China Shipping Development Company Limited 中海發展股份有限公司

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

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)

OVERSEAS REGULATORY ANNOUNCEMENT

This announcement is made pursuant to Rule 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The Announcement on “Summary of the Report on Material Assets Disposal And Acquisition And Connected Transaction (Draft)” is enclosed hereto as overseas regulatory announcement. The following is a translation of the official announcement solely for the purpose of providing information.

By Order of the Board of Directors China Shipping Development Company Limited Yao Qiaohong Company Secretary

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

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Ding Nong, Mr. Yu Zenggang, Mr. Yang Jigui, Mr. Han Jun and Mr. Qiu Guoxuan as executive Directors, Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng as independent non-executive Directors. A Share stock code: 600026 Securities referred to: CS Development Listing in: Shanghai Stock Exchange

H Share stock code: 01138 Securities referred to: CS Development Listing in: The Stock Exchange of Hong Kong Limited

CHINA SHIPPING DEVELOPMENT COMPANY LIMITED

SUMMARY OF THE REPORT ON MATERIAL ASSETS DISPOSAL AND ACQUISITION AND CONNECTED TRANSACTION (DRAFT)

Counterparty of Assets China Ocean Shipping (Group) Acquisition: Company China Ocean Shipping (Group) Company or China COSCO Bulk Shipping Counterparty of Assets Disposal: (Group) Co., Ltd., its appointed wholly-owned subsidiary

Independent Financial Advisor

March 2016

Disclaimer of the Company

I, The purpose of this summary of report is solely for providing summary of this material asset organization to the public, which excluding certain contents in the full text of the Restructuring Report. The full text of combined Report will also be published on the website of the SSE (www.sse.com.cn) ; the document available for inspection will be filed to China Shipping Development Company Limited.

II, The Company and its all Directors, Supervisors and senior management warrant the truthfulness, accuracy and completeness of other discloseable information in this report and issued by the Company in respect of this material asset reorganization contents of application document and that it does not contain any false information, misleading statement or material omission and accept responsibilities for any false information, misleading statement or material omission herein contained. All Directors, Supervisors and senior management warrant that if this transaction is investigated by the judiciary or an investigation is initiated by the CSRC as a result of the alleged existence of false statements, misleading representations or material omissions in the information provided or disclosed in relation to the transaction, they shall not transfer the shares of the Company in which it has interest before a clear conclusion of the investigation of the case is made (if any).

III, The responsible person and the responsible person responsible for accounting of the Company and the responsible person of audit firm warrant the truthfulness and completeness of the financial and accounting information included in this Report and its summary.

IV, The matters mentioned in this Report don't represent the substantive judgement, confirmation or approval of the relevant matters in respect of this material asset reorganization from the CSRC and the SSE. The effectiveness and completion of the relevant matters in respect of this material asset reorganization mentioned in this Report is subject to the approval or authorization from the relevant approval authorities.

V, After the completion of transaction is completed, the Company will be

responsible for the changes in the operation and revenue of the Company; investors are responsible for any investment risk caused by the transaction; in addition to the contents in this Report and its summary and the relevant documents disclosed concurrently with this Report, investors shall also cautiously consider each risk factor disclosed in this Report when they evaluate on this transaction.

VI, If investors have any doubt on this report and its summary, they should consult their own stock brokers, lawyers, professional accountants and other professional consultants.

Disclaimer of Counterparty

China Ocean Shipping (Group) Company is the counterparty of asset acquisition in this material asset reorganization, and China Ocean Shipping (Group) Company or China COSCO Bulk Shipping (Group) Company Limited, its designed wholly-owned subsidiary. China Ocean Shipping (Group) Company and China COSCO Bulk Shipping (Group) Company Limited each has issued an undertaking letter, which they will provide relevant information of The Transaction to CS Development in a timely manner pursuant to the requirement by relevant laws, regulations, rules and normative documents and the CSRC and stock exchanges, and ensure that the information provided for The Transaction is true, accurate and complete, and in the absence of misrepresentation, misleading statement or material omission, and assume (individually and collectively) legal liability for the truth, accuracy and completeness of the information provided. If the information provided contains misrepresentation, misleading statement or material omission, they will assume the relevant liability and compensate CS Development or the investors for the loss incurred；if this transaction is investigated by the judiciary or an investigation is initiated by the CSRC as a result of the alleged existence of false statements, misleading representations or material omissions in the information provided or disclosed in relation to the transaction, they shall not transfer the shares of the CS Development in which it has interest before a clear conclusion of the investigation of the case is made (if any).

Content

CONTENT ...... 5

CHAPTER 1 DEFINITIONS ...... 6

CHAPTER 2 NOTES TO MATERIAL EVENTS ...... 13

CHAPTER 3 NOTES TO MATERIAL RISKS...... 30

CHAPTER 4 THE PROPOSED TRANSACTIONS ...... - 37 -

CHAPTER 5 BASIC INFORMATION OF THE ASSETS TO BE DISPOSED OF ...... - 56 -

CHAPTER 6 BASIC INFORMATION OF THE ASSET TO BE ACQUIRED ...... - 63 -

Chapter 1 Definitions

In this Report, unless the context otherwise requires, the following terms or abbreviations shall have the following specific meanings:

I. General Definition

CS Development, China Shipping Development Company Limited Company, the (former name: Shanghai Haixing Shipping Company) Company, the Listed Company

China Shipping China Shipping (Group) Limited

COSCO Company China Ocean Shipping (Group) Company

China COSCO China COSCO Holdings Company Limited

COSCO Bulk Group China COSCO Bulk Shipping (Group) Co., Ltd.

CS Bulk China Shipping Bulk Carrier Co., Limited

DO Company Dalian Ocean Shipping Company, the predecessor of Dalian Ocean Shipping Company Limited

Dalian Ocean Dalian Ocean Shipping Company Limited

Assets to be Acquired, 100% equity interests in Dalian Ocean Target Assets to be Acquired

Assets to be Disposed, 100% equity interests in CS Bulk Target Assets to be Disposed of

Target Assets, the Target Assets to be Acquired and the Target Assets Target of the to be Disposed of, collectively Transaction

Target Company to be Dalian Ocean Acquired

Target Company to be CS Bulk

Disposed of

Target Companies refers to the Target Company to be Acquired and the Target Company to be Disposed of, collectively

CS Restructuring the acquisition, directly or indirectly, of 50% equity interests in Shanghai Times, 49% equity interests in Shenhua Zhonghai, 51% equity interests in Hong Kong Hai Bao, 49% equity interests in China Ore, as well as, 100% equity interests held by CSDHK which is wholly-owned CS Development in China Shipping Bulk Carrier (Hong Kong) Wylex Co., Limited, 100% equity interests in China Shipping Bulk Carrier (Hong Kong) Co., Limited, 100% equity interests in CS Puyuan Marine Co., Limited, 100% equity interests in Pingan Shipping S.A., 100% equity interests in Xiwang Shipping S.A., 100% equity interests in Jixiang Shipping S.A., 100% equity interests in Fanhua Shipping S.A., 100% equity interests in Ronghua Shipping S.A., 100% equity interests in Shaohua Shipping S.A., 100% equity interests in Nianhua Shipping S.A., 100% equity interests in Inhua Shipping S.A., 100% equity interests in Caihua Shipping S.A., 100% equity interests in Jiahuishan Shipping S.A., 100% equity interests in Jialongshan Shipping S.A., 100% equity interests in Jiamaoshan Shipping S.A., 100% equity interests in Jiashengshan Shipping S.A., 100% equity interests in Li Chuan Shipping S.A. held by CSDHK (a wholly-owned subsidiary of CS Development) by CS Bulk

CSDHK China Shipping Development (Hong Kong) Marine Co., Limited

China Shipping China Shipping Bulk Carrier (Shanghai) Co., Ltd Shanghai

Shanghai Times Shanghai Times Shipping Co., Limited

Shenhua Zhonghai Shenhua Zhonghai Marine Co., Limited

Hong Kong Hai Bao Hong Kong Hai Bao Shipping Co., Limited

China Ore China Ore Shipping Pte. Ltd.

CLNG China LNG Shipping (Holdings) Limited

Wholly-Owned a company directly and indirectly owned as to 100% Subsidiaries

The Transaction/The the acquisition of 100% equity interests in Dalian Ocean Restructuring/The by the Company from COSCO Company, and the Significant Asset disposal of 100% equity interests in CS Bulk by the Restructuring Company to COSCO Company or its designated wholly-owned subsidiary COSCO Bulk Group

The Assets Disposal the disposal of 100% equity interests in CS Bulk by the Company to COSCO Company or its designated wholly-owned subsidiary COSCO Bulk Group

The Assets Acquisition the acquisition of 100% equity interests in Dalian Ocean by the Company from COSCO Company

The Parties refers to the transferor of the Target Assets to be Disposed of, the transferee of the Target Assets to be Disposed of, the transferor of the Target Assets to be acquired, the transferee of the Target Assets to be acquired collectively

This Report, the Report on Material Assets Disposal and Acquisition Restructuring Report of China Shipping Development Company Limited and the Connected Transactions (draft)

Assets Purchase and the Assets Acquisition and Disposal Framework Disposal Framework Agreement of China Shipping Development Company Agreement Limited and China Ocean Shipping (Group) Company entered into between CS Development and COSCO Company on 11 December 2015

Assets Purchase and the Assets Acquisition and Disposal Agreement of China Disposal Agreement Shipping Development Company Limited, China Ocean Shipping (Group) Company and China COSCO Bulk Shipping (Group) Co., Ltd. entered into between CS Development, COSCO Company and COSCO Bulk

Group on 29 March 2016

Profit Forecast the Profit Forecast Compensation Agreement of China Compensation Shipping Development Company Limited and China Agreement Ocean Shipping (Group) Company entered into between CS Development and COSCO Company on 11 December 2015, which has been replaced by the Revised Profit Forecast Compensation Agreement

Revised Profit Forecast the Revised Profit Forecast Compensation Agreement of Compensation China Shipping Development Company Limited and Agreement China Ocean Shipping (Group) Company entered into between CS Development and COSCO Company on 29 March 2016

Assets Valuation the assets valuation reports issued by the valuer in Reports relation to the Target Assets as at the Reference Date

A Shares the ordinary shares of a joint stock company listed on the SSE, the par value of which is denominated in Renminbi and which are subscribed for and traded in Renminbi

Reference Date 31 December 2015

Closing Date the date on which the payment of consideration of the Target Assets to Be Disposed of and the Target Assets to Be Acquired is completed, or such other date otherwise agreed by the Parties

Closing Audit Date the date falls on the end of previous month of the Closing Date (in case the Closing Date is prior to 15th of the month (inclusive of 15th)); or the day falls on the end of the month of the Closing Date (in case the Closing Date is after 15th of the month (exclusive of 15th))

Transition Period the period from the Reference Date to the Closing Audit Date

Share Restrictions shares that are subject to ownership disputes, pledges, freezing orders, sealing-up orders or other restrictions

on transfer under applicable laws or binding agreements

State Council State Council of the PRC

SASAC of State the State-owned Assets Supervision and Administration Council Commission of State Council

NDRC the National Development and Reform Commission

CSRC the China Securities Regulatory Commission

MOFCOM the Ministry of Commerce of the PRC

SFC the Securities and Futures Commission of Hong Kong

Regulatory Authorities the PRC governmental authorities competent to approve and authorize the Transaction, include but not limited to the competent state-owned assets supervision authorities, MOFCOM

SSE the Shanghai Stock Exchange

Clearing Company China Securities Registration and Clearing Corporation Limited, Shanghai Branch and/or Hong Kong Securities and Clearing Company Limited, as the context requires

Dalian ICA Dalian Industry and Commerce Administrative Bureau

CICC, Independent China International Capital Corporation Limited Financial Adviser

Vocation International Vocation International Certified Public Accountants (special general partnership)

China Tong Cheng China Tong Cheng Assets Appraisal Co., Ltd.

Company Law the Company Law of the PRC

Restructuring Measures the Administrative Measures for Significant Asset Restructuring of Listed Companies (Order No. 109 of the China Securities Regulatory Commission)

Listing Rules of SSE the Listing Rules of Shanghai Stock Exchange

Articles of Association the Articles of Association of China Shipping Development Company Limited in force for the time

being, where the context requires

PRC Laws the applicable laws, administrative laws, rules and regulatory requirements of the PRC

Hong Kong Laws the applicable laws, administrative laws, rules and regulatory requirements of Hong Kong, include but not limited to Hong Kong Listing Rules and Hong Kong Code on Takeovers and Mergers

Days clear days

Working Day any day except for Saturday, Sunday and an official public holiday in China

RMB Renminbi, the lawful currency of the PRC

HK$ the lawful currency of Hong Kong

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

PRC the People’s Republic of China, which shall, for the purpose of this Report, exclude Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan

II. Glossary of Technical Terms

Bulk cargo(es)/Dry various raw products, raw materials. Dry bulk cargoes bulk cargo(es) are classified as major bulk cargoes and minor bulk cargoes according to the size of transportation volume. Major bulk cargoes mainly include coal, metal ores, grain, etc.; minor bulk cargoes include steel, forest product, fertilizer, cement, etc.

Bulk cargo tanker(s), vessels specialized in the shipping of dry bulk cargoes bulk cargo ship(s), dry bulk cargo tanker(s) and dry bulk cargo ship(s)

Bulk shipping shipping of dry bulk cargoes

Oil oil such as crude oil、refined oil

Oil tanker(s) vessels specialized in the shipping of oil

Oil transportation the transportation of oil

DWT a measurement unit of vessel shipping capacity

LNG liquefied natural gas, a colourless, odourless, non-toxic and non-corrosive clean energy

LPG liquefied petroleum gas, composed mainly of propane, butane and a small amount of olefin, and a clean energy

Oil and gas transportation of oil, natural gas and liquefied petroleum transportation gas

VLCC a very large crude oil Carrier of over 200,000 dead weight tons

VLOC a very large Iron Ores Carrier of over 200,000 dead weight tons

COA Contract of Affreightment

BDI Baltic Dry Index

CCBFI China Coastal Bulk Freight Index

WTI the oil futures contracts traded on the New York Futures Exchange, which is one of the three basis prices on crude oil market

Thermal coal coal used in electricity generation of coal-fired power stations

Clarksons Clarkson Plc Group, one of the world renowned shipping consulting companies.

In this Report, the total amount may differ from the direct sum of each item as a result of round off differences.

Chapter 2 Notes to Material Events

Terms used herein shall have the same meanings as those defined in “Definitions” of this Report. Investors are reminded to read the full text of this Report cautiously, and pay particular attention to followings:

I. KEY INFORMATION OF THE PROPOSAL OF THE TRANSACTIONS (i) Overall Proposal of the Transactions

The transactions of the Company include material disposal of assets and material acquisition of assets:

1. Material disposal of assets: disposal of 100% equity interests in CS Bulk by the Company to COSCO Company or COSCO Bulk Group, its designed wholly-owned subsidiary;

2. Material acquisition of assets: acquisition of 100% equity interest in Dalian

Ocean from COSCO Company by the Company.

The two transactions mentioned above shall come into effect simultaneously and inter-conditional. If either one of the above will not proceed as a result of failure to obtain approval from the general meeting of the Company, competent authorities of the government or regulatory authorities, the other parts of this transaction will not be proceeded.

(ii) Detailed Proposal of the Transactions

1. Proposal of the material disposal of assets

(1) Counterparties

The counterparties involved in the material disposal of assets are COSCO Company or COSCO Bulk Group, its designed wholly-owned subsidiary.

(2) Target Assets 13

The 100% equity interests in CS Bulk owned by the Company.

(3) Transaction method

The transaction method for the material disposal of assets is settled by cash.

(4) Consideration of transaction

According to the Asset Valuation Report about China Shipping Development Company Limited Proposes to Transfer All Equity Interests of China Shipping Bulk Carrier Co., Limited in respect of Equity Interests of its Subsidiary Held by it (《中海發展股份有限公司擬轉讓所持有的下屬公司股權所涉及的中海散貨遠輸有限公司股東全部權益資產評估報告》) (Zhong Tong Ping Bao Zi [2016] No.46) issued by China Tong Cheng on 10 March 2016, the consideration of proposed disposed subject asset amounted to RMB 5,392,221,600 based on the assessment value of proposed disposed subject asset as of the valuation basis date and after considering other relevant factors. The above asset valuation report will be subject to the filing process according the laws and regulations in the PRC. The consideration of proposed disposed subject asset will be adjusted according to the assessment value after the filing process if any adjustment occurred in the above valuation result during the filing process.

(5) Arrangement for profit or loss for the period

The increase in equity of the Target Assets to be Disposed of arising from profits and any other reasons during the Transition Period commencing from Reference Date to Closing Audit Date shall be entitled to CS Development, the transferee of the Target Assets to be Disposed of shall pay such amount equivalent to the increase in equity to CS Development in cash. The decrease in equity of the Target Assets to be Disposed of arising from loss or any other reasons shall be borne by CS Development, CS Development shall compensate the transferee of the Target Assets to be Disposed of in cash for such amount equivalent to the decrease in equity. All the profit or loss of the Target Assets to be Disposed of incurred during the period commencing from Reference Date to Closing Audit Date shall be audited and confirmed by the engaged auditor within 60 working days after the Closing Date.

(6) Disposal of claims and debts

Unless otherwise agreed, all the claims and debts related to the Target Assets to be Disposed of shall be entitled to or borne by the Target Company to be Disposed of in accordance with relevant agreements.

As of the date of entering into the Asset Acquisition and Disposal Agreement, the liabilities of CS Development and its subsidiaries borne by the proposed Target Companies and its subsidiaries (excluding the liabilities arising out of the CS Restructuring) amounted to RMB6,261,344,338.44 and HK$ 3,444,300,104.55 and US$ 386,714,730.29 in aggregate; unless otherwise agreed, CS Development will not provide any non-operating funds to any proposed Target Companies and its subsidiaries any more. The above liabilities will be fully settled by CS Development or its designed related party on the Closing Date or before, COSCO Company agrees that it will collectively undertake the settlement obligation of such liabilities, for ensuring that the proposed Target Companies and its subsidiaries shall not to use the non-operating funds of CS Development and its subsidiaries after the closing of this transaction.

The liabilities of CS Development and CSD HK, its wholly-subsidiary, arising out of the CS Restructuring by CS Bulk shall be fully settled by COSCO Company and/or its designed wholly-subsidiary on the Closing Date or before.

(7) Contract obligations and default liabilities under the transfer of ownership of relevant assets

CS Development shall, within 30 days commencing from the date on which consideration of the transaction is fully settled as required, assist the transferee of the Target Assets to be Disposed of in completing the change of business registration of the Target Assets to be Disposed of.

The party in breach shall assume the liability for the breach to the observant party according to agreement and laws and regulations, and shall compensate the observant party for the direct losses suffered by the observant party as a result of the default by the defaulting party.

2. Proposal of the material acquisition of assets

(1) Counterparties

The counterparty involved in the acquisition of assets in cash is COSCO

Company.

(2) Target Assets

The 100% equity interests in Dalian Ocean owned by COSCO Company

(3) Transaction Method

The transaction method for the acquisition of assets is settled by cash.

(4) Consideration of transaction

According to the Asset Valuation Report about China Ocean Shipping (Group) Company Proposes to Transfer All Equity Interests of China Shipping Bulk Carrier Co., Limited Held by it (《中國遠洋運輸（集團）總公司擬轉讓所持有的大連遠洋運輸有限公司全部股權資產評估報告》) (Zhong Tong Ping Bao Zi [2016] No.38) issued by China Tong Cheng on 8 March 2016, the consideration of proposed acquired subject asset amounted to RMB 6,628.4552 million based on the valuation value of proposed acquired subject asset as of the valuation basis date and after considering other relevant factors. The above asset valuation report is subject to the filing process according the laws and regulations in the PRC. The consideration of proposed acquired subject asset will be adjusted according to the valuation value after the filing process if any adjustment occurred in the above valuation result during the filing process.

(5) Arrangement for profit or loss for the period

The increase in equity of the Target Assets to be acquired arising from profits or any other reasons during the Transition Period commencing from Reference Date to Closing Audit Date shall be entitled to CS Development. The decrease in equity of the Target Assets to be Acquired arising from loss or any other reasons shall be borne by COSCO Company; COSCO Company shall compensate the CS Development in cash for such amount equivalent to the decrease in equity. All the profit or loss of the Target Assets to be Acquired incurred during the period commencing from Reference Date to Closing Audit Date shall be audited and confirmed by the engaged auditor within 60 working days after the Closing Date.

(6) Disposal of claims and debts

Unless otherwise agreed, all the claims and debts related to the Target Assets to be Acquired shall be entitled to or borne by the Target Company to be Acquired in accordance with relevant agreements.

(7) Contract obligations and default liabilities under the transfer of ownership of relevant assets

COSCO Company, within 30 days commencing from the date on which consideration of the transaction is fully settled as required, assist CS Development in completing the change of business registration of the Target Assets to be Acquired.

II. WHETHER THIS TRASNSACTION CONSTITUTES A CONNECTED TRANSACTION Since China Shipping Group, the controlling shareholder of the Company, and the COSCO Group are in the process of restructuring, therefore, the counterparty of this Material Assets Acquisition, i.e. the COSCO Group and the counterparty of this Material Assets Disposal, i.e. the COSCO Group or its wholly-owned subsidiary COSCO Bulk Group, are deemed to be connected parties of the Company and the Transactions constitute connected transactions.

III. THE TRANSACTIONS CONSTITUTE MATERIAL ASSET RESTRUCTURING Article 12 of the Restructuring Measures provides that the acquisition and disposal of assets by the listed company and the companies held or controlled by such listed company shall constitute material assets reorganization if it meets any of the following criteria: (i) the total assets to be acquired or disposed of exceed 50% of the total assets of the listed company’s audited consolidated financial statement for the

17 most recent financial year; (ii) the operating revenue generated from the assets to be acquired or disposed of during the most recent financial year exceed 50% of the operating revenue of the listed company’s audited consolidated financial statement for the same period; (iii) the net assets to be acquired or disposed of exceed 50% of the net assets of the listed company’s audited consolidated financial statement for the most recent financial year and exceed RMB50,000,000. Article 14 provides that if the listed company acquires and disposes of assets at the same time, the relevant ratios of the assets acquisition and assets disposal shall be calculated separately and the higher of which shall be applicable.

The relevant indicators of the transaction calculated based on the proposal of the transaction are set out below:

Total Assets Net Assets Operating revenue RMB 31 December 2015 31 December 2015 2015 CS Development 68,378,653,300 26,523,202,400 12,776,529,000 Assets to be Acquired 17,238,835,700 6,628,455,200 4,820,386,600 Assets to be Disposed 34,112,647,400 5,368,349,100 6,635,960,300 of Higher of Assets to be Acquired and Assets 34,112,647,400 6,628,455,200 6,635,960,300 to be Disposed of Relevant ratio 49.89% 24.99% 51.94% Note: The total assets and net assets of the Assets to be Acquired are calculated based on the higher of audited Assets to be Acquired or Assets to be Disposed of and the valued consideration.

Based on the indicators above, the transaction constitutes material assets restructuring.

All consideration of the transaction shall be settled in cash. According to the Restructuring Measures, such material assets reorganization is not subject to the approval of CSRC.

IV. THE TRANSACTION DOES NOT CONSTITUTE BACKDOOR LISTING 18

The Transaction will not result in change in the controlling shareholder of CS Development and therefore does not constitute “backdoor listing” set out in Article 13 of the Restructuring Measures.

V. SUMMARY OF PAYMENT METHOD AND SUPPORTING FUND RAISING ARRANGEMENT OF THE TRANSACTION The transfer consideration of the Target Assets shall be settled in cash by the purchaser and does not involve the supporting fund raising of the Listed Company.

VI. THE ASSESSMENT AND CONSIDERATION OF THIS TRANSACTION Assets to be Disposed of in this transaction refers to 100% equity interest of CS Bulk held by the Company. According to the asset valuation report issued by China Tong Cheng, as at 31 December 2015, the base date of appraisal, the book value of shareholder’s equity interest of CS Bulk (on the basis of the parent company, audited) was RMB 5,301.3412 million, the assessment value was RMB 5,392.2216 million based on income approach with an appreciation rate of 1.71%. The asset valuation report of Assets to be Disposed of is subject to the filing process according the laws and regulations in the PRC. The consideration of Assets to be Disposed of is determined to be RMB 5,392.2216 million after negotiation between parties.

Assets to be Acquired of in this transaction refers to 100% equity interest of Dalian Ocean held by COSCO Company. According to the asset valuation report issued by China Tong Cheng, as at 31 December 2015, the base date of appraisal, the book value of shareholder’s equity interest of Dalian Ocean (on the basis of the parent company, audited) was RMB 6,242.9958 million, the assessment value was RMB 6,628.4552 million based on income approach with an appreciation rate of 6.17%. The asset valuation report of Assets to be Acquired is subject to the filing process according the laws and regulations in the PRC. The consideration of Assets to be Acquired is determined to be RMB 6,628.4552 million after negotiation between parties.

VII. THE IMPACT OF THE TRANSACTION ON THE LISTED COMPANY (I) The impact of the transaction on the principal business

Prior to the transaction, the listed company was primarily engaged in oil shipment, LNG shipment and bulk shipping business. In the transaction, the listed company will dispose of the entire bulk shipping segment while acquire 100% equity interests in Dalian Ocean, a company engaged in business such as oil shipment and LNG shipment. After the injection of 100% equity interests in Dalian Ocean, the listed company will become an oil and gas transportation company with more focus on oil shipment and LNG shipment. Therefore, upon the completion of the transaction, the Company can better safeguard the interests of all the shareholders with more concentrated core business, enhanced sustainable profitability and future development prospect.

(II) The impact of the transaction on the shareholding structure

The assets acquisition and assets disposal in the transaction are all settled in cash and does not involve share issue, therefore it will not affect the equity structure of the listed company.

(III) The impact of the Transactions on the financial indicators

Set out below are principal financial information of the listed company before and after this transaction based on the pro forma audited report of CS Development as at 31 December 2015 issued by Baker Tilly China Certified Public Accountants: Before the After the Transactions Item Transactions (Pro Forma) 31 December 2015 31 December 2015 Total assets (RMB) 68,378,653,300 70,294,797,500 Total liabilities (RMB) 41,855,450,900 41,454,289,500 Total owners’ equity (RMB) 26,523,202,400 28,840,508,000 Equity attributable to owners of the 25,697,205,500 29,018,546,600 parent company (RMB) Net assets per share attributable to owners of the parent company (RMB per 6.37 7.20 share) Item Before the After the Transactions

Before the After the Transactions Item Transactions (Pro Forma) 31 December 2015 31 December 2015 Transactions (Pro Forma)

2015 2015 Operating revenue (RMB) 12,776,529,000 10,987,135,300 Operating profit (RMB) 852,299,600 2,409,924,100 Total profit (RMB) 564,699,700 3,171,601,400 Net profit attributable to shareholders 389,685,700 2,923,716,000 of the parent company (RMB) Basic earnings per share (RMB per share) 0.10 0.73

VIII. APPROVAL PROCEDURES REQUIRED TO BE PERFORMED FOR THE IMPLEMENTATION OF THE PROPOSED TRANSACTIONS (I) Authorizations and approvals have been obtained for the Transactions

The following decision-making and approval procedures have been performed for the Transactions:

1. The Proposed Transactions have been considered and approved by the 12th

Meeting of the Board of CS Development in 2015 and the 3rd Meeting of

the Board of CS Development in 2016;

2. The Proposed Transactions have been considered and approved by the

internal decision-making institution of the COSCO Group;

3. The Proposed Transactions have been considered and approved by the

internal decision-making institution of the COSCO Bulk Group.

(II) Approvals and permissions required to be obtained for the Transactions

Approvals and permissions required to be obtained by the Transactions include but not limited to:

1. Filing of the assessment result of the Target Assets with the competent

State-owned Assets Supervision and Administration Commission

(“SASAC”) entity;

2. Approval of the Transactions by the competent SASAC entity;

3. The Proposed Transactions have been approved by voting at the

shareholders’ general meeting of the listed company;

4. The Ministry of Commerce has considered and approved the concentration

of operators involved in the Transactions.

The Transactions shall not be implemented prior to having obtained the above approvals or permissions.

IX. IMPORTANT UNDERTAKINGS MADE BY THE RELEVANT PARTIES INVOLVED IN THE TRANSACTIONS Party Type of making under Contents of undertakings undertakin takings gs The Company undertakes that its assets, employees, finance, organization and business will be independent from CS Development, and it will comply with the relevant requirements on independence of Maintain listed company by CSRC. It will not, in the capacity of controlling China Independence shareholder, violate the standardized operation procedures of a listed Shipping of the Listed company to intervene in the operating decisions of CS Development Group Company and jeopardize the legitimate interests of CS Development and other shareholders. The Company and other companies under its control undertake not to, by any means, use the funds of CS Development and companies under its control.

Please refer to “Chapter 4 The Proposed Transactions  VII. The China Non-competit Impact of the Transactions on the Listed Company  (V) The Impact Shipping ion Group undertaking of the Transactions on the Peer Competition of the Company  2. Undertakings to avoid peer competition” for details.

1. The Company and other companies under its control will endeavor not to enter into or minimize the connected transactions with CS Development. For connected transactions that are inevitable or have China Reduced reasonable grounds, the Company undertakes that it will enter into the Shipping connected agreements on market-oriented basis of fairness, equality and Group transactions openness, perform legitimate procedures pursuant to relevant laws and regulations, normative documents and the constitutional documents of CS Development, ensure the fairness and compliance of connected 22

Party Type of making under Contents of undertakings undertakin takings gs transactions, ensure not to jeopardize the legitimate interests of CS Development and other shareholders through connected transactions, and perform disclosure in accordance with the requirements of relevant laws and regulations and normative documents in a timely manner.

2. The Company will exercise its rights as shareholder in strictly compliance with the relevant requirements of laws and regulations such as Company Law and the constitutional documents of CS Development and abstain from voting on the matters of connected transactions related to the Company and the companies under its control on the general meetings of shareholders of CS Development. The undertaking will be effective throughout the period during which the Company is a controlling shareholder of CS Development.

1. The Company will provide relevant information of The Transactions to CS Development in a timely manner pursuant to the requirement by relevant laws, regulations, rules and normative documents and the CSRC and stock exchanges, and ensure that the information provided for the Transactions is true, accurate and complete, and in the absence of misrepresentation, misleading statement or material omission, and assume joint and several legal Information liability for the truth, accuracy and completeness of the information provided provided. If the information provided contains misrepresentation, COSCO shall be true, misleading statement or material omission, the Company will assume Group accurate and the relevant liability and compensate CS Development or the investors complete. for the loss incurred.

2. If the Transactions are under investigation by judicial authorities or the CSRC as a result of the potential misrepresentation, misleading statement or material omission of the information disclosed, the Company will not transfer any of its shares in CS Development (if any) until an explicit finding of the investigation is available.

provided provided. If the information provided contains misrepresentation, COSCO shall be true, misleading statement or material omission, the Company will assume Bulk Group accurate and the relevant liability and compensate CS Development or the investors

complete. for the loss incurred as a consequence.

Party Type of making under Contents of undertakings undertakin takings gs As at the proposal signing date, Restructuring Report signing date, the effective date and closing date of the assets disposal and acquisition of the Material Asset Restructuring:

1. The Company is legally and fully entitled to the Target Assets, the ownership of the Target Assets is clear and free from any mortgage, pledge, distrain, freeze and other rights being limited, and is not under any trust, shareholding entrustment or similar arrangement and undertaking or arrangement for prohibition or limitation on transfer.

2. The Target Company and its subsidiaries are duly established and existing without defective capital contribution and other matters that Integrity of lead to or may lead to dissolution, liquidation or bankruptcy. COSCO the Target Group Assets 3. There is no legal proceeding, arbitration or dispute of any other kind of which the Target Assets is the subject. There is no pending or potential legal proceeding, arbitration and any other administrative or judicial proceeding that could render the Target Assets held by the Company under distrain, freeze or limitation on transfer by relevant judiciary authorities or administrative authorities. There is no legal impediment for the transfer of such assets.

The Company guarantees that the above information above are true, accurate and complete. If the above information contains misrepresentation, misleading statement or material omission, the Company will assume the relevant liability and compensate CS Development or the investors for the loss incurred as a consequence.

Please refer to the relevant contents of “Chapter VIII Material Operating COSCO Contracts of the Transactions  III. Main Contents of the Profit results Group Forecast Compensation Agreement (Revised)” for details. guarantee

China Shipping Group is the controlling shareholder of CS Development, COSCO Group is the counterparty of CS Development in the Material Asset Restructuring. To protect the interest of minority shareholders of the listed company, further undertakings are hereby given in respect of debts arising from borrowings and payables between CS Bulk and its subsidiaries and CS Development and its subsidiaries as follows:

China Undertaking 1. The debts of CS Bulk and its subsidiaries arising from the Shipping to resolve borrowings and payables owing to CS Development and its Group, issues on use subsidiaries (except for debts arising from the internal consolidation of COSCO of funds bulk carriers) shall be fully settled by the China Shipping Group Group and/or its designated connected party on or before the Closing Date of the Material Asset Restructuring of CS Development;

2. COSCO Group has agreed to assume joint and several liabilities for the settlement of the above debts to ensure that CS Bulk and its subsidiaries will not use any non-operating capital of CS Development and its subsidiaries after completion of Closing;

Party Type of making under Contents of undertakings undertakin takings gs 3. With effect from the date of issuance of this Letter of Undertaking, China Shipping Group has agreed to provide necessary financial assistance to CS Bulk and its subsidiaries for daily operation funds.

1. Before completion of this transaction, in accordance with the requirements of the financing agreement as set out in the annex of this undertaking letter, the Company will sign relevant change documents to replace CS Development as standby charterer and assume all rights and obligations of CS Development under the relevant financing agreement and standby charter agreement; 2. The Company will assist CS Bulk and/or its wholly-owned subsidiaries to sign relevant change documents to replace CSDHK as Change of charterer and assume all rights and obligations of CSDHK under the COSCO charterer and relevant financing agreement and standby charter agreement in Group standby accordance with the requirements of the financing agreement as set charterer out in the annex of this undertaking letter before completion of this transaction; 3. The Company will procure CS Bulk to sign supplemental agreement with the shipowner in Germany pursuant to which CS Bulk or its subsidiaries shall be designated as the charterer of Edward Bulk Vessel and assume all rights and obligations of CS Development under the time charter agreement, and agree to provide relevant guarantee in respect of the abovementioned vessel chartering at the request of the shipowner in Germany.

X. ARRANGEMENT FOR THE PROTECTION OF INTEREST OF MEDIUM AND SMALL INVESTORS IN THE RESTRUCTURING According to the relevant requirements of the “Opinions of the State Council Office on Further Enhancing the Protection of Legal Interests of Medium and Small Investors in the Capital Markets (Guo Ban Fa [2013] No.110) and “Restructuring Measures”, the Company has made appropriate arrangement for the protection of interests of medium and small investors in the Restructuring, the details are as follows:

(I) Ensure the pricing of assets are fair and equitable

For the Target Assets of the Transactions, the Company has engaged accountants and an asset assessment agency to conduct audit and assessment on the Target Assets to ensure the pricing of the Target Assets of the Transactions is fair, just and reasonable. Independent directors of the Company will express independent opinions

25 on the fairness of the pricing method of the Transactions. The independent financial advisor and legal advisor engaged by the Company will review the compliance and risks of the implementation process of the Transactions, the transfer of assets and the related follow-up matters, and express opinions will be given thereof.

(II) Strict performance of information disclosure obligations of the Listed Company

The Listed Company and the relevant persons for information disclosure shall strictly comply with the requirements of the relevant laws and regulations, including the Securities Law (《證券法》), Measures for the Administration of Information Disclosure by Listed Companies (《上市公司信息披露管理辦法》), Notice on Regulating Information Disclosure by the Listed Company and Actions of the Relevant Parties (《关於規範上市公司信息披露及相關各方行為的通知》), Restructuring Measures (《重組辦法》) and Provisions on Some Issues of Regulating Material Asset Restructuring of Listed Companies (《關於規範上市公司重大資產重組若干問題的規定》), to adopt strict confidential measures for the Restructuring Proposal and duly perform the obligations of information disclosure and make disclosure fairly to all investors on material events that may have relatively large impact on the trading price of the shares of the listed companies. After the disclosure of this report, the Company will continue to strictly comply with the requirements of the relevant laws and regulations and disclose the progress of the Restructuring of the Company timely and accurately.

(III) Strict compliance with the relevant procedures

In the course of the Transactions, the Company will strictly comply with the relevant requirements and perform the statutory procedures in voting and disclosure. The Target Assets involved in the Transactions have been audited by the accounting firm with eligible qualifications in the securities business, and will be assessed by a valuation agency with eligible qualifications in the securities business, to ensure the fair, just and reasonable prices of the Target Assets of the Transactions. The Material Asset Restructuring Report prepared by the Listed Company has been submitted to the Board of Directors for discussion, and the related directors have abstained from voting. Independent directors have expressed independent opinions on the fairness of

26 the Transactions, the independent financial advisor and legal advisor have issued independent financial advisor report and legal opinions on the Transactions.

Pursuant to the relevant requirements of the Company Law, SSE Listing Rules and the Articles of Association, the Company will submit a proposed resolution on the Transactions for consideration at the general meeting of shareholders of the Company.

(IV) Provision of internet voting platform for the general meeting

The Board of Directors of the Company will publish a reminder announcement before the date of convening the general meeting for considering the Transactions to remind shareholders to participate in the general meeting to consider the Transactions. Pursuant to the relevant requirements of Certain Requirements of CSRC to Increase the Protection for the Interest of Public Shareholders (《關於加强社會公眾股股東權益保護的若干規定》), for the convenience of shareholders to participate in the general meeting, the Company will provide an internet voting platform for the voting of the Transactions. Shareholders may participate in physical voting in person or may cast their votes directly through internet. The resolution passed by the general meeting must be approved by more than two-thirds of the voting rights held by shareholders attending the general meeting. Related shareholders will abstain from voting voluntarily and the voting rights held by such shareholder will not be counted in the total voting rights of shareholders attending the general meeting.

(V) Attributable profit and loss during the Period

During the transition period from the Reference Date to the Closing Audit Date, any increase in interest of the Target Asset to be acquired caused by profits or any other reasons shall be entitled to CS Development; any decrease in interest of the Target Asset to be acquired caused by losses or any other reasons shall be borne by the COSCO Group, COSCO Group shall compensate CS Development on the shortfall with an equivalent amount in cash.

During the transition period from the Reference Date to the Closing Audit Date, any increase in interest of the Target Asset to be Disposed of caused by profits and any other reasons shall be entitled to CS Development, the transferee of the Target Assets to be Disposed of shall pay such sum to CS Development with an equivalent amount in cash; any decrease in interest of the Target Asset to be Disposed of caused 27 by losses or any other reasons shall be borne by CS Development, CS Development shall compensate the transferee of the Target Assets to be Disposed of on the shortfall with an equivalent amount in cash.

(VI) Compensation arrangement for committed performance of Target Assets

CS Development and COSCO Group entered into the Profit Forecast Compensation Agreement on 11 December 2015, and entered into the Profit Forecast Compensation Agreement (Amendment) on 29 March 2016 to replace the above Profit Forecast Compensation Agreement, for the purpose of making compensation arrangements for matters relating to the profit forecast of the Assets to be acquired, please refer to the main content of “Chapter 8 Major Contracts of the Transactions  3. Main Content of the Profit Forecast Compensation Agreement (Amendment)” of this report for details.

(VII) Explanation on dilution of current period earnings on Restructuring

According to the financial statements of the Listed Company for 2015 audited by Baker Tilly China Certified Public Accountants (LLP) and the pro forma financial statements of the Listed Company for 2015 reviewed by Baker Tilly China Certified Public Accountants (LLP), the earnings per share of the Listed Company for 2015 was RMB0.10 per share before the Transactions, the pro forma earnings per share of the Listed Company for 2015 is RMB0.73 per share after completion of the Transactions, representing an increase of 650.28% when compared with the amount before the Transactions. Therefore, after completion of the Transactions, the earnings per share of the Listed Company will grow significantly, and the Transactions will not dilute the earnings per share of the Listed Company for the current period.

(VIII) Appointment of intermediaries with eligible business qualifications

According to the Restructuring Measures, CS Development has appointed an independent financial advisor and a legal advisor to review the Transactions, an accounting firm with relevant securities business qualifications to conduct an audit, and an assessment agent with securities business qualifications to conduct valuation.

The independent financial advisor and legal advisor appointed by CS Development have issued an independent financial advisor report and legal opinions in respect of the Transactions according to the requirements of the relevant laws and regulations.

XI. STOCK INCENTIVE SCHEME

As at 11 December 2015, the Resolution Regarding the Grant of Authorisation to the Management to Formulate the Stock Incentive Scheme was approved on the 12th

Board Meeting in 2015 of CS Development. According to the Guidelines on

Deepening the Reform of State-owned Enterprises, in order to actively explore and implement the employee stock ownership plan under mixed ownership, align the interests of key employees of CS Development, shareholders and the Company and further improve the competitive edge of CS Development, the Board of Directors of

CS Development has authorized the management to research on and formulate a feasible stock incentive scheme of the Company and assist on relevant personnel work of the material assets reorganization. The management of CS Development will research on and formulate a feasible stock incentive scheme.

XII. OTHER IMPORTANT ITEMS Investors may view the full text of this report and the opinions of the intermediaries at the designated website (www.sse.com.cn)

Chapter 3 NOTES TO MATERIAL RISKS

Apart from the other contents herein and the relevant documents disclosed concurrently with this report, investors are also advised to give due consideration to the following risk factors when assessing the transaction.:

I. RISKS RELATED TO THE TRANSACTION (1) Risk of potential suspension, discontinuance or cancellation of the transaction

Although the Company has formulated confidentiality measures in accordance with relevant requirements, potential suspension, discontinuance or cancellation of the transaction may occur as a result of abnormal fluctuation of share price or unusual transactions deemed as involving in insider transactions during the transaction. During the audit procedure of the transaction, parties involved in the transaction may need to improve to transaction proposal as required by the regulatory authorities, if the parties involved in the transaction cannot agree on the measures to improve the transaction proposal, the transaction may be cancelled. Moreover, if the results of the Target Assets decline significantly during the transaction, or if unpredictable events with material effects occur, the transaction may not proceed on schedule.

Investors should note that the transaction may not proceed or may have to be reinitiated due to the aforesaid events and may exposed to the risk of re-pricing.

(2) Risk of failure to obtain approval for the restructuring

Approval or endorsement yet to be obtained for the transaction include but are not limited to the following:

1. filing for the valuation report of Target Assets by the competent authorities of State-owned Assets Supervision and Administration Commission

2. approval for the transaction by the competent authorities of State-owned Assets Supervision and Administration Commission;

3. approval by voting for the proposal for the transaction by the general meeting of shareholders of the listed company;

4. review and approval for business operators concentration related to the transaction by the Ministry of Commerce

If the aforesaid approval cannot be obtained or cannot be obtained on time, the transaction will not proceed. Investors are advised to remain cautious about the relevant investment risks.

(3) Risk of the appraisal or valuation for the Target Assets

China Tong Cheng, the asset valuer in this restructuring, has adopted appropriate valuation methods to assess the Assets to be Disposed of and the Assets to be Acquired. The valuer has fulfilled the obligation of diligence and has strictly observed the relevant rules in the process of valuation. However, the valuation is based on a series of assumptions and the relevant operation status of the Target Assets. Any unexpected significant change in the future may lead to discrepancy between the appraised and the actual asset values. As such, there are risks that the final result of the aforesaid valuation will be different from the actual results. Investors should therefore be aware of such risks.

II. MARKET RISKS (1) Risk of cyclical fluctuation in the industry

The prosperity level of shipping industry is closely related to cyclical development of economy and the state policies. In recent years, three fourths of the contribution to global economic growth are from emerging economies are developing countries, but certain emerging economies are experiencing slowdown on economic growth due to the effect of economic cycle. For now, the majority of the growing momentum of global economy is from the improvement of economy in developed countries, but developed countries are still exposed to various risks such as deflation risk. Meanwhile, the global economy is exposed to the risks from the volatility in financial market and the change in capital flow. Although the global economy is developing in a positive direction, the foundation for recovery is still unstable with fragile and unbalanced growth. Global and Chinese economic development is under 31 various uncertainty, although it is seeing signs of recovery in shipping industry, the entire shipping market may remain weak in the future if the overall economic environment fail to recover rapidly as expected. This may bring certain uncertainty to the expansion and development of the Company’s principal business.

(2) Risk of Competition

Shipping companies compete with each other in various areas such as freight rate, coverage of shipping routes, service reliability, shipping capacity available, quality of customer service, value-added service and customer requirement, all of which may cause fluctuation in freight rate.

In recent years, in anticipation of the shipping market recovery in the future, ship owners in China and abroad have made huge investment in building new vessels. The explosive growth in the number of current orders will undoubtedly intensify the overcapacity situation and cause delay for the market to regain the balance between supply and demand, which makes the industry recovery more difficult.

Moreover, shipping companies are in the trend of pursuing large scale vessels with increasing investment in marine technology and information equipment, which may challenge the Company in various aspects such as hull structure, service capacity, information system and management efficiency.

III. RISKS RELATED TO BUSINESS AND OPERATION (1) Cost risk

Fuel and lubricant (such as engine oil and other lubricant) cost is an important operating cost for shipping companies. According to the pro forma consolidated financial information of the Listed Company after completion of the reorganization, on 31 December 2015, the pro forma combined fuel cost and lubricant cost of the Listed Company accounted for approximately 26.22% and 1.61% of the pro forma combined core business. The rise of international crude oil price may lead to the increase in voyage cost and in turn affect the profitability of the Listed Company. Calculated on the basis of pro forma consolidated financial information of the Listed Company after completion of the reorganization on 31 December 2015, with other factors remained unchanged, for every 1% rise in fuel prices, the costs for core 32 business of the Listing Company will increase by RMB19.7564 million; for every 1% rise in lubricant prices, the costs for core business of the Listing Company will increase by RMB1.2111 million. The uncertainty from the fluctuation of fuel and lubricant prices will cause the fluctuation of operation cost and thus affect the profitability of the Listed Company.

(2) Risk from the change of policies on environment protection

With the growing consciousness on environment protection in China, the government may promulgate more stringent laws and regulation to prevent the vessels from polluting the water area. Such change in policies will increase the Company’s expense on ship equipment and relevant insurance and affect the business and operating efficiency of shipping companies.

(3) Risk related to work safety on ship

Force majeure such as severe weather, pirate, war, labour strike, mechanical breakdown and human error are inevitable during the voyage of shipping vessels. In recent years, the international situation remains tense and turbulent with various uncertainty and unstability. Geopolitical issues around the world have been affecting the economy and trade development and infrastructure construction in certain areas and also have a negative impact on shipping market, which may adversely affect the operation of the Company.

(4) Risk from the change in business structure

The Company is now engaged in oil shipment, LNG shipment and bulk shipping business. Upon the completion of the transaction, CS Development will exit out of bulk shipping business and become a professional oil and gas shipping platform. Because of such exit out of bulk shipping business, the revenue and profit of the Company will primarily be derived from oil and gas shipment business in the future, and the business cycle of shipping industry will directly affect the profitability and stock price of the Company. Investors are advised to remain cautious about the risk from the change in business structure as a result of the transaction.

(5) Risk related to subsequent integration

Upon the completion of the transaction, the Company will hold 100% equity

33 interests in Dalian Ocean. Although both the Company and Dalian Ocean are well-established and under effective management, the difference in business models and internal operating management systems between the two companies will cause difficulty for subsequent integration of the Company in the future. As such, there still exist uncertainties on whether the listed company and Dalian Ocean can be integrated smoothly as expected. Investors are advised to remain cautious about the risk from operation integration after the transaction.

The Company will continuously improve the corporate governance and strengthen the internal control so as to mitigate such risk, and make true, accurate, timely, complete and fair disclosure in respect of relevant matters.

(6) Risk related to the potential reduction on profitability of the Acquired Assets

Shipment of commodities such as oil is materially affected by the fluctuation of macro economy. During the rising stage of the macro economy, the demand for resources such as oil will rise rapidly and lead to the increase of demand for oil shipment, while during the recession stage of the macro economy, the demand for oil shipment will inevitably be affected and the freight rate for oil shipment will fluctuate. Moreover, natural disaster and accidents may also cause fluctuation in shipping industry and in turn expose the Company to the risk of reduction on profitability.

Shipping is the main way of transportation for commodities with the advantage of large capacity and low freight cost, particularly in oil shipment, but other ways of transportation are still competitive to a certain extent. For example, the opening of crude oil transmission pipelines and the construction of deep water wharf in costal port in China will decrease the demand for crude oil trans-shipping. The aforesaid factors may affect the profitability of the Acquired Assets.

(7) Risks of significant changes in net profit of Assets to be Acquired and operating cash flows

In the consolidated statements of the Assets to be Acquired in 2013, 2014 and 2015, net profit attributable to owners of the parent company amounted to RMB

-909.49 million, RMB-373.1727 million and RMB804.0891 million respectively, whereas net cash flow from operating activities amounted to RMB-239.8169 million, RMB490.1338 million and RMB2,520.7215 million respectively, with substantial fluctuation in each accounting period. Due to reduced costs and expenses of the major business of the Assets to be Acquired driven by year-on-year decline in fuel price, coupled with continuous improvement in oil tanker market since October 2014, the rise in oil tanker freight rate has also increased the income from operating activities of the Assets to be Acquired, resulting in significant changes in the net profit and operating cash flows of the Assets to be Acquired in the last two years and one period. As the profitability and operating cash flow of the Assets to be Acquired is closely related to the fluctuations of international crude oil price and oil tanker freight rate, and is highly relevant to the improvement in the oil tanker market, hence, the changes in international crude oil market and the resultant changes in oil tanker freight rate and in the recovery of oil tanker market will have direct effects on the profitability and operating cash flow of the Assets to be Acquired, and might lead the profit of Assets to be Acquired could not match the number of on the Appraisal Report.

(8) Risks of further loss of the Assets to be Disposed of before the Closing Date

Since 2015, affected by continuous weak demand of global commodities and exacerbating overcapacity of dry bulk cargo ships, the dry bulk transport market repeatedly recorded historical lows. In 2015, net profit attributable to owners of the parent company in the consolidated statements of the Assets to be Disposed of was -1,539.641 million. Since 2016, the global bulk transport market has seen no significant improvement with market freight rate hovering at the bottom. As the status of profit and loss of the Assets to be Disposed of before the Closing Date will affect the performance of the Listed Company, if the Assets to be Disposed of record further loss before the Closing Date, the profitability of the Listed Company will be adversely affected.

IV. OTHER RISKS (1) Risk of volatility in share price

In addition to operating results and financial position, the share price of the Company is also affected by various factors such as international and domestic macro-economic situation, capital market movement, investor’s expectation and various unexpected major events. When considering investing in the shares of the Company, investors shall make prudent judgement after taking into account the potential risks from all the factors mentioned above.

(2) Other risks

The Company does not preclude the possibility that adverse effects may be derived from political, economic, natural disaster and other factors beyond our control.

CHAPTER 4 THE PROPOSED TRANSACTIONS

I. BACKGROUND AND PURPOSE OF THE TRANSACTIONS (I) Background of the Transactions

1. The importance of the global shipping business has become more prominent

The maritime transportation industry accounts for 85% of the global trading of goods and over 90% of the transportation of foreign materials in China. The maritime transportation industry is the lifeline of countries all over the world to enhance trade and economic development and nation’s strength. It is also the strategic channel for China to fully integrate into the world economy in wider scope and higher level. Since the opening and reform, the maritime transportation industry of China has developed rapidly, but the “sizeable but less vigorous” conditions are still major problems. Hence, building a strong maritime transportation industry is an integral part of establishing a great ocean power.

2. The international shipping market is facing enormous challenges and opportunities

As a result of the global economic downturn, each of the shipping markets has been declining since the financial crisis, and the Baltic Dry Index (BDI) hit historically low levels this year. Clear diverse performance is seen in the shipping market and the shipping enterprises are faced with unprecedented challenges.

Under the current global economic condition, the international shipping market has a lot of profound changes, with the trend of “large-scale industry development, business model alliances, large-scale load bearing capability”. The international shipping industry is transforming from the traditional operation model of “high risk, high investment, high return and strong cycling” to the industrialized model of “large-scale, cost effective, maximizing turnover with lower profit margin, and long cycling”. In the meantime, there is clear distinction between the performances of shipping enterprises, except for certain large-scale enterprises with strong profitability, the profitability of other shipping counterparts is decreasing.

To adapt to the development trend of the international shipping industry, and capitalize on the business opportunities of shipping industry, it is a must for the most significant state-owned shipping enterprises to reduce excessive competition, enhance capacity of scale,

optimize allocation of resources, reduce costs and improve quality.

3. The national strategy sets a new direction for the maritime transportation industry

Since the 18th Party Congress, the Central Committee of Chinese Communist Party and the State Council have proposed significant strategic measures of “One Belt, One Road”, the reaching out of China’s equipment to the international market, and the facilitation of international cooperation, and have published the “Opinions of the State Council concerning the Promotion of the Healthy Development of Maritime Industry” (Guo Fa No. [2014] 32). According to the requirement of SASAC of State Council to promote the adjustment of business layout of state-owned economic sectors and deepen the reform of state-owned enterprises, the shipping enterprises need to meet core targets of expanding, strengthening and improving their businesses, as well as, building a competitive world-class integrated logistic supply chain service group, so as to provide support and security for the globalization of China’s economy.

(II) Purpose of the Transactions

As the importance of the global shipping industry has become more prominent, it is intended that CS Development will be, through the Transaction, built into a listed platform of professional oil and gas transportation to enhance its overall profitability, thereby enhancing the interests of all the Shareholders.

1. Building a listed platform of professional oil and gas transportation and making the Company less vulnerable to cyclical effects

Through the disposal of bulk shipping business and the acquisition of 100% equity interests in Dalian Ocean, CS Development will become a listed platform specializing in oil and gas transportation upon the completion of the Transactions. Its strategic development target is to become a world-class energy transportation enterprise, to create a large energy transportation fleet of a globally leading position, to become a global leader in the oil transportation market in terms of transportation capacities, and to build a specialised oil and gas transportation fleet. CS Development will facilitate the development of the new business by capitalizing its existing resources in the shipping sector. It will further strengthen its leading position in the domestic trade oil transportation market, and further enhance its competitiveness in all relevant market segments, thereby optimizing business model, diversifying business development, and enhancing profitability of the Company. In addition,

the integration of LNG businesses of both parties will help to achieve long-term and stable operating revenue and effectively improve the Company’s capabilities of countering the industry cycle risks.

2. Unifying the layout and enhancing the international competitiveness

Upon the completion of the Transaction, CS Development will capitalize the golden opportunity brought by the transformation of the international shipping market, so as to expand its global market share and accelerate the process of internationalization; to unify the allocation of overseas investment, avoid wastage of resources and enhance investment efficiency; to set up a uniform strategy of expanding into overseas and local markets and focus efforts in building a stronger position among the competition at home and abroad; and to unify its brand image and focus the strengths of both parties to participate in international competition.

3. Integrating resources of both parties, strengthening synergies and enhancing overall competitiveness

Upon the completion of the Transactions, CS Development and Dalian Ocean will fully leverage the synergies in terms of fleet structure, route layout, pricing, crew composition, purchasing costs and fleet operation, achieve reasonable allocation of resources, strengthen overall competitiveness of the Company, satisfy the demand for future expansion of the fleet scale as well as the strategic need for a global route layout, thereby serving the national strategies better and securing the safety of national energy transportation.

II. APPROVAL PROCEDURES REQUIRED TO BE PERFORMED FOR THE IMPLEMENTATION OF THE PROPOSED TRANSACTIONS (I) Authorizations and Approvals have been obtained for the Transactions

The following decision-making and approval procedures have been performed for the Transactions:

1. The Proposed Transactions have been considered and approved by the 12th Meeting of the Board of CS Development in 2015 and the 3rd Meeting of the Board of CS Development in 2016; 2. The Proposed Transactions have been considered and approved by the internal decision-making institution of the COSCO Group; 3. The Proposed Transactions have been considered and approved by the internal decision-making institution of the COSCO Bulk Group.

(II) Approvals and permissions required to be obtained for the Transactions

Approvals and permissions required to be obtained by the Transactions include but not limited to:

1. Filing of the assessment result of the Target Assets with the competent State-owned Assets Supervision and Administration Commission (“SASAC”) entity; 2. Approval of the Transactions by the competent SASAC entity; 3. The Proposed Transactions have been approved by voting at the shareholders’ general meeting of the listed company; 4. The Ministry of Commerce has considered and approved the concentration of operators involved in the Transactions.

The Transactions shall not be implemented prior to having obtained the above approvals or permissions.

III. SPECIFIC PROPOSALS OF THE TRANSACTIONS (I) Overall proposal of the Transactions

The Transactions of the Company include two transactions comprising a material disposal and a material acquisition of assets:

1. Material asset disposal: The Company will dispose of 100% equity interest in CS Bulk to COSCO Group or its designated wholly-owned subsidiary CS Bulk Group;

2. Material asset acquisition: The Company will acquire 100% equity interest in Dalian Ocean from the COSCO Group.

The above two transactions will be effective simultaneously and are inter-conditional. If any one of the transactions cannot be implemented due to the failure to obtain approval from the shareholders’ general meeting of the Company, any competent government authority or regulatory authority, all other dealings contemplated under the Transactions will not be implemented.

(II) The specific proposals of the Transactions

1. The proposal of material asset disposal

(1) Counterparty of the Transaction

The counterparty of the material asset disposal is the COSCO Group or its designated wholly-owned subsidiary COSCO Bulk Group.

(2) Target Asset

100% equity interest of CS Bulk held by the Company.

(3) Method of Transaction

The transaction for the material asset disposal will adopt the cash method.

(4) Consideration of the Transaction

According to the “Assessment Report on All Equity Interests of Shareholders of China Shipping Bulk Carrier Co., Ltd. involved in the Proposed Transfer of Equity Interest held in a Subsidiary by China Shipping Development Company Limited” (Zhong Tong Ping Bao Zi [2016] No.46) issued by the China Tong Cheng on 10 March 2016, based on the valuation as at the Valuation Date of the Target Asset to be Disposed of, and taking into account other relevant factors comprehensively, the consideration for the Target Asset to be Disposed of shall be RMB 5,392,221,600. The aforesaid asset assessment report is still required to comply with the filing procedure pursuant to the laws and regulations of China, if any adjustment is made to the aforesaid assessment result during the filing process, then the consideration for

the Target Asset to be Disposed of will be adjusted according to the valuation after the filing procedure is completed. (5) Arrangement for profit or loss for the period During the transition period from the Reference Date to the Closing Audit Date, any increase in interest of the Target Asset to be Disposed of caused by profits and any other reasons shall be entitled to CS Development, the transferee of the Target Assets to be Disposed of shall pay an equivalent amount in cash to CS Development. Any decrease in interest of the Target Asset to be Disposed of caused by losses and any other reasons shall be borne by CS Development, CS Development shall compensate the transferee of the Target Assets to be Disposed of on the shortfall with an equivalent amount. Any profit and loss of the Target Asset to be Disposed of arising in the period between the Reference Date and the Closing Audit Date shall be confirmed by an audit conducted by an external auditor within 60 business days after the Closing Date. (6) Disposing of creditors’ rights and debts Unless agreed otherwise, all the creditors’ rights and debts related to the Target Asset to be Disposed of will continue to be entitled to or borne by the Target Company to be Disposed of according to the relevant agreements.

As at the date of signing the Asset Transfer Agreement, the debts of the Target Company to be Disposed of and its subsidiaries owing to CS Development and its subsidiaries (except for debts arising from the internal consolidation of bulk carriers) was in the aggregate amounts of RMB6,261,344,338.44, HK$3,444,300,104.55 and US$386,714,730.29. Unless agreed otherwise, CS Development will no longer provide any non-operating capital for the Target Company to be Disposed of and its subsidiaries from the date of signing the Asset Transfer Agreement. The aforesaid debts will be fully settled by the China Shipping Group and/or its designated connected party on or before the Closing Date, the China Shipping Group agreed to undertake joint and several liabilities of such debts to ensure that upon closing of the Transaction, the Target Company to be Disposed of and its subsidiaries will no longer possess any non-operating capital of CS Development and its subsidiaries.

The debts arising from internal consolidation of bulk carriers by CS Bulk owing to CS Development and its wholly-owned subsidiary CSDHK will be fully settled by the COSCO Group and/or its designated wholly-owned subsidiary on or before the Closing Date. (7) Contract obligations and default liabilities under the transfer of ownership of the relevant assets

CS Development shall complete the procedure for change of business registration of the Target Asset to be Disposed of in cooperation with the transferee of the asset to be Disposed of within 30 days from the date of full payment of the agreed consideration for the Transaction.

The party in breach shall assume default liabilities to the observant party according to the terms of agreement and legal requirements, and shall compensate the observant party for the direct losses suffered by the observant party as a result of the default by the defaulting party.

2. The proposal of material asset acquisition

(1) Counterparty of the Transaction

The counterparty of the material asset acquisition is the COSCO Group.

(2) Target Asset

100% equity interest of Dalian Ocean held by the COSCO Group.

(3) Method of Transaction

The transaction for the material asset acquisition will adopt the cash method.

(4) Consideration of the Transaction

According to the “Asset Assessment Report on the Proposed Transfer of All Equity Interest in Dalian Ocean Shipping Company Limited by China Ocean Shipping (Group) Company” (Zhong Tong Ping Bao Zi [2016] No.38) issued by the China Tong Cheng on 8 March 2016, based on the valuation as at the Valuation Date of the Target Asset to be Acquired, and taking into account other relevant factors comprehensively, the consideration for the Target Asset to be Acquired shall be RMB 6,628,455,200. The aforesaid asset assessment report is still required to comply with the filing procedure pursuant to the laws and regulations of China, if any adjustment is made to the aforesaid assessment result during the filing process, then the consideration for the Target Asset to be Acquired will be adjusted according to the valuation after the filing procedure is completed. (5) Arrangement for profit or loss for the period During the transition period from the Reference Date to the Closing Audit Date, any increase in interest of the Target Asset to be Acquired caused by profits or any other reasons shall be entitled to CS Development. Any decrease in interest of the Target Asset to be Acquired caused by losses or any other reasons shall be borne by the COSCO Group, the

COSCO Group shall compensate CS Development on the shortfall with an equivalent amount. Any profit and loss of the Target Asset to be Acquired arising in the period between the Reference Date and the Closing Audit Date shall be confirmed by an audit conducted by an external auditor within 60 business days after the Closing Date. (6) Disposing of creditors’ rights and debts Unless agreed otherwise, all the creditors’ rights and debts related to the Target Asset to be Acquired will continue to be entitled to or borne by the Target Company to be Acquired according to the relevant agreements. (7) Contract obligations and default liabilities under the transfer of ownership of the relevant assets The COSCO Group shall complete the procedure for change of business registration of the Target Asset to be Acquired in cooperation with CS Development within 30 days from the date of full payment of the agreed consideration for the Transaction.

IV. THE TRANSACTIONS CONSTITUTE MATERIAL ASSET RESTRUCTURING Article 12 of the “Restructuring Measures” stipulates that: “A material asset restructuring will be constituted by the purchase or sale of assets carried out by a listed company and its holding company or controlled companies when one of the following criteria is fulfilled: (1) the total amount of assets purchased or sold represents more than 50% of the total assets in the audited combined financial statements as at the end of the latest financial year of the listed company; (2) the operating revenue generated by the assets purchased or sold in the latest financial year represents more than 50% of the operating revenue generated by the listed company in the audited combined financial statements for the same period; (3) the net assets purchased or sold represent more than 50% of the net assets in the audited combined financial statements as at the end of the latest financial year of the listed company, and exceed RMB50,000,000.” Article 14 stipulates that: “If the listed company purchases and sells assets at the same time, the relevant percentage of the assets purchased and the assets sold shall be calculated separately and the higher percentage between the two shall prevail.”

According to the estimated calculations on the proposals of the Transactions, the corresponding indicators of the Transactions are as follows:

Total Assets Net Assets Operating revenue Unit: RMB 31 December 2015 31 December 2015 2015 CS Development 68,378,653,300 26,523,202,400 12,776,529,000 Assets proposed to be 17,238,835,700 6,628,455,200 4,820,386,600 acquired Assets proposed to be 34,112,647,400 5,368,349,100 6,635,960,300 sold The higher between the assets proposed to be 34,112,647,400 6,628,455,200 6,635,960,300 acquired and assets proposed to be sold Percentage 49.89% 24.99% 51.94% Note: The total assets and net assets proposed to be acquired shall be based on the higher between the audited amount of total assets or net assets and the amount of valuation.

Based on the above estimated indicators, the Transactions constitute material asset restructuring.

Since the consideration for the Transactions is in cash, pursuant to the provisions of the “Restructuring Measures”, such material asset restructuring is not required to be submitted to the CSRC for approval.

V. WHETHER THE TRANSACTIONS CONSTITUTE CONNECTED TRANSACTIONS Since China Shipping Group, the controlling shareholder of the Company, and the COSCO Group are in the process of restructuring, therefore, the counterparty of this Material Assets Acquisition, i.e. the COSCO Group and the counterparty of this Material Assets Disposal, i.e. the COSCO Group or its wholly-owned subsidiary COSCO Bulk Group, are deemed to be connected parties of the Company and the Transactions constitute connected transactions.

VI. THE TRANSACTIONS DO NOT CONSTITUTE BACKDOOR LISTING The Transactions will not result in a change in de facto controller of CS Development, and thus will not constitute a case of “backdoor listing” as stipulated in Article 13 of the

“Restructuring Measures”.

VII. THE IMPACT OF THE TRANSACTIONS ON THE LISTED COMPANY (1) The impact of the Transactions on the principal activities of the Company

Prior to the Transactions, the Listed Company is principally engaged in oil tanker shipping, LNG shipping and bulk shipping businesses. After completion of the Transactions, the Listed Company will have sold all the bulk shipping business, and at the same time have acquired 100% equity interest in Dalian Ocean engaging in oil tanker shipping and LNG shipping. After the 100% equity interest in Dalian Ocean is injected, the principal business of the Listed Company will become a professional oil and gas shipping company which is more focused on oil tanker shipping and LNG shipping.

1. The impact on the capability to secure COA contracts and customer service capability after consolidation

The capability to secure COA contracts mainly depends on whether the capacity of the fleet is able to satisfy the diversified and long-term shipping demand from customers. After the injection of Dalian Ocean into the Company, the shipping capacity of CS Development will be enhanced significantly, its customer service capability will also be further strengthened. Particulars of performance are as follows:

(1) Global shipping capacity of the Company after consolidation will be the largest in world ranking:

Unit: ten thousand DWT

2,000.0 1,870 1,800.0 1,600.0 1,400.0 1,200.0 959 910 1,000.0 800.0 600.0 400.0 200.0 0.0

Source: Clarksons, statistics based on self-owned shipping capacity + orders

After consolidation, the sum of self-owned shipping capacity and orders of the Company will be the largest in the world at 18,700,000 DWT. And prior to the consolidation, the sum of self-owned shipping capacity and orders of CS Development and Dalian Ocean are ranking 14th and 12th respectively.

(2) Capacity of VLCC fleet of the Company will be increased significantly after the consolidation, and ranking the second largest in the world:

Unit: ten thousand DWT

1,600.0 1,338 1,400.0 1,200.0 1,000.0 791 800.0 547 600.0 400.0 200.0 0.0

Source: Clarksons, statistics based on self-owned shipping capacity + orders

After consolidation, the sum of self-owned shipping capacity and orders of the VLCC fleet of the Company will be the second largest in the world at 13,380,000 DWT. And prior to the consolidation, the sum of self-owned shipping capacity and orders of CS Development and Dalian Ocean are ranking 11th and 8th respectively.

(3) After the consolidation, oil tankers of the VLCC, Suez, Aframax and Panamax classes will be owned by the Company as follows:

Handy VLCC Suez Aframax Panamax General size LNG LPG tankers tankers tankers tankers tankers tankers Self-owned shipping capacity 966.52 47.78 109.55 142.82 137.21 0.63 138.61 1.16 (10,000 DWT/10,000 m3)

Shipping capacity under construction 371.80 - 22.80 55.47 15.00 - 432.32 - (10,000 DWT/10,000 m3) Total (10,000 DWT/10,000 1,338.32 47.78 132.35 198.29 152.21 0.63 570.93 1.16 m3) Average age of vessel 6.52 11.59 6.32 7.54 7.68 2.98 N.A 13.45 (years) Note: Shipping capacity under construction is calculated up to 2018.

(4) After the consolidation, the Company will not only have a significant increase in shipping capacity under its control, further cooperation with original customers will also be enhanced, which will reduce significantly the constraint of shipping capacity on the Company’s ability to secure new COA contracts in future, and will have a significant positive impact on maintaining the existing customer resources and expanding into domestic and overseas qualify customers.

Through the consolidation of oil tanker resources of two large groups, the Company is ready to plan for a global market presence, “globalization” of markets, operation management network and resources consolidation can be realized by leveraging on the new overseas operation network to present a better landscape of “globalization of customers”. Each regional network will fully utilize its own geographical and time zone advantages, by using its overall strategy as guiding principle, synergy and efficiency in operations, its operation and management under all weather conditions and around the clock are ensured to satisfy the demand of customers in all aspects as far as possible.

In line with global network planning, reasonable globalization of business planning can avoid the market risk of over reliance on the cargo source from only one region, realizing a complementary effect between overseas network business and domestic business. Also, with an increasing number of customers in the Company, the customer mix of the Company will be improved continuously and channels of cargo sources will be consolidated and enhanced. After completion of the consolidation, the Company will further combine the freight rate trends of various regional markets, through long and short routes, spot and time charters, the fleet operations and allocation of shipping capacity will be more flexible, which will be advantageous to the Company in obtaining greater operating benefits in market fluctuations

and enhancing the long-term economic benefits of the overall oil tanker shipping business.

2. The impact on cost control and transport efficiency after the consolidation

After completion of the Transactions, the Company will release the synergy effect of the oil and gas business consolidation on cost control effectively by coordinating the optimized allocation of various resources. For example, in terms of procurement cost, the supplier intensiveness will be increased notably which will facilitate further optimization of procurement decisions, improvement in supplier management mechanism, increase in the bargaining power of the company and will in turn reduce the procurement cost of fuel oil and spare parts. In terms of transportation cost, with notable increase in the Company’s fleet size, the number of various types of vessels will be able to satisfy the different demands of various shipping regions and customers, through reasonable positioning of vessels, the flexible development of diversified modes of operation such as principal operation, COA operation and time charters is possible to reduce vacancy rate of vessels and in turn lower then unit cost of transportation.

(II) The impact of the Transactions on the profitability of the Company

Affected by the persistent falling prices of commodities, significant reduction in demand for bulk shipping and oversupply in shipping capacity, the international bulk shipping market remained in depression recently. In coastal bulk shipping markets, affected by factors such as the slower economic growth and structural transformation in China, there was a decrease in the domestic demand for coal-fired generated electricity, insufficient market demand for coastal bulk cargo shipping and the condition of oversupply in shipping capacity continued, resulting in declining coastal dry bulk freight rates. Under a market depression environment, the gross profit margin of the dry bulk business of the Company in 2015 decreased to 3.0% from 8.3% recorded in the same period of the previous year, with weak profitability.

Benefiting from the persistent low levels of international crude oil prices, the pace of strong recovery in the international tanker shipping market has been accelerated, the average freight rate of all major shipping routes is higher when compared with the same period of the previous year, with significant improvement in the operating revenue of ship owners. In the domestic oil shipping market, affected by the overhaul of Sinopec pipelines and falling international oil prices in the first half of the year, there was high demand in oil imports and transshipments, with a decrease in long-haul cargo sources such as ocean oil, the structure of shipping lines presented a trend towards short voyages. On LNG shipping business, with

rapid development in the domestic LNG market in recent years, its proportion in energy consumption has been rising faster. The rapid development in LNG imports in China has provided a material strategic opportunity for the LNG shipping business in China. Benefiting from the market recovery, the gross profit margin of the oil shipping business of the Company in 2015 increased to 35.6% from 15% during the same period of the previous year, and profitability was increased remarkably.

Through the Transactions, the Company will divest the bulk shipping business and inject the relevant assets of oil shipping business and LNG shipping business, and will become an oil shipping company with the largest fleet-controlled shipping capacity in the world. Viewing from the recent trends of crude oil and LNG prices, consumption level, business inventories and national strategic reserves, falling prices have stimulated the growth in demand, with new demand from business inventories as well as demand from additional national strategic reserves. Therefore, under the current more robust condition in market demand for crude oil and LNG shipping, the outlook for the oil and gas shipping industry is optimistic and tends to support a higher freight rate level. In addition, LNG shipping usually adopts the project-bundle operation model, freight rate is less affected by fluctuations in LNG prices. When the oil shipping market is affected by the cyclical fluctuations in the industry, LNG shipping can effectively enhance the Company’s resistance against cyclical movements in the industry and ensure a stable profitability. In conclusion, under the support of a number of factors relating to the development conditions in the industry and national policies, with the principal business in energy shipping is favourable for the Company to increase its profitability and will reduce the effect of cyclical movements in the industry on the profitability of the Company, and the stability of the profitable performance of the Company is enhanced.

According to the pro forma combined financial statements of the Listed Company of the latest financial year reviewed by Baker Tilly China, the pro forma operating revenue and operating cost of 2015 were RMB10,987,135,300 and RMB7,648,693,300 respectively. Pro forma net profit attributable to owners of the parent company was RMB2,923,716,000, increased by 650.28% when compared with the net profit attributable to owners of the parent company of RMB389,685,700 for 2015.

For details of the impact of the Transactions on the profitability of the Company, please refer to “2. Analysis on profitability after completion of the Transactions” of “(III) Analysis of the impact of the Transactions on the financial indicators and non-financial indicators of

the Listed Company” under “III. The Impact of the Transactions on the Listed Company” in “Chapter 10 Management Discussion and Analysis”. (III) The impact of the Transactions on connected transactions of the Company Prior to the completion of the Transactions, the connected transactions of the Company adhere to the principles of transparency, fairness and impartiality. The Articles of Association of the Company have stipulated the approval authority and approval procedures for connected transactions. The Supervisory Committee and independent directors are able to perform supervisory duties in a diligent, responsible and practicable manner in accordance with the laws, regulations and Articles of Association, and timely express independent opinions on connected transactions. The Company’s control on connected transactions is able to prevent risk effectively and protect the legal interests of the Company and the substantial and minority shareholders as a whole.

Prior to the Transactions, there was no transaction between the Asset to be Acquired and China Shipping Group, the controlling shareholder of the Company, and its subsidiaries (excluding the Company and its subsidiaries), therefore after completion of the Transactions, there will not be new connected transactions between the Asset to be Acquired and China Shipping Group and its other subsidiaries.

Prior to the Transactions, transactions between the Asset to be Acquired and the COSCO Group, its controlling shareholder, and its subsidiaries included transactions such as financial services, property leasing, procurement of materials, provision of labour services. As the China Shipping Group and the COSCO Group are in the process of restructuring, if the COSCO Group and its subsidiaries become connected persons of the Listed Company after the aforesaid restructuring, then after completion of the Transaction, the aforesaid connected transactions will become new connected transactions.

Since the Transactions will divest the assets of bulk shipping business from the Company, therefore the size of daily connected transactions will decrease accordingly, such as the provision of shipping materials and services between China Shipping Group and the Company relating to the Asset to be Disposed of, the shipping crew management service between China Shipping International Ship Management Co., Ltd. and the Company, and the financial service between China Shipping Finance Co., Ltd. and the Company.

For details of the connected transactions of the Company after the Transactions, please refer to “(IV) Connected Transactions of the Listed Company after Completion of the

Transactions” of “II. Connected Transactions” in “Chapter 12 Peer Competition and Connected Transactions”.

To protect the interests of the Company and its shareholders as a whole, the Company will regulate the connected transactions after completion of the Transactions based on the principles of equality and mutual benefit. The connected transactions of the Company will adopt market pricing and disclosure of information will be made by the Company according to the requirements of relevant laws, regulations and regulatory rules, to ensure the reasonableness, fairness and legality of the pricing of the relevant connected transactions.

(IV) The impact of the Transactions on the Peer Competition of the Company

1. Peer competition after completion of the Transactions

Prior to the Transactions, the Listed Company is mainly engaged in oil shipping business, LNG shipping business and bulk shipping business. After completion of the Transactions, the bulk shipping business of the Listed Company will be sold entirely and will at the same time acquire 100% equity interest in Dalian Ocean which operates oil shipping business and LNG shipping business. The principal business of CS Development and its subsidiaries will change to oil and gas shipping business and will become the only professional platform for operating oil and gas shipping business under the China Shipping Group.

In 2010, the Company chartered a bulk vessel, namely Edward, for a term commencing from the delivery date and ending on the date of not less than 120 months, but not exceeding 122 months and 15 days. This bulk vessel is currently operated by CS Bulk. The Company and CS Bulk are under negotiation with the shipowner to change the charterer to CS bulk or its subsidiaries, which is intended to be completed before the completion of this transaction.

According to the documents provided by Dalian Ocean and the explanation provided by Dalian Ocean, Dalian Ocean is currently chartering two bulk cargo vessels (i.e. vessels “艾维亚” and “帕维亚”) for a charter term of 7 years with starting from 30 August 2011. From the beginning of the fifth year of the leasing term, the ship owner will have one option per year to terminate the right of the leasing contract. Dalian Ocean had re-chartered these bulk cargo vessels to a third party and in fact it had never engaged in bulk shipping business. Given Dalian Ocean had in fact never engaged in bulk shipping business, the aforesaid vessel leasing agreement of Dalian Ocean will not affect the positioning of the principal business of CS Development in oil and gas shipping business after completion of the Transactions

To sum up, there will be no substantive peer competition between the China Shipping Group and its other controlled enterprises and CS Development after completion of the Transactions.

As the China Shipping Group and the COSCO Group are in the process of restructuring, after completion of the Transactions, the COSCO Group and its controlled enterprises will not engage in oil and gas shipping related business, thus no competition will exist between CS Development and the COSCO Group and its controlled enterprises.

2. Undertakings to avoid peer competition

To avoid peer competition with the Listed Company, China Shipping Group, the controlling shareholder of CS Development, has made the following undertakings: (1) After completion of the material asset restructuring, the Company will not directly or indirectly (including but not limited to the form of sole ownership, joint venture, cooperation and associated company) participate or carry out business activities which are in real competition or may be in real competition with the principal business of CS Development. (2) For products produced or business engaged by enterprises which are wholly-owned, controlled or invested by the Company in future which are or may be in competition with CS Development, the Company has undertaken that it will transfer all capital or shares in the aforesaid enterprises upon request from CS Development, and has promised to CS Development or its wholly-owned subsidiaries give the pre-emptive rights to purchase the aforesaid capital or shares, subject to compliance with laws and regulations, and will attempt with its best efforts to facilitate the price of the relevant transaction will be determined on fair, and reasonable basis and on normal commercial transactions with independent third parties. (3) If the interests of CS Development and other shareholders have suffered damage due to the breach of the above undertakings by the Company or other enterprises controlled by the Company, the Company will be liable for the corresponding compensation liabilities according to the law. (4) As the Company has issued the “Letter of Undertaking to Avoid Peer Competition” (“Original Letter of Undertaking”) on 15 June 2011, and promised as follows:

“a. China Shipping has positioned CS Development as the only ultimate consolidated business platform for professional oil shipping, bulk and LNG shipping under China

Shipping.

b. For bulk cargo vessels and oil tankers owned by China Shipping and its controlled non-listed enterprises, China Shipping has promised to inject these bulk cargo vessels and oil tanker assets into CS Development when conditions are ripe through methods such as asset acquisition and restructuring at the selected right timing within 5 years, or to divest such assets externally to eliminate the peer competition between China Shipping and CS Development to facilitate sustainable and stable development of CS Development.

……

d. Before completion of injecting the above bulk cargo vessels and oil tanker assets into CS Development or divesting them externally by China Shipping, China Shipping will lease the above vessels for operation by CS Development (including holding subsidiaries and/or joint venture companies) on market terms according to the business needs of CS Development, or entrust the above vessels for operation and management by CS Development (including holding subsidiaries and/or joint venture companies) to avoid peer competition. ”

Considering after completion of the material asset restructuring, CS Development will no longer engage in bulk cargo shipping business, and uncertainties exist concerning whether the material asset restructuring will be implemented or whether it will be implemented before 15 June 2016, the Company has adjusted the contents of the above undertakings related to the bulk shipping business as follows: If the material asset restructuring is completely implemented, the undertakings as stated in item (a) and item (b) regarding the injection of bulk shipping assets into CS Development or their external divestment and item (d) regarding the leasing and entrusted operation of the bulk shipping assets before injection or external divestment contained in the Original Letter of Undertaking shall cease to be performed; if the material asset restructuring fails to be implemented, then the matters of undertaking as contained in the Original Letter of Undertaking shall continue to be performed, and the performance period will be extended to within one year from the date of announcement of the termination of the material asset restructuring. (V) The impact of the Transactions on the equity structure of the Company The restructuring does not involve share issue, therefore the shareholding structure of the Listed Company will not have any changes as a result of the restructuring. (VI) The impact of the Transactions on the Debts of the Company

According to the pro forma combined financial statements of the Listed Company for the latest year reviewed by Baker Tilly China, after completion of the Transactions, the size of debts and gearing ratio of the Company will decrease. The details are as follows: Unit: RMB

After the Transactions Before the Transactions Item (Pro Forma Figures) (Actual Figures) 31 December 2015 31 December 2014 31 December 2015 31 December 2014 Total assets 70,294,797,500 66,467,589,900 68,378,653,300 65,750,401,600 Total liabilities 41,454,289,500 44,746,808,800 41,855,450,900 43,102,671,700 Total equity of owners 28,840,508,000 21,720,781,100 26,523,202,400 22,647,729,900 Gearing ratio 58.97% 67.32% 61.21% 65.55%

In the Transactions, after the Company have received the consideration for the transfer of Asset to be Disposed of, and the repayment of debts for the Company and wholly-owned subsidiaries of the Company settled by the Asset to be Disposed of, and the payment of the consideration for the transfer of the Asset to be Acquired, it is expected the total net cash received will be approximately RMB13.5 billion. The Company plans to use the cash proceeds received from the Transactions to repay borrowings of the Company in the amount of approximately RMB10.7 billion, which will reduce the size of debts of the Company accordingly and the gearing ratio of the Company will be decreased to about 49%.

Chapter 5 Basic information of the Assets to be Disposed

I. BASIC INFORMATION OF THE ASSETS TO BE DISPOSED OF

Chinese name: 中海散貨運輸有限公司 (China Shipping Bulk Carrier Co., Limited)

Corporate nature: Company with limited liability

Room 11-402, No. 56 Jingang Avenue, Nansha District, Guangzhou Residence:

Floor 21-28, No. 308 Bingjiangzhong Road, Haizhu Main office location: District, Guangzhou

Qiu Guoxuan Legal representative:

Registered capital: RMB4,300,000,000 Date of establishment: June 12, 2012

59831616-4 Organization Code:

Uniform Code of Social 91440101598316164J Credit:

Water transport equipment leasing services; international freight forwarders; coal and related products wholesale; grain, beans and potato wholesale; metal and metal ore wholesale (except for national franchised and controlled items); steel wholesale; steel retail; non-metallic minerals and products wholesale (except for national franchised and controlled items); import and export goods (except for Scope of business: franchised and controlled goods); cargo water transport agents; building materials, decoration materials wholesale; water transport equipment wholesale; ship repair; ship spare parts sales; the technical inspection of ships, offshore equipment, onshore engineering; international ships management; domestic ships management; international shipping; general cargo transport for internal trade

II. THE EQUITY STRUCTURE AND CONTROLLING RELATIONSHIP STATUS OF THE ASSETS TO BE DISPOSED OF As of the date of this Report, the 100% equity interests of CS Bulk is held by CS Development.

III. THE MAJOR BUSINESS DEVELOPMENTS OF THE ASSETS TO BE DISPOSED OF FOR THE LAST THREE YEARS The Assets to be Disposed of are a subsidiary of CS Group, specializing in the

integration platform for dry bulk transport, mainly operating in the coastal, offshore bulk transportation business, with routes covering all major ports along the Chinese coast and riverside and across the world. As at 31 December 2015, the Assets to be Disposed of owned and controlled aggregate dry bulk capacity of more than 200 vessels and a total transport capacity of over 17 million deadweight tons.

(1) Coastal dry bulk transport

The coastal bulk transport business of the Assets to be Disposed of derived from the coastal bulk transport business of the former three shipping groups directly under the Ministry of Transport. It has been taking a leading position in coastal markets and has been undertaking the task of transporting coal, grain and other key materials in China’s coastal areas for a long time. The Assets to be Disposed of has been adhering to the business strategy of “big customers, large-scale cooperation” and has long established strategic partnerships with Baosteel, Shenhua, China Coal, Huaneng, Datang, China Power Investment Corporation,

China Resources, Guangzhou Development, Shanghai Shen Ning and other large customers. Ships operated by it include 20,000-ton, 30,000-ton, 40,000-ton, 48,000-ton, 57,000-ton and 70,000-ton dry bulk carriers of various types. It provides customers with coal, iron ore, grain, steel, and other dry bulk cargo transportation services in coastal areas, with shipping routes covering major domestic ports along the coast and along the Yangtze River.

(2) Offshore dry bulk transport

The offshore fleets operated by the Assets to be Disposed of included: the classes of Handysize, Handymax, Supramax, Panamax, Capesize and VLOC, etc. The fleet is increasingly becoming a large, automated, long-range and young fleet. The operating regions of the offshore dry bulk transport business of the Assets to be Disposed of is based in China with operations around the world, mainly in the Far East and Southeast Asia and branching off to Australia, Canada, Indian and Atlantic Oceans. It provides coal, iron ore, grain, aluminum, nickel ore, fertilizer and other dry bulk cargo transportation services for customers at home and abroad with shipping routes covering major ports around the world. In 2014, the turnover volume of the offshore dry bulk transport business of the Assets to be Disposed of was 16.72 billion ton-nautical miles, with operating income of RMB4.155 billion. In aspect of VLCC fleet business, the Assets to be Disposed of depended on the COA contract of carriage and achieved import 26,170,000 tons of iron ore. In 2014, the foreign non-coal cargo

transport volume was 46,020,000 tons, accounting for 40.5% of the total volume.

The major data of the transport turnover of different cargo types of CS Bulk for the last three years are as follows:

Unit：100,000,000 ton-nautical miles 2015 2014 2013 Categories % of the % of the % of the Turnover Turnover Turnover total total total Internal trade transport 721.1 23.78% 723.7 30.21% 666.2 30.68% Coal 531.0 17.51% 567.3 23.68% 540.3 24.88% Iron ore 77.2 2.55% 71.0 2.96% 67.0 3.09% Other dry bulk 112.9 3.72% 85.4 3.56% 58.9 2.71% Foreign trade transport 2,310.9 76.22% 1,672.1 69.79% 1,505.5 69.32% Coal 200.8 6.62% 121.7 5.08% 178.0 8.20% Iron ore 1,767.5 58.29% 1,475.4 61.58% 1,130.7 52.07% Other dry bulk 342.7 11.30% 75.1 3.13% 196.8 9.06% Total transport 3,032.0 100.00% 2,395.8 100.00% 2,171.7 100.00% turnover

Details of operating income of different cargo types of CS Bulk for the last three years are as follows:

Unit：RMB10,000 2015 2014 2013 Categories % of the % of the % of the Amount Amount Amount total total total Internal trade transport 266,353.1 43.43% 262,045.9 38.68% 284,241.9 47.70% Coal 131,076.3 21.37% 193,366.5 28.54% 209,432.4 35.15% Iron ore 14,982.9 2.45% 27,736.2 4.09% 33,558.7 5.64% Other dry bulk 26,402.1 4.30% 25,838.8 3.81% 32,061.5 5.39% Internal trade ship 93,891.8 15.31% 15,104.4 2.23% 9,189.3 1.54% leasing Foreign trade transport 347,048.2 56.57% 415,537.3 61.32% 311,554.5 52.30% Coal 25,430.5 4.09% 44,096.6 6.51% 60,531.5 10.15% Iron ore 211,030.4 34.40% 260,584.1 38.46% 212,055.7 35.60% Other dry bulk 54,263.2 8.88% 20,733.1 3.05% 14,758.8 2.48%

2015 2014 2013 Categories % of the % of the % of the Amount Amount Amount total total total Foreign trade ship 56,324.1 9.18% 90,123.5 13.30% 24,208.5 4.06% leasing Total operating 613,401.3 100.00% 677,583.2 100.00% 595,796.4 100.00% income

IV. MAJOR FINANCIAL INDICATORS OF THE ASSETS TO BE DISPOSED OF FOR THE LAST THREE YEARS According to the audit reports (Tian Zhi Ye Zi No.996 [2016]) issued by Baker Tilly China, the major financial indicators of CS Bulk for the last three years are as follows:

(1) Major data in consolidated balance sheets

As at 31 December 2015, the assets and liabilities of CS Bulk for the last three years are as follows: Unit：RMB10,000 Item 31 December 2015 31 December 2014 31 December 2013 Total assets 3,411,264.74 3,107,700.63 2,993,129.81 Total liabilities 2,874,429.84 2,245,885.37 2,161,008.12 al owners’ equity 536,834.91 861,815.26 832,121.68 Of which: total owners’ equity attributable 432,743.69 766,223.79 746,004.39 to the parent company

(2) Major data in the consolidated income statement

As of 31 December 2015, the operation status of CS Bulk for the last three years are as follows: Unit：RMB10,000 Item 2015 2014 2013 Operating income 663,596.03 672,918.44 590,834.79 Operating profit -93,081.70 -17,825.68 -55,017.09 Total profit -151,241.96 20,518.12 -71,454.62 Net profit -147,360.55 27,813.30 -54,033.36 Net profit attributable to owners of parent -153,964.10 18,538.58 -55,817.17 company Net profit attributable to owners of parent -110,666.67 -37,583.93 -69,204.75 company net of exception profit or loss

(3) Major data in consolidated cash flow statements

As of 31 December 2015, the cash flow of CS Bulk for the last three years are as

follows: Unit：RMB10, 000 Item 2015 2014 2013 Net cash flow from 137,976.23 263,458.56 73,220.67 operating activities Net cash flows from -12,794.63 -149,174.86 -146,276.09 investing activities Net cash flow from -112,606.02 -122,281.68 -14,482.93 financing activities Net increase in cash and 13,921.94 -7,532.41 -89,193.95 cash equivalents

(4) Main composition of exceptional items

Unit：RMB10,000 Item 2015 2014 2013 Profit or loss on disposal of -132,339.36 -12,181.44 -9,502.78 non-current assets Government grants credited to current profit or loss of the period （except for those closely relevant to normal business of the company, conformed to the requirements of 39,644.28 47,618.04 604.75 State policy, granted on fixed amount basis or enjoyed on continuous fixed amount basis subject to certain standards） Profit arising from investment costs for acquisition of a subsidiary, an associate and a joint venture by the corporation being less than its share 37,213.41 - - of fair value of identifiable net assets of the investee on acquisition

Item 2015 2014 2013 Net profit or loss for the period of subsidiary formed from the merger of enterprises under common 3,038.93 65,299.92 31,042.69 control from the beginning of period to the date of merger Net non-operating income/(expenses) 2,319.55 471.55 452.71 other than the above items Total of exceptional items -50,123.18 101,208.07 22,597.36 Affected income tax amount -12,530.80 25,302.02 5,649.34 Affected minority interests (after tax) 5,705.04 10,508.82 1,776.63

During the reporting period, the main exceptional items of CS Bulk were profit or loss on disposal of non-current assets, government grants credited to current profit or loss of the period, net profit or loss for the period of subsidiary formed from the merger of enterprises under common control from the beginning of period to the date of merger etc..

CHAPTER 6 BASIC INFORMATION OF THE ASSET

TO BE ACQUIRED

I. BASIC INFORMATION OF THE ASSET TO BE ACQUIRED

Chinese name: 大連遠洋運輸有限公司 English name: Dalian Ocean Shipping Co., Ltd. Building B, Dalian International Ocean Building, No.6, Address: Youhao Square, Zhongshan District, Dalian, China Limited liability company (legal person sole investment) Business type:

Principal place of Building B, Dalian International Ocean Building, No.6, business: Youhao Square, Zhongshan District, Dalian, China Legal representative: ZHU Jianhui (朱建輝) Registered capital: RMB 6,378,152,557.36 Date of establishment: 1 January 1978 Uniform Code of Social 912102001184172667 Credit: Sea, land transport for import and export of commodities, agency for shipping vessel, transport of international passengers, terminal barging for storage and transport, container repairing, loading, vessel repairing; crew training; international and domestic vessel management business; supply of resources for vessels; import and export of goods and technologies; provision of crews for foreign ships or ships from Hong Kong or Macau or Taiwan, handling for application for training, examinations and relevant certificates (except seaman’s book and foreign certificate of competence) etc. for non-local assignment mariner, crew affair management for employers of mariners, Business scope: provision of crews and other business for domestic voyages; (the followings are limited to the operation of affiliated companies) resources supply for vessels; general shipping, carriage of dangerous goods; garment processing, labour protective clothing processing; vessel spare parts, bulk food, sea crew duty free, marine paint, lubricants, timber, chemical coating, household appliances and equipment, sales of car accessories; storage of resources, multipurpose use of returned materials; repair for household appliances; house leasing; warehouse and storage services. (Items which require approval in accordance with the law may only commence operating activities after approval is granted by the relevant authorities).

II. THE EQUITY STRUCTURE AND OWNERSHIP AND CONTROL STRUCTURE OF THE ASSET TO BE ACQUIRED

As at the date of this Restructuring Report, the shareholder of Dalian Ocean is the COSCO Group, their ownership and control relationships are as follows:

SASAC of State Council

100%

COSCO Group

100%

Dalian Ocean

III. THE DEVELOPMENT OF PRINCIPAL ACTIVITIES OF THE ASSET TO BE ACQUIRED IN THE LAST THREE YEARS

(I) Regulation of the industry in which DALIAN OCEAN operates

1. Domestic regulatory policies

① Regulation of business qualifications

Regulations on International Maritime Transportation of the PRC (《中華人民共和國國際海運條例》) is the main legal basis in the PRC of regulating inbound and outbound international maritime transport operations and the underlying ancillary operating activities at the PRC ports. According to these regulations, companies engaged in activities of international shipping transportation, non-vessel operating common carriers, international shipping agencies, international vessel management, loading and unloading of international shipments, international maritime goods warehousing and international maritime container freight station and container yard should be subject to the supervision and administration of the Ministry of Transport and the transport authorities of the relevant local governments, and obtained the approval and the relevant qualification certificates from the above-mentioned authorities.

Companies engaged in waterway transport and waterway transport services in coastal area, rivers, lakes and other navigable waters in the PRC shall comply with the requirements of the Regulations of the PRC for the Administration of Maritime Transport (《中華人民共和國水路運輸管理條例》), and should be in accordance with the conditions for operation qualification under the Rules for the Administration of Qualification for the Operation of

Domestic Maritime Transport 《國內船舶運輸經營資質管理規定》( ). In accordance with the Regulations of the PRC for the Administration of Maritime Transport, establishment of enterprises engaged in the operation of maritime transport or maritime transport services shall be examined and approved by competent transport authorities, and the competent transport authorities will issue the relevant permits upon examination and approval.

The operation of international freight agency service must comply with the relevant provisions of the Provisions of the People’s Republic of China for the Administration of International Freight Agency (《中華人民共和國國際貨物運輸代理業管理規定》) and the Rules for the Implementation of the Provisions of the People’s Republic of China for the Administration of International Freight Agency (《中華人民共和國國際貨物運輸代理業管理規定實施細則》). Meanwhile, according to the Notice of the Ministry of Commerce and the State Administration for Industry and Commerce on Relevant Issues about the Registration and Management of International Freight Agents (Shang Mao Fa No. [2005]32) (《商務部、國家工商行政管理總局關於國際貨物運輸代理企業登記和管理有關問題的通知》（商貿發[2005]32號）) and the Rules for Filing Procedures of the International Freight Agency Enterprise (Provisional) (Order of MOC, 2005 No. 9 )(《國際貨運代理企業備案（暫行）辦法》（商務部令2005年第9號）), application of enterprises for engaging in the international freight agency shall not be examined and approved by competent commerce authorities, but shall complete the filing procedures with the Ministry of Commerce or its authorized agencies. Under those provisions, an international freight agency enterprise may, after completing the filing procedures, act as agent for consignors and consignees of goods exported or imported, or as an independent operator, conducting international freight agency services.

② Regulation of vessels, routes and freight rate

Pursuant to the provisions of the Regulations of the PRC for Vessel Registration (中華人民共和國船舶登記條例) , vessels of corporate legal persons established in accordance with the PRC law with principal operating establishments in the PRC shall register in accordance with the Regulations and obtain the vessel’s nationality certificate and vessel ownership registration certificate. PRC Maritime Safety Bureau is the authority in charge of vessel registration. All vessels registered or intended to be registered in the PRC shall apply for statutory examination with the vessel examination authority. A corresponding examination

certificate will be issued by the vessel examination authority in accordance with relevant requirements after the vessel has passed the examination.

Under the Maritime Transport Regulations of the PRC (中華人民共和國海運條例), a 15-day notice is to be given for the opening or cancellation of any international scheduled service, or changing the vessel or time for any international scheduled service, and such opening or cancellation or change has to be filed with the competent communications department of the State Council within 15 days following their occurrence. Freight rates charged by international maritime transport service operators which are engaged in operation of international scheduled transport services shall be registered with the competent transport authorities under the State Council pursuant to the prescribed format.

③Regulation of maritime safety

In respect maritime operation safety, the principal regulations promulgated in China include the Regulations on Management of Inland Waterway Traffic Safety of the People’s Republic of China (《中華人民共和國內河交通安全管理條例》) and the Regulations on Inspection of Vessel and Maritime Facilities of the People’s Republic of China 《中華人民共( 和國船舶和海上設施檢驗條例》). Pursuant to such regulations, owners or operators of vessels with Chinese nationality must apply for building and periodical inspection to the vessel survey authorities. For vessels meeting certain conditions (vessels engaged in international navigation, vessels navigating on the sea with the prescribed number of passengers of more than 100, oil tankers, roll-on/roll off vessels, liquefied gas carriers and bulk chemical carriers with a DWT of more than 1,000), application for classification survey must be submitted to China Classification Society.

Vessels with foreign nationality navigating in ports and coastal waters within China must comply with laws and regulations such as the Regulations on Management of Vessels with Foreign Nationality of the People’s Republic of China (《中華人民共和國對外國籍船舶管理規則》) and the Maritime Traffic Safety Law (《海上交通安全法》). Such vessels entering and leaving ports in China shall be subject to the inspection of the competent authorities. Such vessels navigating within ports, shifting berths and berthing and departing a mooring point and handling station outside a harbour must be navigated by a pilot designated by the competent authorities.

④Regulation on prevention of environmental pollution

The Ministry of Transport promulgated the Regulations on Prevention of Pollution of Sea Areas by Vessels of the People’s Republic of China (“Regulations on Prevention of Pollution by Vessels”) (《中華人民共和國防止船舶污染海域管理條例》) and Rules for Vessel Operation Safety and Pollution Protection (《中華人民共和國船舶安全營運和防止污染管理規則》)in December 1983 and July 2001, respectively. Pursuant to such regulations, all vessels with any nationality, owners of vessels with foreign nationality and other individuals within waters under the jurisdiction of the People’s Republic of China shall comply with the Regulations on Prevention of Pollution by Vessels and shall not release oil, oil mixtures, wastes and other toxic and harmful substance violating the Marine Environmental Protection Law of the People’s Republic of China (《中華人民共和國海洋環境保護法》) and the Regulations on Prevention of Pollution by Vessels. Pursuant to the Marine Environmental Protection Law and the Regulations on Prevention of Pollution by Vessels, for vessels meeting certain conditions (oil tankers with a DWT of no less than 150, vessels other than oil tankers with a DWT of more than 400 and bulk oil tankers with a DWT of more than 2,000), relevant pollution protection approval must be obtained. Vessels in international routes shall also maintain the Oil Record Book and the IOPP.

2. International regulatory policies

The principal conventions formulated by the International Maritime Organization include the International Convention for the Safety of Life at Sea, the International Convention for the Prevention of Pollution from Ships in 1973, as modified by the Protocol of 1978, and the International Convention on Load Lines. The companies engaged in the international shipping business are subject to the aforesaid international conventions. According to the Geneva Convention on the High Seas in 1958 and the United Nations Convention on the Law of the Sea in 1982, each state should enforce effective jurisdiction and control over the vessels flying its flag on the administrative, technical and social matters. A flag state is responsible for the registration and management of vessels, the inspection of vessels and the issue of Vessel Registration Certificates. Meanwhile, there are many regional port state regulatory agreements in the world, mainly including the Paris MOU, the Black Sea MOU, the Indian Ocean MOU and the Tokyo MOU. The port regulatory authorities of the each state who signs the regional port state regulatory agreements have power to inspect the foreign merchant vessels arriving at its ports in respect of the water safety regulation, the prevention of pollution from vessels, the inspection of vessels and offshore facilities,

regardless of the flag state of the vessels. In addition, the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers also imposes restrictions on seafarers’ qualifications.

(II) Operating conditions of the principal businesses of Dalian Ocean in the latest three years

1. Overview of the principal business of Dalian Ocean

Dalian Ocean is principally engaged in tanker shipping business for liquefied bulk cargo transportation, covering oil tanker shipping, LNG transportation and LPG transportation, etc.

As of 31 December 2015, the headquarters of Dalian Ocean and all of its wholly-owned subsidiaries owned 29 oil tankers in total with 6.60mn deadweight tons. Dalian Ocean has operated tanker shipping as its core business, and at the same time, developed LNG transportation and LPG transportation businesses. Over the years, through overall improvement of vessel management and crew training, Dalian Ocean has significantly enhanced its core competitiveness with rising reputation internationally.

The operating conditions of the tanker shipping and LPG transportation of Dalian Ocean in the last three years are set out below: Unit: RMB10,000 2015 2014 2013 Business Revenue Percentage Revenue Percentage Revenue Percentage Tanker shipping 455,312.80 94.46% 377,391.62 91.45% 322,174.74 89.30% LPG 7,069.43 1.47% 6,951.76 1.68% 5,998.53 1.66% transportation Sub-total 462,382.23 95.92% 384,343.38 93.14% 328,173.27 90.96% Other operating 19,656.43 4.08% 28,311.32 6.86% 32,598.07 9.04% revenue Total 482,038.66 100.00% 412,654.70 100.00% 360,771.34 100.00%

Dalian Ocean mainly operates its LNG business through CLNG. The operating income recorded by CLNG in the last three years are set out below: Unit: RMB10,000 Business 2015 2014 2013 Operating income of CLNG 96,252.39 92,839.93 97,538.75 Note: It represents the total operating income recorded by CLNG which is owned as to 50% by Dalian Ocean. The operating income of CLNGis not consolidated in the combined

financial statements of Dalian Ocean.

2. Major business developments of Dalian Ocean

(1) Tanker shipping business

① Overview of Dalian Pcean’s tanker shipping business

Tanker shipping, which mainly includes shipping of domestic and foreign crude oil and domestic refined oil, is the largest in asset scale among the businesses of Dalian Ocean, contributing the largest amount of revenue and being the major source of cash flows and profits. Its assets for tanker shipping are comprised of the tanker shipping assets of the headquarters and the tanker shipping business of 2 wholly-owned subsidiaries, 1 joint venture and 1 associate. As of 31 December 2015, the headquarters of Dalian Ocean and all of its wholly-owned subsidiaries owned 29 oil tankers in total with 6.60mn deadweight tons. Dalian Ocean has ordered 16 vessels (including 8 VLCCs, 5 Panamax and 3 MR vessels) being under construction.

Dalian Ocean has maintained a strategic core position in tanker shipping with structural adjustment. Dalian Ocean has grasped the opportunity under the relevant policies , with the approach of upgrading transportation capacities and two major focuses, being the optimization of large-scale crude oil transportation capacities and development of refined oil transportation capacities, it has strived to promote tanker fleet structural adjustment and realize continuous optimization in fleet operating structure and the mix of transportation capacities, strengthening its sustainability and risk control. Dalian Ocean actively implemented the strategy of “Taking Stability as the First Priority, Achieving Solid Operation and Establishing Stable Development”. It has established a close relationship with well-known international and domestic customers, with the business scope covering more than 300 ports in over 70 countries and regions worldwide.

② Mode of operation

Dalian Ocean mainly operates the business of ocean oil transportation. Ocean oil transportation mainly includes three modes of operation, namely, voyage charter, time charter and COA (Contract of Affreightment).

A. Voyage charter

Voyage charter refers to a voyage charter contract entered into at the time and place

where the vessel of the former voyage will return in ballast by considering the overall market conditions, through direct negotiations with the charter party or shipping agents, and selecting the most appropriate timing in the spot market with a principle of maximized benefits.

B. Time charter

Time charter refers to the leasing of a vessel by the shipowner for use by the leasee within a certain period of time (e.g. one year). During the charter period, the leasee can freely operate the vessels, such as making arrangements for carriage of goods, making leasing agreements, port anchorage, cargo loading and delivery, within the shipping zones allowed according to the terms of the charter. During this period, the shipowner will obey the instructions from the leasee in operating the vessel, the rental will be calculated per day or per deadweight ton carried and will be paid on a fixed term basis. Under time charter, the shipowner will lease the vessel to the leasee, without losing the ownership of the vessel involved, it is just a kind of ship hiring service provided to the leasee.

C. COA means a contract of affreightment. In a COA, the shipowner has committed to complete the transportation of goods specified by the cargo owner within a period of time according to the terms of the contract, regardless of voyages or type of vessels . In nature, it can be regarded as a mix of a number of voyages entered into with a charterer, the model of which is either beneficial for the shipowner to keep stable cargo sources or favourable for the consignor to maintain stable demand for the long-term shipping, while the significant fluctuation of operating revenue can be avoided in light of high volatility of the market price. It can obtain stable cargo sources and relatively fixed revenue than single voyages and keeps the possibility for both parties to gain market revenue with reference to the spot market price than timer charter.

③ Business process

The basic flow of business process Dalian Ocean under the three modes of operation is summarized as follows:

A. Voyage charter and time charter

1) The Company communicates with the customer to confirm the intention for carriage of goods, the Company will deploy shipping capacity according to market and its own conditions;

2) Signing of contract with the following terms in general:

a) Confirm the nature of business (time charter, voyage charter);

b) Confirm the carriage volume and shipping route;

c) Calculation method of rental and freight or method of rental calculation, means of payment and agreement on other fees;

d) Settlement method: Time charter usually requires the carrier to pay the next rental a certain period in advance (usually 15 days) during the effective period of the time charter, until rentals are fully settled before the end of shipping; voyage charter usually adopts the method of cash on delivery.

3) The Company will arrange vessels for leasing;

4) At the end of the charter, collect the remaining rental or the relevant freight amount.

The actual business flow process is set out as follows:

Considering Confirm market and Deploy Signing Time charter intention its own shipping contract of conditions capacity Completion of carriage Arrange vessels for leasing the voyage and Spot shipment collection of freight

 Confirm carriage volume and shipping route  Confirm rental, freight or method of rental calculation and agreement on other fees  Settlement method: Time charter usually requires the carrier to pay the next rental a certain period in advance (usually 15 days) during the effective period of the time charter, until rentals are fully settled before the end of shipping; voyage charter usually adopts the method of cash on delivery.

B. COA contract

The business flow process of a COA contract may be summarized as follows:

1) The Company and the customer enter into a COA contract with the following terms in general:

a) the term of the contract

b) Carriage volume and initial arrangement of shipping route;

c) Freight amount or method of freight calculation and agreement on other fees;

d) Settlement method;

e) Other agreed terms.

2) The Company will enter into a voyage charter shipping contract with the customer in respect of a particular shipment, the voyage charter shipping contract will supplement the specific details of the particular voyage charter on the basis of the COA contract, and confirm the actual carriage volume, freight rate and shipping route, etc.;

3) The Company will arrange a vessel for the shipment;

4) Upon completion of the voyage, freight amount will be collected. The actual business flow process is set out in the following diagram:

Enter into yearly COA contract

Enter into voyage Enter into voyage Enter into voyage Enter into voyage charter a charter b charter c charter

Arrange for actual Arrange for actual Arrange for actual Arrange for actual carriage of goods carriage of goods carriage of goods carriage of goods

Completion Completion Completion Completion of voyage of voyage of voyage of voyage

Collection Collection Collection Collection of freight of freight of freight of freight

④ Major customers of Dalian Ocean

Five largest customers and their sales in the tanker shipping business of Dalian Ocean during the last three years are set out below: Unit: RMB Percentage in total Year No. Name of customer Sales amount sales China International United 1 Petroleum & Chemicals Co., Ltd. 1,108,236,400 22.99% (中國國際石油化工聯合公司) 2 CHINA OIL (HK) CO.,LTD 279,622,100 5.80% 2015 3 BLUE FIN TANKER INC LTD 256,788,500 5.33% Shanghai China Ports 4 International Logistics Co., Ltd. 225,032,700 4.67% (上海華港國際物流有限公司)

5 DAY HARVEST LTD 175,201,800 3.63%  Total  2,044,881,500  42.42% China International United 1 Petroleum & Chemicals Co., Ltd. 1,390,021,200 33.68% (中國國際石油化工聯合公司) 2 DAY HARVEST LTD 22,889.14 5.55% Shanghai China Ports 2014 3 International Logistics Co., Ltd. 20,591.16 4.99% (上海華港國際物流有限公司) 4 BLUE FIN TANKER INC LTD 14,346.23 3.48% 5 CHINA OIL (HK) CO.,LTD 72,520,700 1.76%  Total  2,040,807,200  49.46% China International United 1 Petroleum & Chemicals Co., Ltd. 1,346,282,300 37.32% (中國國際石油化工聯合公司) Shanghai China Ports 2 International Logistics Co., Ltd. 171,994,800 4.77% (上海華港國際物流有限公司) 2013 3 DAY HARVEST LTD 136,740,000 3.79% 4 BLUE FIN TANKER INC LTD 102,421,600 2.84% 5 CHINA OIL (HK) CO.,LTD 57,736,700 1.60%  Total  1,815,175,500  50.32%

During the reporting period, none of the directors, supervisors, senior management officers and core technical officers, other key connected persons or shareholders holding more than 5% shares in the Assets to be acquired had any interest in the five largest customers.

⑤ Major suppliers and procurement information

Five largest suppliers and procurements from them in the tanker shipping business of Dalian Ocean during the last three years are set out below: Unit: RMB Percentage in total Year No. Name of supplier Procurement amount procurement amount COSCO Petroleum Pte. Ltd. (中遠 1 833,213,800 23.05% 石油有限公司) China Marine Bunker (PetroChina) 2015 2 Co., Ltd. 41,053,600 1.14% (中國船舶燃料有限責任公司) COSCO (HK) Insurance Brokers 3 23,039,700 0.64% Ltd.

Percentage in total Year No. Name of supplier Procurement amount procurement amount (中遠（香港）保險顧問有限公司) Guangdong Sea Land Express International Shipping Agency 4 (Qinzhou Branch) Co., Ltd. 16,517,400 0.46% (廣東海陸通國際船舶代理欽州分公司) Yuantong Marine Service Co., 5 Limited 16,648,100 0.46% (遠通海運設備服務有限公司)  Total  930,472,600  25.75% COSCO Petroleum Pte. Ltd. (中遠 1 13,25,897,200 32.22% 石油有限公司) COSCO (HK) Insurance Brokers 2 Ltd. 27,746,700 0.67% (中遠（香港）保險顧問有限公司) Guangdong Sea Land Express International Shipping Agency 3 (Qinzhou Branch)Co., Ltd. 20,339,100 0.49% 2014 (廣東海陸通國際船舶代理欽州分公司) China Marine Bunker (PetroChina) 4 Co., Ltd. 19,267,500 0.47% (中國船舶燃料有限責任公司) Yuantong Marine Service Co., 5 Limited 11,498,500 0.28% (遠通海運設備服務有限公司)  Total  1,404,749,000  34.13% COSCO Petroleum Pte. Ltd. (中遠 1 1,379,933,200 33.34% 石油有限公司) COSCO (HK) Insurance Brokers 2 Ltd. 35,864,000 0.87% (中遠（香港）保險顧問有限公司) China Marine Bunker (PetroChina) 3 Co., Ltd. 26,951,500 0.65% (中國船舶燃料有限責任公司) 2013 Yuantong Marine Service Co., 4 Limited 11,889,700 0.29% (遠通海運設備服務有限公司) Guangdong Sea Land Express International Shipping Agency 5 (Qinzhou Branch) Co., Ltd. 10,267,200 0.25% (廣東海陸通國際船舶代理欽州分公司)  Total  1,464,905,600  35.39%

During the reporting period, none of the directors, supervisors, senior management

officers and core technical officers, other key connected persons or shareholders holding more than 5% shares in the Assets to be acquired had any interest in the five largest suppliers.

⑥ Operating conditions

Operating revenue of the tanker shipping business during the last three years are set out as follows: Unit: RMB10,000 2015 2014 2013 Type Amount Percentage Amount Percentage Amount Percentage Domestic crude oil 30,106.71 6.61% 27,953 7.41% 22,890.37 7.10% Domestic refined oil ------Foreign crude oil 352,669.07 77.46% 342,905 90.86% 288,284.21 89.49% Foreign refined oil 6,175.24 1.36% 4,399 1.17% 11,000.16 3.41% Vessels leasing for 66,361.78 14.57% 2,136 0.57% - - foreign oil Total revenue of oil 100% 377,392 100.00% 322,174.74 100% transportation 455,312.80

(2) LNG transportation business

① Overview of the LNG transportation business

Dalian Ocean mainly operates its LNG transportation business through CLNG, which was registered and established on 15 March 2004 in Hong Kong upon approval by MOFCOM (Shang He Pi [2004] No. 88 (商合批[2004]88號)). Dalian Ocean and China Merchants Group, being the shareholders of CLNG, each holds 50% of shares. CLNG owns the first and the largest LNG transportation fleet in China.

The principal activities of CLNG include investment in business related to LNG transportation; development and management for LNG transportation investments; investments in LNG vessels; investment in LNG vessel management companies; investment in LNG transportation companies; provision of consultation services such as management, technology and financing in LNG transportation. As of 31 December 2015, apart from the existing 6 LNG vessels in operation, CLNG also has orders for 15 LNG vessels on hand.

For the operation of existing projects and vessel management, 6 vessels are under the safe and secured operation by the management company of CLNG and guarantee reliable shipping for the contract performance of charterers.

For project development, with remarkable development in 2014, CLNG has been involved in the investments of 15 LNG vessels, including the cooperative investment with CNOOC Ltd. for the construction of 4 LNG vessels under the QC project; active participation in the investment in YAMAL project for Arctic Class LNG vessels, cooperative investment with Teekay corporation in Canada for construction of 6 Arctic Class LNG vessels; and cooperative investment with Dynagas and Sinotrans & CSC for 5 Arctic Class LNG vessels.

② LNG transportation business operation model

LNG transportation business operation model is mostly in the form of project bundles.

Current development projects of CLNG include the cooperative investment with CNOOC Ltd. for the construction of the QC project, cooperative investment with Teekay Corporation in Canada for construction of YAMAL Arctic Class LNG project, cooperative investment with Dynagas and Sinotrans & CSC in YAMAL Arctic Class LNG project, etc. Apart from the QC project in cooperation of CNOOC Ltd., the mode of operation for all of the above projects is in the form of project bundle operation, whereas the mode of operation for the cooperative investment with CNOOC Ltd. for the construction of the QC project is in the form of unified deployment of global fleets. All vessels are chartered to the charters under long-term (over and including 20 years) time charter.

③ Operating Conditions of CLNG

Dalian Ocean mainly operates its LNG business through CLNG. The below table set out the operating income recorded by CLNG during the reporting period: Unit: RMB10,000 Entry 2015 2014 2013 Operating income of 96,252.39 92,839.93 97,538.75 CLNG Note: It represents the total operating income recorded by CLNG which is owned as to 50% by Dalian Ocean. The operating income of CLNGis not consolidated in the combined financial statements of Dalian Ocean.

(3) LPG transportation business

① Overview of the LPG transportation business

The LPG transportation business is mainly conducted through Shenzhen COSCO Long Peng LNG Transport Ltd. (“Long Peng Company”), which is established in 2004 as a joint venture between Dalian Ocean and certain private enterprises (which are major cargo owners

of Long Peng Company), in which Dalian Ocean holds 70% of shares. As of 31 December 2015, Long Peng Company owned 4 LPG vessels with 11,600 deadweight tons.

② LPG transportation business operation model

The LPG transportation business of Dalian Ocean mainly adopts a combined operation model of time charter and self-operation. Dalian Ocean leases out two LPG vessels by time charter to ensure stable revenue will be generated even in a volatile market. At the same time, for self-operated vessels, Dalian Ocean actively develops the Taiwan Strait shipping route which charges a relatively higher rental to ensure a better revenue level for two other LPG vessels.

③ Operating conditions of LPG transportation business

Operating conditions of the LPG transportation business of Dalian Ocean during the last three years are set out as follows: Unit: RMB10,000 2015 2014 2013 Business Amount Percentage Amount Percentage Amount Percentage Self-operated LPG 46,940,000 66.40% 34,280,000 49.31% 28,050,000 46.76% business Time charter LPG 23,750,000 33.60% 35,240,000 50.69% 31,940,000 53.24% business Total of LPG 70,690,000 100% 69,520,000 100% 59,990,000 100% business

(III) Service quality control of Dalian Ocean

Service quality plays an increasingly important role in shipping enterprises for their competiveness improvement, which is the major content of daily management of Dalian Ocean. Dalian Ocean earnestly implements “Quality Vitalization Outline” issued by State Council and rules and regulations required by Ministry of Transport on quality management. Meanwhile, Dalian Ocean follows market-oriented, enhances quality works, improves quality awareness and service quality, formulates “Service Management Manual”, and requires each subsidiary formulating implementing rules on this basis, so that emphasizing quality management and implementing at every level.

Dalian Ocean puts quality works into every person and every segment working in the ships through conducting pre-dispatch training on crew, reporting communication of the leaders and rating activities between vessels and crew, and Dalian Ocean seriously sums up

the experience and conducts a wide range of communication and implements total quality management. Through establishing performance tracking mechanism, customer satisfaction survey and customer complaint management system, it would ask for customer comments on a regular basis, rectify deficiencies in the work immediately, respond to customer complaints quickly and effectively and improve its services. Dalian Ocean has maintained its overall stable situation of safe production, achieved a pass rate of 100% for examination of major oil companies for three consecutive years and an excellent PSC inspection results, listing the first among domestic oil transportation companies.

(IV) Composition of and change in key personnels of Dalian Ocean

As of 31 December 2015, senior crew as a percentage of the total number of crew members was approximately 59.60%, ranking first in terms of the number of senior crew in relation to liquid bulk cargo in China.

The crew composition by functions of Dalian Ocean in the last three years is set forth in the following table:

Unit: person

Employee type 2015 2014 2013 Senior executives 9 9 10 Operation officers 43 56 55 Safety managers (Managers in charge of crew and 106 108 99 managers in charge of vessels) Other managers (including finance, audit, law, IT, 377 414 459 administration and party affairs) Senior crew 1,478 1,443 1,506 Crew General crew 1,002 1,107 1,162 Total 3,015 3,137 3,291 As of 31 December 2015, employees with a undergraduate degree or above as a percentage of the total number of employees was 37.88%, and the composition by degrees is as follows:

Unit: person

Employee type 2015 2014 2013 Postgraduates 63 59 50 Undergraduates 1,079 1,087 1,095 Junior college graduates 881 912 953

Employee type 2015 2014 2013 Technical secondary school graduates 623 786 829 Employees with a level below technical secondary school 369 293 364 education Total 3,015 3,137 3,291

IV. MAJOR FINANCIAL INDICATORS OF THE ASSET TO BE ACQUIRED FOR THE LAST THREE YEARS According to the “Audit Report (Ruihua Shen Zi [2014] No. 01640164)” (瑞華審字 [2014]第01640164號《審計報告》), the “Audit Report (Ruihua Shen Zi [2015] No. 01640120)” (瑞華審字[2015] 01640120號《審計報告》) and the “Audit Report (Ruihua Shen Zi [2016] No. 01640070)” (瑞華審字[2016] 01640070號《審計報告》) issued by Ruihua Certified Public Accountants LLP, the major financial indicators for the last three years of DO Company/ Dalian Ocean are as follows:

(I) Major Data of the Combined Balance Sheet

As of 31 December 2015, the assets and liabilities of DO Company/ Dalian

Ocean for the last three years are set out as follows: Unit: RMB10,000 Item 31 December 2015 31 December 2014 31 December 2013 Total assets 1,723,883.57 1,519,206.46 1,459,911.17 Total liabilities 1,112,924.69 1,153,944.31 1,108,815.62 Total equity of owners 610,958.88 365,262.16 351,095.54 Including: Total equity attributable to 607,271.22 387,469.41 370,228.60 owners of the parent company

(II) Major Data of the Combined Income Statement

As of 31 December 2015, the operating conditions of DO Company/ Dalian Ocean during the last three years are set out as follows: Unit: RMB10,000 Item 2015 2014 2013 Operating revenue 482,038.66 412,654.70 360,771.34 Operating cost 361,415.47 411,529.02 413,910.88 Operating profit 78,288.21 -35,990.58 -85,971.04

Item 2015 2014 2013 Total profit 81,645.70 -31,794.82 -93,489.61 Net profit 80,813.78 -40,391.46 -94,457.80 Net profit attributable to owners of 80,408.91 -37,317.27 -90,949.00 the parent company Net profit after extraordinary profit and loss attributable to parent 76,460.28 -38,532.56 -85,135.44 company

(III) Major Data of the Combined Cash Flow Statement

As of 31 December 2015, the cash flows of DO Company/ Dalian Ocean during the last three years are set out as follows: Unit: RMB10,000 Item 2015 2014 2013 Net cash flow generated from 252,072.15 49,013.38 -23,981.68 operating activities Net cash flow generated from -166,959.58 -100,579.02 -25,512.62 investing activities Net cash flow generated from -16,575.19 44,761.43 85,072.56 financing activities Net increase in cash and cash 77,950.67 -6,485.72 33,913.12 equivalents Note: The financial data for 2013 and 2014 were audited raw financial data (combined) of DO Company prior to transformation; the financial data for 2015 were audited raw financial date (combined) after the transformation of DO Company into Dalian Ocean.

(IV) Main Composition of Extraordinary profit or loss Unit: RMB10,000 Item 2015 2014 2013 1. Profit or loss from disposal of non-current assets, including provision -4,791.36 -8,903.62 -6,968.13 for the write-off portion of asset impairment 2. Government grants credited to current 19,769.60 19,269.65 1,055.36 profit or loss 3. Trading financial assets held and disposed, profit or loss from changes in -92.91 -2,977.20 381.84 fair value arising from trading financial liabilities or investment gains 4. Profit or loss received from external 999.94 custodian loans 5. Other non-operating income and -11,620.74 -6,170.18 -1,605.80 expenses excluding the above items 6. Others 1,371.18 Sub-total 4,264.53 1,218.64 -5,765.55

Income tax effect 46.31 -22.80 27.34 Minority shareholder effect (after tax) 269.59 26.15 20.67 Total 3,948.63 1,215.29 -5,813.57 Net profit attributable to owners of the 80,408.91 -37,317.27 -90,949.00 parent company Net profit after extraordinary profit and 76,460.28 -38,532.56 -85,135.44 loss attributable to the parent company

For the years of 2013, 2014 and 2015, extraordinary profit or loss after income tax effect of Dalian Ocean was RMB-58.14mn, RMB12.15mn and RMB39.49mn respectively, and the percentage of extraordinary profit or loss after income tax effect in 2015 was 4.91% of the net profit for the current period.

The major extraordinary profit or loss item of Dalian Ocean was profit or loss from disposal of non-current assets and government grants credited to current profit or loss.

For the years of 2013, 2014 and 2015, profit or loss from disposal of non-current assets was RMB69.68mn, RMB-89.04mn and RMB-47.91mn respectively, mainly attributable to net loss incurred in vessel disposals. Due to the “scrap and build” policy, Dalian Ocean completely dismantled old vessels. Since 2014, new vessels have been progressively delivered with a subsequent slowdown in the pace of abandoning old vessels, but still some old vessels will be completely dismantled.

For the years of 2013, 2014 and 2015, government grants of Dalian Ocean credited to current profit or loss were RMB10.55mn, RMB192.70mn and RMB197.78mn respectively, mainly represents the subsidy for the retirement and replacement of vessels received, and receipts of such subsidy have been in place since 2014.

In addition to the complete dismantlement of old vessels as well as subsidy for the retirement and replacement of vessels received, the proportion of other extraordinary profit or loss of Dalian Ocean is not material.