as at 31 December 2014 and 31 December 2013, both were better than the standard of 4% for finance companies as required by China Banking Regulatory Commission (中國銀行業監督管理委員會). Bad loan ratios of CS Finance Company were both zero as at 31 December 2014 and 31 December 2013, both were better than the standard of 5% for finance companies as required by China Banking Regulatory Commission (中國銀行業監督管理委員會). Asset loss reserve ratio of CS Finance Company were both 250% as at 31 December 2014 and 31 December 2013, both were better than the standard of 100% for finance companies as required by China Banking Regulatory Commission (中國銀行業監督管理委員會). Loan loss reserve ratio of CS Finance Company were both 250% as at 31 December 2014 and 31 December 2013, both were better than the standard of 100% for finance companies as required by China Banking Regulatory Commission (中國銀行業監督管理委員會). We concur with Directors’ view that CS Finance Company is able to provide the deposit services to the Group.

In light of the above, we are of the view that the proposed annual caps for the Deposit Services and the Foreign Exchange Services under the New Financial Services Framework Agreement for the three years ending 31 December 2018 are determined based on reasonable estimation and after due and careful consideration and they are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

3. New Services Agreement

In arriving at our opinion on the terms of the New Services Agreement, we have taken into consideration of the following factors and reasons:

Background of the New Services Agreement

As disclosed in the 2012 Announcement, the Company entered into the Existing Services Agreement with China Shipping pursuant to which China Shipping agreed to provide necessary supporting shipping materials and services for the on-going operations of the oil transportation

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

business and dry bulk cargo transportation business including dry-docking and repair services, supply of lubricating oil, fresh water, raw materials, bunker oil as well as other services for the ongoing operations for all vessels owned or bareboats chartered by the Group. The term of the Existing Services Agreement will expire on 31 December 2015.

In addition, as disclosed in the 2014 Announcement, each of China Shipping Bulk and China Shipping Tanker entered into the Existing Sea Crew Management Agreements with China Shipping International respectively in respect of the provision of sea crew management services by China Shipping International to the Group. The term of the Existing Sea Crew Management Agreements will expire on 31 December 2015.

Principal terms of the New Services Agreement

The principal terms of the New Services Agreement have been set out in the Letter from the Board and are summarized below.

Date		:	29	September 2015
Parties		:	(i)	China Shipping (as provider of services);	and
			(ii)	The Company (as recipient of services)
Subject	matter	:	China Shipping Group agreed to provide to the		Group certain
			Agreed Supplies and Services for the ongoing		operations	for
			all	vessels owned or bareboats chartered by the Group.		The
			Agreed Supplies and Services include:
			(1)	supply of lubricating oil, fresh water, raw materials,
				bunker oil, mechanical and electrical	engineering,
				supporting shipping materials and	repairs	and
				maintenance services for vessels and life	boats;
			(2)	oil removal treatment, maintenance, telecommunication
				and navigational services;
			(3)	dry docking, repairs, special coating, technical
				improvements of vessels;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) management services of sea crew including manning services, allocation of sea crew members, provision of training programs and maintenance of electronic database of sea crew members;
(5) accommodation, lodging, medical services and transportation for employees;
(6) agency commissions incurred in connection with cargo space booking on visiting vessels, organizing onward distribution of freight and various logistic services;
(7) service on sale and purchase of vessels, accessories and other equipment; and
(8) miscellaneous management services.
Term : Subject to the approval being obtained from the Independent Shareholders, the New Services Agreement will be effective from 1 January 2016 to 31 December 2018.
Payment terms : Other than fees which cannot be ascertained at the time or such fees which are being disputed, all fees and charges for a particular calendar month where the Agreed Supplies and Services have been provided by China Shipping Group to the Group shall be determined by the last business day of such calendar month and shall be paid by the Group no later than the 15th day in the following calendar month.
Pricing policy : The fees for the Agreed Supplies and Services will be determined by reference to the prevailing market price of the Agreed Supplies and Services and a combination of other factors. The prevailing market price shall be determined by reference to the price chargeable by independent third parties for identical or similar type of supporting shipping material or service at the time in China or overseas (as the case may be) and the price charged to independent third parties by China Shipping in the most recent transaction of a similar nature.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In determining the prevailing market price as described above, the fees for each category of the Agreed Supplies and Services are taken into account of a number of factors as follows:

in respect of (1) supply of shipping materials : by reference to the type and quantity of shipping materials required as costs of different types of shipping materials vary significantly, the time and location of delivery;
in respect of (2) and (3) maintenance and technical improvements of vessels : by reference to the level of technicality required for the particular maintenance or improvement work, the scale and scope of the proposed maintenance or improvement, the type of vessels involved, the type of materials and labour required for such maintenance or improvement work;
in respect of (4) management services of sea crew members and maintenance of electrical database : by reference to the capacity of vessels, the required number of sea crew members, the estimated working hours of the relevant employees taking into account the employees’ benefits and the minimum wage requirements under the applicable PRC laws and regulation, the cost of maintaining the electronic database;
in respect of (5) accommodation, medical and transportation services for sea crew members : by reference to the number of sea crew members involved, costs of accommodation, medical insurance and transportation provided;
in respected of (6) agency commissions : by reference to the market standard of commission rate, type of vessels involved, value and volume of cargo involved; and
in respect of (7) service fees on sale and purchase of vessels : by reference to type and quantity of vessels, accessories and other equipment involved, estimated marketing expenses and the proposed sale targets.

We have obtained and reviewed one contract and/or invoice from China Shipping and one contract and/or invoice from independent third parties for each category of the Agreed Supplies and Services. We note that the prices of the contracts and/or invoices with China Shipping are no less favourable than that of the contracts and/or invoices with independent third parties. We are of the view that the above pricing policies are fair and reasonable so far as the Independent Shareholders are concerned as fees of the Agreed Supplies and Services will be set at market prices.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of the New Services Agreement

As stated in the Letter from the Board, China Shipping Group has been providing the necessary supporting shipping services and shipping materials to the Group since the Group’s establishment. The New Services Agreement is essential to the core businesses and operation of the Group as it will provide the necessary supporting shipping services and shipping supplies to all the vessels owned or bareboats chartered by the Group. The terms of and consideration payable under the New Services Agreement have been arrived at after arm’s length negotiation. The Board believes that securing the Agreed Supplies and Services from China Shipping Group, who is an experienced service provider in the shipping industry, will provide the Group with a stable and reliable supply of shipping materials and supporting services at competitive costs.

We concur with the Directors’ view that by entering into the New Services Agreement, the Group can take advantages of (i) the long-established relationship with China Shipping Group; and (ii) the stability and reliability of the supply of the Agreed Supplies and Services. Therefore we concur with the Directors’ view that the entering into of the New Services Agreement is in the ordinary and usual course of the business of the Company and is in the interests of the Company and the Shareholders as a whole.

Annual caps and its basis of determination

A summary of the historical amount under the Existing Services Agreement and the Existing Sea Crew Management Agreements and proposed annual caps for the continuing connected transactions under the New Services Agreement for each of the two years ended 31 December 2014, the six months ended 30 June 2015, and for each of the three years ending 31 December 2018 are set out in the table below:

		Historical amount	Historical amount		Proposed annual	Proposed annual	caps
				2015
	2013	2014	(Jan-Jun)		2016	2017	2018
	(RMB’000)	(RMB’000)	(RMB’000)		(RMB’000)	(RMB’000)	(RMB’000)
Agreed Supplies and
Services (except for the
sea crew management
services)	3,795,000	4,124,000	1,128,000
Sea crew management
services		1,197,000		592,000
Fees for the Agreed
Supplies and Services	3,795,000	5,321,000	1,720,000		6,820,000	7,420,000	8,220,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As stated in the Letter from the Board, the proposed annual caps above have been determined based on (i) the above historical figures; (ii) management’s estimates of fleet operational costs over the next three years ending 31 December 2018; (iii) management’s estimates of the market prices and other relevant market developments; and (iv) the estimated increase in shipping capacity.

As discussed with the management of the Company, the proposed annual caps of the fees for the Agreed Supplies and Services are closely related the fleet business operations of the Group and its operational costs over the next three years. Therefore, to arrive at our view, we have discussed with management of the Company on the following factors:

(i) The historical figures

As shown in the above table, the amounts of the Agreed Supplies and Services (except for the sea crew management services which are provided to the Group under the Existing Sea Crew Management Agreements, and not within the scope of service of the Existing Services Agreement) for the year ended 31 December 2014 increased approximately 10% as compared with that for the year ended 31 December 2013. Thus the Directors estimate that the amounts of the Agreed Supplies and Services for the three years ending 31 December 2018 will increase.

(ii) The fleet business operation of the Group and its operation costs

As stated in the Interim Report, the oil shipping market has benefited from the continuous low prices of international crude oil. According to the WTI (NYMEX) Price, the market future price quotes for crude oil WTI which is an indication of the crude oil market price, the price of crude oil decreased from around US$100 per barrel in May 2014 to around US$50 per barrel in October 2015. As discussed with the management of the Company, low international oil prices will drive the demand for transportation in the oil shipping market, which will further support the increase in trading volume of international crude oil and be beneficiary to the Company’s oil shipment. Given the potential increase in the Company’s revenue from oil shipment, it is expected that the fleet operational costs will increase accordingly.

As stated in the Interim Report, the Group owned 173 vessels with a total capacity of 16,933,000 dwt and 22 vessels with a total capacity of 2,611,000 dwt was under construction as at 30 June 2015. Based on the information provided by the Company, the Group’s shipping capacities for the three years ending 31 December 2018 is estimated to be approximately 17 million dwt, 18 million dwt and 19 million dwt respectively. Therefore, the demand of the Agreed Supplies and Services will be increased.

In light of the above, we are of the view that the proposed annual caps for the Agreed Supplies and Services for the three years ending 31 December 2018 are determined based on reasonable estimation and after due and careful consideration and they are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered the principal factors and reasons as discussed above, we are of the view that terms of the provision of Deposit Services and Foreign Exchange Services under the New Financial Services Framework Agreement and the Agreed Supplies and Services under the New Services Agreement and the Annual Caps are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we would recommend (i) the Independent Board Committee to advise the Independent Shareholders’ and; (ii) the Independent Shareholders, to vote in favour of the ordinary resolutions in this regard.

Yours faithfully, For and on behalf of TC Capital Asia Limited Edward Wu Managing Director

Note: Mr. Edward Wu of TC Capital Asia Limited is a responsible officer licensed under the SFO to engage in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities having over 14 years of experience in investment banking and corporate finance.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A. FINANCIAL INFORMATION OF THE GROUP

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

The audited consolidated financial statements of the Group together with the relevant notes for each of the three years ended 31 December 2012, 2013 and 2014 and the unaudited consolidated financial statements for the six months ended 30 June 2015 have been set out on pages 74 to 186, pages 76 to 190, pages 87 to 208 and pages 37 to 80 in the annual reports of the Company for the years ended 31 December 2012, 2013 and 2014 and the interim report of the Company for the six months ended 30 June 2015 published on 15 April 2013, 17 April 2014, 30 April 2015 and 16 September 2015, respectively, available on the websites of the Company (http://www.cnshippingdev.com) and the Stock Exchange (http://www.hkex.com.hk).

B. WORKING CAPITAL

Taking into account the financial resources available to the Group, including internally generated funds and the available banking facilities, the Directors of the Company are of the opinion that the Group has sufficient working capital for its requirement for at least 12 months from the date of this circular.

C. STATEMENT OF INDEBTEDNESS

At the close of business on 30 September 2015, being the latest practicable date for the purpose of indebtedness statement prior to printing of this circular, the total outstanding interest-bearing bank and other borrowings, other loans, obligations under finance leases and corporate bonds of the Group are as follows:

	Total	Secured	Unsecured
	RMB’000	RMB’000	RMB’000
Interest-bearing bank and other borrowings	32,917,640	14,083,516*	18,834,124
Other loans	1,206,423	—	1,206,423
Obligations under finance leases	414,736	414,736#	—
Corporate bonds	3,978,021	—	3,978,021

Secured by pledges of the Group’s 51 vessels and 6 vessels under construction with total net carrying amount of approximately RMB20,198,797,000 and RMB5,049,712,000 respectively.
Secured by charges over the vessels held under finance leases with total net carrying amount of approximately RMB597,361,000.

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APPENDIX I FINANCIAL INFORMATION OF THE GROUP

At the close of business on 30 September 2015, the Group has the following significant contingent liabilities and guarantees:

(i) In August 2011, one of the Group’s cargo vessels “Bihuashan” collided with “Li Peng 1”, which caused “Li Peng 1” to sink afterwards. The Group has set up a Limitation of Liability for Maritime Claims Fund amounting to approximately RMB22,250,000. Since the Group had been insured, all compensation will be borne by the insurance company. As at 30 September 2015, the Group was still in the process of settling all the issues concerned.
(ii) East China LNG Shipping Investment Co. Ltd., a non wholly-owned subsidiary of the Company, holds 30% equity interests in each of Aquarius LNG Shipping Limited (“Aquarius LNG”) and Gemini LNG Shipping Limited (“Gemini LNG”), and North China LNG Shipping Investment Co. Ltd., a non wholly-owned subsidiary of the Company, holds 30% equity interests in each of Capricorn LNG Shipping Limited (“Capricorn LNG”) and Aries LNG Shipping Limited (“Aries LNG”). Each of these four companies above entered into ship building contracts for the construction of one LNG vessel. After the completion of the LNG vessels, the four companies would, in accordance with time charters agreements to be signed, lease the LNG vessels to the following charterers:

Company name

Charterer

Aquarius LNG Papua New Guinea Liquefied Natural Gas Global Company LDC

Gemini LNG Papua New Guinea Liquefied Natural Gas Global Company LDC Aries LNG Mobil Australia Resources Company Pty Ltd. Capricorn LNG Mobil Australia Resources Company Pty Ltd.

On 15 July 2011, the Company entered into four guaranteed leases (the “Lease Guarantees”). According to the Lease Guarantees, the Company irrevocably and unconditionally provided the charterers, successors and transferees of the four companies listed above with guarantee (1) for the four companies to fulfil their respective obligations under the lease term, and (2) to secure 30% of amounts payable to charterers under lease term.

According to the term of the Lease Guarantees and taking into account the possible increase in the value of the lease commitments and the percentage of shareholdings by the Company in the above four companies, the amount of lease guaranteed by the Company is limited to USD8.2 million (approximately RMB52 million).

The guarantee period is limited to that of the lease period, which is 20 years.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) On 9 March 2013, one of the Group’s cargo vessels “CSB Talent” had a broken bollard caused by strong wind at the dock and collided with several parked vessels nearby, which resulted in damage of the floating dock and other facilities. In March 2014, claims on damage caused by the collision amounted to an aggregate of approximately RMB173,865,000. Since the Company had been insured with PICC Property and Casualty Company Limited (Guangzhou Branch) and The London Steam Ship Owners Mutual Insurance Association Limited, all compensation will be borne by the insurance companies. As at 30 September 2015, the Group was still in the process of settling all the issues concerned.
(iv) On 23 December 2013, five of the Group’s oil tankers “Danchi”, “Baichi”, “Daiqing 71”, “Daiqing 72” and “Ruijintan” extracted oil from “Bohaiyouyihao”. This act was sued by a group of plaintiffs for ocean pollution. As at 23 April 2014, claims on damage caused by ocean pollution amounted to an aggregate of approximately RMB47,452,000. Since the Company had been insured with PICC Property and Causalty Company Limited (Shanghai Branch), the London P&I Club and SKULD, all compensation will be borne by the insurance companies. As at 30 September 2015, the Group was still in the process of settling all the issues concerned.
(v) At the 2014 seventh Board meeting held on 30 June 2014, the Company approved the ship building contracts, time charter agreements and supplemental construction contract signed by three joint ventures of the Company for the Yamal LNG project. To secure the obligation of the ship building contracts, time charter agreements and supplemental construction contracts, the Company provides corporate guarantees to the shipbuilders, Daewoo Shipbuilding & Marine Engineering Co., Ltd. and DY Maritime Limited. The total aggregate liability of the Company under the corporate guarantees is limited to USD490,000,000 (approximately RMB3,117,037,000). In addition, the Company provides owner’s guarantees to the charterer, YAMAL Trade Pte. Ltd. The total aggregate liability of the Company under the owner’s guarantees is limited to USD6,400,000 (approximately RMB40,712,000).
(vi) At the 2015 sixth Board meeting on 28 April 2015, the Company approved China Shipping Bulk Carrier Co., Limited (“CS Bulk Carrier”), a wholly-owned subsidiary of the Company, to guarantee not more than 50% of the total debt of Guangzhou Development Shipping Co., Limited, a joint venture of the Group, including loan and accrued interest limited to approximately RMB26,250,000, where the guarantee was unconditional and non-cancellable.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables in the ordinary course of business, as at the close of business on 30 September 2015, the Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors confirmed that no material changes in the indebtedness and contingent liabilities of the Group since 30 September 2015 up to and including the Latest Practicable Date.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

D. FINANCIAL TRADING AND PROSPECTS OF THE GROUP

Competitive landscape and development trend in the industry

The international economic conditions in 2015 are expected to remain complicated and volatile. While the growth of global economy is likely to rebound slightly, it is difficult to achieve obvious turnaround from the overall weak recovery trend and low growth rate is expected to be the trend in the next few years. Global trading growth will likely be restrained by the fragile economy growth rate.

Taking into account development of the global economy, it is unlikely that insufficient market demand for transportation and the over-capacity issues will be substantially improved in the short term. With the gradual transformation of China’s economic structure and energy structure, the growth in marginal demand for iron ore and coal will be suppressed. In the second half of 2015, while imbalance of supply and demand in the international dry bulk shipping market will continue to exist, the pace for vessel owners to place orders is expected to slow down significantly, which will be beneficial for future market recovery although the influence of this on the market may be minimal in the second half of 2015.

It is expected that international oil prices that are closely-related to the operation of shipping enterprises will remain at a low level in 2015, thus likely relieving the cost pressure of shipping enterprises. Meanwhile, low international oil prices will drive the demand for transportation in the oil shipping market, which will further support increase in trading volume of international crude oil and be beneficial to large oil tankers such as VLCC and Suez.

Development strategies and work initiatives of the Company

The above mentioned conditions and factors include both opportunities and challenges to the shipping industry. Faced with a fast changing market environment, in the second half of 2015, the Group will capture the favorable opportunity of continued low international oil prices to actively research and judge the market and timely adjust operating strategy, and will deepen reform and innovation as well as excellent operation for continuous enhancement of our risk-resistant ability, sustainable development capability and core competitiveness by implementing the following initiatives:

(1) Strengthen safety management to ensure safety development of the Group. Adhering to the concept of “intrinsic safety for safe development”, we will further promote various reforms on safety management, nurture outstanding safety culture, and endeavor to forge the safety brand into the Group’s core competitiveness.
(2) Conduct careful research and make informed judgement of the markets, and take full advantage of the opportunities to achieve solid operation. Targeting at different circumstances in the domestic and international trading markets, the Group will implement specific business strategies to continue consolidating the leading position of the Company in the domestic trading market, and speed up the pace to catch up with international

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

outstanding enterprises, further enhancing the brand image and market competitiveness of the Company. The Group will continue to adhere to the strategy of “major clients, great co-operation and comprehensive services”, increase service awareness and strive to satisfy customer needs and create values for customers actively.

In 2015, for oil shipment operations, the Group will continue to deepen cooperation with the top three domestic petroleum companies to further create an innovative cooperation relationship, so as to consolidate and enhance its market share in offshore oil shipment. Meanwhile, the Group will utilise the joint advantages of domestic and offshore trading markets to establish a scientific market research and judgment mechanism, utilise the opportunity of international market improvement to strengthen the adjustment in shipping routes structure, and grab the VLCC fixed loading at high level to scientifically plan the term leasing ratio, so as to strive for increasing profitability and stabilising market fluctuation.

For bulk cargo shipment operations, the Group will actively respond to the major trend of adjustment in PRC economic structure and energy structure, and increase the structure of cargo sources. The Company will focus on improving the pricing mechanism and contract performance mechanism for COA contracts, improving customer management, consolidating benefits from joint ventures and associates, strengthening communication with senior management of business partners, and maintaining good cooperation results with joint ventures and associates. Meanwhile, the Group will make good use of the unified platform for bulk cargo operations to allocate shipping capacities reasonably between long-term chartering and spot market contracts, further enhancing the market share of offshore shipment operations.

For LNG shipment operations, the Group will further enhance the integrated capabilities on LNG project development, vessel construction management, business management, bank financing, crew and vessel management and talent cultivation, so as to safeguard the LNG market for the two major groups, Sinopec and China National Petroleum Corporation, and actively develop cooperation with other LNG importers.

(3) Accelerate fleet structure adjustment and increase competitiveness of fleet. The Group will firmly capture the strategic opportunity of “The 21st Century Maritime Silk Road” established by the Chinese government, focusing on the establishment of medium-long term development planning of fleet, disposal of old and obsolete vessels and construction and delivery of large-scale vessels. In addition, through continuous fleet optimisation, the Group will actively pursue upgrade of fleet and technology to develop the fleet towards the direction of large-scale, modernised and lowcarbon operations, thereby enhancing the overall competitiveness of the fleet.
(4) Adhere to the costs-come-first and continue to improve operating efficiency and cost reduction and control level. In the second half of 2015, the Group will further sort out key links and system of cost control, continue to improve comprehensive energy saving mechanism, strengthen evaluation, analysis and decision-making mechanism of fuel cost control, fully utilise the current favorable opportunity of low oil prices, as well as

— I-5 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

scientifically and reasonably perform fuel locking and purchasing work. Meanwhile, the Group will continue to enhance its communication and coordination with suppliers, striving for breakthrough in management and control of various costs items such as crew expenses, vessel repair charges, port charges, to create a competitive advantage of low cost.

(5) Strengthen funds management and expand financing channels to secure development funds and strive for reduced capital costs. According to the new vessel delivery plans, the capital expenditure of the Group in 2015 and 2016 will be RMB4.53 billion and RMB2.48 billion, respectively. In this connection, the Group will further strengthen cooperation with banks, fully utilise both domestic and international markets and reasonably use financial instruments to secure the required capital funds, and will continuously enhance operating benefits and efficiency of capital operations, reduce financing costs and maintain a relatively sound financial structure.
(6) Strengthen talent development and team building. The Group will formulate the 13th five year plan for building a team of cadre according to the development plan for our fleet and the needs of various business segments, and strengthen the building of a team of international and sophisticated cadre talents. Moreover, the Group will also continuously improve the business level and capability of employees and secure manpower for fleet development through active exploration and establishment of a long term educational and training mechanism.

Effect of the New Financial Services Framework Agreement and Services Agreement on the earnings and asset and liabilities of the Group

In respect of the New Financial Services Framework Agreement, (1) deposits to be placed by the Group through the Deposit Services will generate interest income for the Company; (2) loans to be obtained by the Group through the loan services will result in an increase in the scale of assets and liabilities of the Company; and (3) the Foreign Exchange Services to be used by the Group will not have any significant effect on the earnings and assets and liabilities of the Group.

In respect of the New Services Agreement, there has been no, and the Group does not expect there will be any, significant effect on the earnings and assets and liabilities of the Group.

— I-6 —

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular for which Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors’ Interests and Short Positions

As at the Latest Practicable Date, none of the Directors , proposed Directors and chief executives and supervisors had any interest and 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 to be notified to the Company and the Stock Exchange which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 and the Stock Exchange under the provisions of Divisions 7 and 8 of Part XV of the SFO or pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in appendix 10 of the Listing Rules to be notified to the Company and the Stock Exchange or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein.

Directors’ Interest in Any Asset Acquired, Disposed or Leased

None of the Directors or the proposed Directors has had any material interest, direct or indirect, in any asset which, since 31 December 2014, being the date to which the latest audited consolidated financial statements of the Group have been made up, had been acquired or disposed of by or leased to any member of the Group or was proposed to be acquired or disposed of by or leased to any member of the Group.

Directors’ Service Contracts

As at the Latest Practicable Date, none of the Directors had entered into, or proposed to enter into, any service contracts with the Company or any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

Directors’ Interest in Contracts and Competing Interests

No contracts of significance to which the Company, any of its holding companies, fellow subsidiaries or subsidiaries was a party and in which a Director had a material interest (other than common directorship with China Shipping) and which is significant to the Group’s business, whether directly or indirectly, subsisted at the date of this circular. None of the Directors or proposed Directors or their respective close associates has any competing interest (as would be required to be disclosed to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controller shareholder of the Company for the purpose of the Listing Rules).

— II-1 —

GENERAL INFORMATION

APPENDIX II

3. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest audited financial statements of the Group were made up.

4. MATERIAL LITIGATION

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

5. CONSENT AND EXPERT

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

Name Qualification TC Capital Asia Limited Independent Financial Adviser and a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

The Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or opinions and/or the references to its name in the form and context in which it appears.

As at the Latest Practicable Date, (i) the Independent Financial Adviser did not have any interest, either direct or indirect, in any assets which had been, since 31 December 2014, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group; and (ii) the Independent Financial Adviser did not have any shareholding interests in any member of the Group and it did not have any right, whether legally enforceable or not, to subscribe for or nominate persons to subscribe for securities of any member of the Group.

6. MATERIAL CONTRACTS

There are no material contracts (not being contracts entered into in the ordinary course of business) entered into by members of the Group within two years preceding the date of this circular.

7. MISCELLANEOUS

(i) The legal address of the Company is at Room A-1015, No. 188 Ye Sheng Road, China (Shanghai) Pilot Free Trade Zone, People’s Republic of China.
(ii) The registered office of the Company in Hong Kong is 20/F, Alexandra House, 18 Chater Road, Central, Hong Kong.

— II-2 —

GENERAL INFORMATION

APPENDIX II

(iii) The Company’s branch share registrar and transfer office in Hong Kong is at Hong Kong Registrars Limited at 17M Floor, Hopewell Centre,183 Queen’s Road East, Wanchai, Hong Kong.
(iv) The secretary of the Company is Ms. Yao Qiaohong, being an affiliated person of The Hong Kong Institute of Chartered Secretaries. Ms. Yao obtained a company secretary training certificate from the Shanghai Stock Exchange.
(v) In the event of inconsistency, the English version of this circular shall prevail over the Chinese version.

8. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Reed Smith Richards Butler at 20/F., Alexandra House, 18 Chater Road, Central, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 28 December 2015:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the two financial years ended 31 December 2014;
(c) the letter from the Board, the text of which is set out in pages 7 to 23 of this circular;
(d) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out in page 24 of this circular;
(e) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out in pages 25 to 39 of this circular;
(f) the written consent from the Independent Financial Adviser;
(g) a copy of this circular;
(h) the New Financial Services Framework Agreement; and
(i) the New Services Agreement.

— II-3 —

BIOGRAPHY OF THE PROPOSED DIRECTORS

APPENDIX III

INFORMATION ON THE PROPOSED EXECUTIVE DIRECTOR

MR. YANG JIGUI (“Mr. Yang”)

Mr. Yang Jigui (楊吉貴), born in September 1966 and aged 49, has a university education background with a MBA degree and is also a senior accountant. Mr. Yang is currently the deputy Chief Financial Officer of China Shipping (Group) Company (hereinafter referred to as “China Shipping”) and a director of China Shipping Haisheng Co., Ltd. Before that, Mr. Yang has served successively as: deputy chief of Accounting Section, deputy chief of Finance Section under Finance Department of Guangzhou Maritime Transport (Group) Co., Ltd.; manager of Finance Department of Guangzhou Marine Transport (Group) Co., Ltd. Shenzhen Shipping Branch; chief accountant of Supply and Trade Division of Guangzhou Maritime Transport (Group) Co., Ltd.; head of Finance Department of China Shipping Supply and Trade Co., Ltd.; deputy director of Planning and Finance Department of China Shipping; general manager of Planning and Finance Department of China Shipping; general manager of Finance Department of China Shipping. In March 2014, Mr. Yang became the general manager assistant of China Shipping and general manager of Finance Department of China Shipping. In July 2015, he became the deputy Chief Financial Officer of China Shipping. Mr. Yang is also a non-executive director of China Everbright Bank Company Limited (the A shares and H shares of which are listed on the Shanghai Stock Exchange (stock code 601818) and the main board of the Stock Exchange (stock code 6818) respectively).

It is proposed that subject to the Shareholders’ approval at the EGM, Mr. Yang will enter into a service contract with the Company for his appointment as an executive Director for a term from the date of the EGM up to and including 17 June 2018 (or the date of the Company’s annual general meeting in 2018, whichever is earlier). Pursuant to such proposed service contract, Mr. Yang will not receive any remuneration from the Group as an executive Director. Such service contract shall be terminated by either party giving at least three months’ prior notice in writing. For further details of the EGM, Shareholders may refer to the notice of the EGM to be published by the Company in due course.

Save as disclosed above, Mr. Yang does not hold any other position with the Company or other members of the Group. Save as disclosed above, Mr. Yang does not hold and has not, in the past three years, held any directorships in any other public companies the securities of which are listed on any securities market in Hong Kong or overseas. Mr. Yang does not have any relationship with any director, member of senior management or substantial or controlling shareholder of the Company. As at the Latest Practicable Date, Mr. Yang does not have any interest in the shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”).

Save as disclosed above, there is no other information relating to Mr. Yang’s proposed appointment as an executive Director that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules. Save as disclosed herein, there is also no other matter which needs to be brought to the attention of the Shareholders in respect of Mr. Yang’s proposed appointment as an executive Director.

— III-1 —

BIOGRAPHY OF THE PROPOSED DIRECTORS

APPENDIX III

INFORMATION ON THE PROPOSED INDEPENDENT NON-EXECUTIVE DIRECTOR

MR. TEO SIONG SENG (“Mr. Teo”)

Mr. Teo Siong Seng (S. S. Teo 張松聲), was born in Singapore in December 1954, aged 60. Mr. Teo graduated from Glasgow University in the United Kingdom in 1979 with a First Class Honours Degree in Naval Architecture & Ocean Engineering. He is the managing director of Pacific International Lines (Pte) Ltd., the chairman and chief executive officer of Singamas Container Holdings Limited, a company listed on the main board of the Stock Exchange (stock code 00716). He is the former president of the Singapore Chinese Chamber of Commerce & Industry and a nominated member of parliament of the Singapore Government. He was the founding chairman of Singapore Maritime Foundation and president of Singapore Shipping Association. He was an independent non-executive Director of China COSCO Holding Company Limited (the A shares and H shares of which are listed on the Shanghai Stock Exchange (stock code 601919) and the main board of the Stock Exchange (stock code 1919) respectively) from June 2008 to May 2014 and an independent non-executive director of China Shipping Container Lines Company Limited (the A shares and H shares of which are listed on the Shanghai Stock Exchange (stock code 601866) and the main board of the Stock Exchange (stock code 2866) respectively) from June 2013 to May 2015. He is currently the chairman of the Singapore Business Federation, honorary consul of the United Republic of Tanzania in Singapore, the chairman of The Singapore Maritime Institute Board of Directors and Chairman of the Governing Council, the director of Business China (Singapore), and chairman of the Standard Steamship Owners’ Protection and Indemnity Association (Asia) Ltd.

It is proposed that subject to the Shareholders’ approval at the EGM, Mr. Teo will enter into a service contract with the Company for his appointment as an independent non-executive Director for a term from the date of the EGM up to and including 17 June 2018 (or the date of the Company’s annual general meeting in 2018, whichever is earlier). Pursuant to such proposed service contract, Mr. Teo will be entitled to a director’s fee of RMB300,000 per year from the Company and will not be entitled to any other remuneration or bonuses as an independent non-executive Director. The director’s fee was determined pursuant to the Group’s remuneration policy for independent non-executive directors as approved by the Shareholders in the annual general meeting of the Company held on 18 June 2015. Such service contract may be terminated by either party giving at least three months’ prior notice in writing. For further details of the EGM, Shareholders may refer to the notice of the EGM to be published by the Company in due course.

Save as disclosed above, Mr. Teo does not hold any other position with the Company or other members of the Group. Save as disclosed above, Mr. Teo does not hold and has not held, in the past three years, any directorships in any other public companies the securities of which are listed on any securities market in Hong Kong or overseas.

Mr. Teo does not have any relationship with any director, member of senior management or substantial or controlling shareholder of the Company. As at the Latest Practicable Date, Mr. Teo does not have any interest in the shares of the Company within the meaning of Part XV of the SFO.

— III-2 —

BIOGRAPHY OF THE PROPOSED DIRECTORS

APPENDIX III

Save as disclosed above, there is no other information relating to Mr. Teo’s proposed appointment as an independent non-executive Director which is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules. Save as disclosed herein, there is also no other matter which needs to be brought to the attention of the Shareholders in respect of Mr. Teo’s proposed appointment as an independent non-executive Director.

— III-3 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

==> picture [65 x 48] intentionally omitted <==

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)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

Notice is hereby given that the extraordinary general meeting (the “ EGM ”) of China Shipping Development Company Limited (the “ Company ”) will be held at 2:00 p.m. on Monday, 28 December 2015 at 3rd Floor, Parkview Hotel, 555 Dingxiang Road, Padong New Area, Shanghai, the People’s Republic of China to consider and, if thought fit, pass the following ordinary resolution:

to approve, ratify and confirm the deposit services (the “ Deposit Services ”) to be provided by China Shipping Finance Company Limited (中國海運財務有限責任公司) (“ CS Finance Company ”) to the Company and its subsidiaries (the “ Group ”) under the new financial services framework agreement dated 29 September 2015 (the “ New Financial Services Framework Agreement ”) entered into between the Company and CS Finance Company and the proposed annual caps in respect of the Deposit Services contemplated thereunder; and to authorise the directors of the Company (“ Directors ”) to exercise all powers which they consider necessary and do such other acts and things and execute such other documents which in their opinion may be necessary or desirable to implement the Deposit Services contemplated under the New Financial Services Framework Agreement;
to approve, ratify and confirm the foreign exchange services (the “ Foreign Exchange Services ”) to be provided by CS Finance Company to the Group under the New Financial Services Framework Agreement and the proposed annual caps in respect of the Foreign Exchange Services contemplated thereunder; and to authorise the Directors to exercise all powers which they consider necessary and do such other acts and things and execute such other documents which in their opinion may be necessary or desirable to implement the Foreign Exchange Services contemplated under the New Financial Services Framework Agreement;
to approve, ratify and confirm the loan services (the “ Loan Services ”) to be provided by CS Finance Company to the Group under the New Financial Services Framework Agreement and the proposed annual caps in respect of the Loan Services contemplated thereunder; and to authorise the Directors to exercise all powers which they consider necessary and do such other acts and things and execute such other documents which in their opinion may be necessary or desirable to implement the Loan Services contemplated under the New Financial Services Framework Agreement;

— N-1 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

to approve, ratify and confirm the agreed supplies and services (the “ Agreed Supplies and Services ”) to be provided by 中國海運(集團)總公司 (China Shipping (Group) Company) (“ China Shipping ”) to the Group under the new services agreement dated 29 September 2015 (the “ New Services Agreement ”) entered into between the Company and China Shipping and the proposed annual caps in respect of the Agreed Supplies and Services contemplated thereunder; and to authorise the Directors to exercise all powers which they consider necessary and do such other acts and things and execute such other documents which in their opinion may be necessary or desirable to implement the Agreed Supplies and Services contemplated under the New Services Agreement;
to approve the appointment of Mr. Yang Jigui as an executive director of the Company and the terms of the service contract of Mr. Yang Jigui, details of which are set out in the circular of the Company date 12 November 2015 and to authorise any Director to make any further amendments to such service contract as he sees fit or desirable and execute the same on behalf the Company;
to approve the appointment of Mr. Teo Siong Seng as an independent non-executive director of the Company and the terms of the service contract of Mr. Teo Siong Seng, details of which are set out in the circular of the Company date 12 November 2015 and to authorise any Director to make any further amendments to such service contract as he sees fit or desirable and execute the same on behalf the Company; and
to approve and confirm the aggregate financial commitments of RMB1,200,000,000 (equivalent to approximately HK$1,460,880,000) under the guarantees to be provided by the Company for the benefit of China Shipping Bulk Carrier Co., Ltd and China Shipping Tanker Co., Ltd and US$800,000,000 (equivalent to approximately HK$6,200,000,000) under the guarantee to be provided by the Company for the benefit of China Shipping Development (Hong Kong) Marine Co., Limited, each of which is a direct wholly-owned subsidiary of the Company, for a period of one year from the date of the EGM, to guarantee their respective repayment obligations for commercial bank loans, and to authorise the Chairman of the board of Directors, the Chief Executive Officer and the Chief Financial Officer to exercise all powers which they consider necessary to do such acts and things and execute such other documents which in their opinion may be necessary or desirable to implement these guarantees.

By order of the Board

China Shipping Development Company Limited Yao Qiaohong Company Secretary

12 November 2015 Shanghai The People’s Republic of China

— N-2 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

Notes:

(A) The H Share register of the Company will be closed from Saturday, 28 November 2015 to Monday, 28 December 2015 (both days inclusive), during which no transfer of H Shares will be effected. Any holders of H Shares of the Company, whose names appear on the Company’s register of members at the close of business on Monday, 28 December 2015 are entitled to attend and vote at the EGM after completing the registration procedures for attending the meeting. For the holders of H Shares, in order to be entitled to attend and vote at the EGM, their share transfer documents must be lodged with the Company’s H share registrar not later than 4:30 p.m. on Friday, 27 November 2015.

The address of the share registrar (for share transfer) for the Company’s H Shares is as follows:

Hong Kong Registrars Limited Shops 1712-1716 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

(B) Holders of H Shares, who intend to attend the EGM, must complete the reply slips for attending the EGM and return them to the Office of the Secretary to the Board of Directors of the Company not later than 20 days before the date of the EGM, i.e. no later than Tuesday, 8 December 2015.

Details of the Office of the Secretary to the Board of Directors of the Company are as follows:

7th Floor, 670 Dong Da Ming Road, Shanghai, The People’s Republic of China Postal Code: 200080 Tel: 86(21) 6596 6666 Fax: 86(21) 6596 6160

(C) Each holder of H Shares who has the right to attend and vote at the EGM is entitled to appoint in writing one or more proxies, whether that proxy is a shareholder or not, to attend and vote on his behalf at the EGM.
(D) The instrument appointing a proxy must be in writing under the hand of the appointor or his attorney duly authorised in writing. If that instrument is signed by an attorney of the appointor, the power of attorney authorising that attorney to sign, or other documents of authorisation, must be notarially certified.
(E) For holders of H Shares, the form of proxy, and if the form of proxy is signed by a person under a power of attorney or other authority on behalf of the appointor, a notarially certified copy of that power of attorney or other authority, must be delivered to the Company’s H share registrar, Hong Kong Registrars Limited, 17M Floor, Hopewell Centre 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time appointed for holding the EGM (or any adjournment thereof) in order for such documents to be valid.
(F) Each holder of A Shares is entitled to appoint in writing one or more proxies, whether a shareholder or not, to attend and vote on its behalf at the EGM. Notes (C) to (D) also apply to holders of A Shares, except that the proxy form or other documents of authority must be delivered to the Office of the Secretary to the Board of Directors, the address of which is set out in Note (B) above, not less than 24 hours before the time appointed for holding the EGM (or any adjournment thereof) in order for such documents to be valid.

— N-3 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

(G) If a proxy attends the EGM on behalf of a shareholder, he should produce his identity card and the instrument signed by the proxy or his legal representative, which specifies the date of its issuance. If the legal representative of a shareholder which shareholder is a legal person attends the EGM, such legal representative should produce his identity card and valid documents evidencing his capacity as such legal representative. If a shareholder which is a legal person appoints a company representative other than its legal representative to attend the EGM, such representative should produce his identity card and an authorisation instrument affixed with the seal of that shareholder (which is a legal person) and duly signed by its legal representative.
(H) The EGM is expected to last for an hour. Shareholders attending the EGM are responsible for their own transportation and accommodation expenses.
(I) As at the date of this notice, the Board of Directors of the Company comprises Mr. Xu Lirong, Mr. Zhang Guofa, Mr. Huang Xiaowen, Mr. Ding Nong, Mr. Yu Zenggang, Mr. Han Jun and Mr. Qiu Guoxuan as executive Directors, Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi and Mr. Rui Meng as independent non-executive Directors.

— N-4 —

AI assistant

Dida Inc. — Proxy Solicitation & Information Statement 2015

50671_rns_2015-11-11_423efa6a-8472-43f9-a753-a33b9de6c016.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

PROVISION OF GUARANTEES TO SUBSIDIARIES

TC Capital Asia Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

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

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION AND

PROVISION OF GUARANTEES TO SUBSIDIARIES AND APPOINTMENT OF DIRECTORS

1. INTRODUCTION

LETTER FROM THE BOARD

2. THE NEW FINANCIAL SERVICES FRAMEWORK AGREEMENT AND THE NEW SERVICES AGREEMENT

BACKGROUND INFORMATION

In respect of the New Financial Services Framework Agreement

LETTER FROM THE BOARD

THE NEW FINANCIAL SERVICES FRAMEWORK AGREEMENT

Pricing Policy

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Annual Caps

LETTER FROM THE BOARD

(ii) Net Current Assets of the Group

(iii) Expected growth of international operations and capital needs of the Group

(iv) CS Finance Company’s financial ability

LETTER FROM THE BOARD

Payment Terms

Term

Reasons for and benefits of entering into the New Financial Services Framework Agreement

LETTER FROM THE BOARD

THE NEW SERVICES AGREEMENT

Agreed Supplies and Services to be provided

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Annual Caps

LETTER FROM THE BOARD

Payment terms

Term

Reasons for and benefits of entering into the New Services Agreement

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

New Financial Services Framework Agreement

New Services Agreement

LETTER FROM THE BOARD

4. PROVISION OF GUARANTEES TO SUBSIDIARIES

FINANCIAL COMMITMENTS OF THE GUARANTEES

LETTER FROM THE BOARD

INFORMATION ON THE SUBSIDIARIES

REASONS FOR THE GUARANTEES

ACCUMULATED AMOUNT OF EXTERNAL GUARANTEES

LETTER FROM THE BOARD

5. APPOINTMENT OF DIRECTORS

6. EGM

LETTER FROM THE BOARD

7. CLOSURE OF H SHARE REGISTER OF MEMBERS OF THE COMPANY

8. INDEPENDENT BOARD COMMITTEE

9. INFORMATION ABOUT THE COMPANY AND CS FINANCE COMPANY AND CHINA SHIPPING

LETTER FROM THE BOARD

10. RECOMMENDATION

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

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

Yours faithfully,

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OPINION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS

1. Background information of the parties to the New Financial Services Framework Agreement and the New Services Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Background of the New Financial Services Framework Agreement

Principal terms of the New Financial Services Framework Agreement

Dida Inc. Proxy Solicitation & Information Statement 2015