COSCO SHIPPING Development Co., Ltd. - Annual Report 2005

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(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2866)

ANNOUNCEMENT OF THE FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER, 2005

FINANCIAL HIGHLIGHTS

Turnover increased 26.9% to RMB28,374,680,000
Operating profit decreased 9.0% to RMB4,730,576,000
Profit attributable to equity holders decreased 10.7% to RMB3,582,782,000

The board of directors (the “Board”) of China Shipping Container Lines Company Limited (“CSCL” or the “Company”) is pleased to present the audited consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31 December, 2005, together with the comparative figures for the year ended 31 December, 2004.

CHAIRMAN’S STATEMENT

After the prosperous shipping year in 2004, year 2005 was still a rather booming year in the shipping industry. Under such operating environment, the Group continued to develop at a rapid pace.

During 2005, capturing business opportunities in the shipping industry and relying on the continuous rapid growth in China’s economy, and making full use of its strengths in fleet, cost, operation and management, the Group was able to achieve remarkable results again under an operating environment where there was a general increase in operation costs. I am pleased to report that for the year ended 31 December, 2005, the Group recorded a turnover of RMB28,374,680,000, achieving an increase of 26.9% as compared with the same period last year. However, profit before income tax decreased by 8.2% as compared with the same period last year to RMB4,309,263,000 and profit attributable to equity holders decreased by 10.7% as compared with the last year to RMB3,582,782,000 as a result of an increase in operation cost such as fuel price, etc.

The Board recommends the payment of a final dividend of RMB0.12 per share.

OPERATION REVIEW

During 2005, the world economy was in the cycle of stable growth. Growth rate of the global economy for the year was 4.3% (information source: IMF forecast of world economy). With the increasing recovery of cross-border investments, world trade developed rapidly with a growth rate of approximately 7%. China’s economy still showed strong performance during 2005, achieving an increase of 9.9%. Total amount of imports and exports was more than RMB1,400 billion (information source: National Bureau of Statistics of China). As a result, container through-put in China for the year 2005 reached 75.8 million TEU, representing an increase of 23% as compared to 2004 (information source: PRC’s Ministry of Communications). Global container through-put for the year 2005 increased by approximately 9.9% as compared to 2004 (information source: Drewry quarterly report). The overall performance of the market is quite prosperous.

However, the rapid growth of global container shipping capacity as well as the continuous rise in the operation cost of fuel price, fleet cost and port charges constituted to a certain extent negative factors in the operation of liner shipping companies.

The Group adopted a series of measures during 2005 according to the complex and fluctuating market situation:

I. The Group continued to optimize fleet structure and improve core competitiveness of the fleet. For the year 2005, 21 large container vessels with a total capacity of 95,113 TEU were added to the fleet. As a result, vessels with capacity of more than 4,000 TEU accounted for 76.7% of total shipping capacity of the Group and the average age of the fleet was 1.95 years old only. The large-scale and modernization of the container fleet had been enhanced to a new level. The fleet structure was further improved.
II. The Group upgraded shipping capacity in the major trade lanes and improved the overall structure of global trade lanes. The Group upgraded the shipping capacity in trade lanes including West America route and Europe/Mediterranean route to satisfy the demand for capacity due to an increase in market trading volume. The Group newly inaugurated trade lanes including the fifth European route, the third Australian route, the Around The World route, Europe – Mediterranean route and Mediterranean – North Africa route. At the same time, the Group strengthened service network of feeder transportation including regions such as Mediterranean, Southeast Asia and the Yangtse River, etc.
III. The Group strived to explore and expand the market and enhance its ability in soliciting cargo. The Group was able to enlarge the proportion of basic supply of cargo and enhance ability to withstand fluctuation and risks in market through tasks including setting up additional agency network points, supervising port agents to strengthen ability in soliciting cargo as well as contracting with beneficial cargo owners and large customers.
IV. The Group strived to stringently control its operation costs and increase income while reducing expenses. The Group’s operation costs had increased rapidly as a result of a relatively large increase in additional capacity and an increasingly improved overall arrangement of trade lanes. Therefore, the Group on the one hand adjusted the surcharge level, on the other hand devoted much efforts to reduce each kind of operation cost including transshipment cost, container control cost and fuel cost, etc.
V. The Group strengthened its cooperation with other liner shipping companies in order to reduce operation cost while expanding the coverage of trade lanes.
VI. The Group rode on its unique advantage and increased income by means of flexible deployment of resources. The Group enhanced utilization of its vessels, saved costs of purchasing feeder services and reduced cost of repositioning containers through measures such as deploying reefer containers to carry dry cargo, carrying feeder cargoes on major trade lanes and carrying both international and domestic cargo on the same vessel, etc.

OUTLOOK

In 2006, the world economy and world trade will continue the current trend of stable growth. It is forecasted by International Monetary Fund that the growth in the world’s economy will maintain at the level of approximately 4.3% and trade volume will increase by about 7.4%. It is hopeful that the PRC’s foreign trade will increase by about 15% as compared to 2005 to over RMB1,600 billion. (information source: Ministry of Commerce of the PRC).

Although the demand for container shipping maintains at a booming state, the concentrated delivery of global new additional capacity in 2006 will result in pressure on the freight rate of major trade lanes in the shipping market. It is forecasted by Drewry that in 2006, the global additional capacity will increase by about 15.7%, which is higher than the increase in container through-put of 9.7%. However, we believe that the pressure on the trade lanes with concentrated capacity will be alleviated as a result of the adjustment of trade lanes of each liner shipping company. Moreover, coverage of trade lanes will be further expanded. New regional feeder services including the Black Sea, Mediterranean and the Caribbean Sea are being developed and major trade lanes are being extended as a result of the growth in the economies in the Middle East, South Asia, Africa, South America and East Europe, etc. Accordingly, certain proportion of newly increased capacity will be digested. In addition, the state of surplus capacity growth over container volume growth will be alleviated to a certain extent as a result of factors including port infrastructure and the trade imbalance between eastbound and westbound.

Under the present operating environment, the Group, always with investors’ interests in mind, will make full use of its high level of management and operation skill to pursue excellence.

In 2006, the Group will implement the following strategies and operation programme:

I. To continue to optimize fleet structure and improve core competitiveness of the Group. In 2006, 13 new vessels with a total capacity of 63,992 TEU will be put into operation, of which the super large container vessels with a capacity of 9600 TEU will be delivered and put into operation in trade lanes in Far East/ Europe. It is estimated that the container vessels with capacity of over 4000 TEU will account for 78.6% of the total capacity of the Group by the end of the 2006. Since most of these vessels were ordered during the period between 2001 and 2003, which was the down cycle of the shipping industry, thus the cost is relatively lower than market price. With the deployment of these vessels, the Group will reduce its cost further in the future.

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II. To expand the trade lanes coverage and explore the more profitable shipping business between third countries
The Group has inaugurated many new trade lanes according to the market situation including the route from Far East to Middle East, the route from Far East to the west coast of South America, the route from Middle East to Europe, the route from Europe to the east coast of North America and so on and is planning to inaugurate the trade lanes including route from Europe to the east coast of South America, route 7 to Europe, route 4 to the Mediterranean sea, the route through Red Sea, the route from Europe to US Gulf, the route from Europe to Latin America and the route from the Mediterranean sea to the West Africa, etc..
The Group will continue to construct and further improve the local regional networks within the regions in Asia, the Mediterranean sea, Middle East, Baltic Sea, and Latin Americas, etc, and this will further expand the coverage of its service as well as reduce the transshipment cost.
III. To expand and enhance the cooperation between the trade lanes and the exchange of slots, increase the frequency of the shipping schedules, expand the market, shorten the delivery time, decrease the volume of transshipment as well as increase the efficiency and to reduce cost.
IV. To stabilize freight rates and increase profits. As the market has been improving, all trade lanes have been fully loaded and even overloaded since March, which laid a sound foundation for increasing freight rates. The freight rates for Europe/Mediterranean trade lanes have been increased by US$200/US$400 (20’ GP/40’ GP) from 1st April. From 1st May, the freight rates for the west coast of America trade lanes will be increased by US$150/FEU, and inland America will be increased by US$350/FEU and east coast of America will be increased by US$400/FEU. The freight rates for Australian, Middle East and African trade lanes also increased at varying degrees. What’s more, the Group has also adjusted fuel surcharge in a timely manner according to the upward trend of the oil price. The fuel surcharge for Europe/Mediterranean trade lanes was increased to US$270/TEU from US$240/TEU earlier this year. The fuel surcharge for American trade lanes in Q1 has been increased to US$590/TEU from US$455/TEU at the end of last year.
V. To control cost and improve efficiency. The Group has locked in 270,000 tons of fuel. Calculated on the basis of 75,800 tons that have been consumed, the Group has saved about US$1,780,000. Calculated on the basis of the current oil price, savings for the whole year is expected to be around US$10,000,000 by oil price hedging. The Group will continue to pay close attention to changes in the fuel market and lock in fuel in a timely manner and control sailing speed to save costs. In addition, the Group will refine its management on its port charges, containers costs and the costs of inland, transshipment and inland transshipment. For example, to reduce inland expenses by controlling the proportion of inland cargo in North America within 40%.
VI. By relying on the strong growth of China’s economy, to continue to expand its market share of China’s imports and exports and steadily boost its market share of domestic ports from 10% to 15%. Furthermore, in order to satisfy the expanding demand of its fleet, the Group will also focus on those newly inaugurated third country markets to increase the overseas network of cargo solicitation ports hence to increase its market share of global container shipping market.
VII. To control the investment size appropriately according to the change of shipping market thus to guarantee the investment return and control the gearing ratio in a reasonable range. Meanwhile the Group will continue to pay close attention to the foreign exchange risk (i.e. RMB appreciation), and adopt appropriate measures including timely foreign exchange conversion and financial hedging instruments to mitigate the Group’s currency exposure.
VIII. To seek new sources of profit growth; the export and import volume of vehicle in China has been increased rapidly and the Group will enter into the vehicleshipping business at the appropriate time. Moreover, the Group will also strengthen the strategy research related to the industry development such as terminal and logistics according to the future development of the Company, so as to enhance extended services and increase marginal profit.

The outstanding achievement in 2005 is owed to the efforts of all the employees of the Group and the support from all of the shareholders. I would like to take this opportunity to express my sincere gratitude on behalf of the Group to all of them. Regarding the future, the Group, with full confidence, will return more to the shareholders with the unchanged spirit of professionalism, diligence and commitment.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 December, 2005

Note
Turnover
3
Operating costs
4,6
Gross profit
Other income
5
Administrative and general expenses
6
Operating profit
Finance costs
7
Share of profit of an associated company
Profit before income tax
Income tax expense
8
Profit for the year
Attributable to:
Equity holders of the Company
Minority interest
Dividends
10
Basic earnings per share for profit attributable to the equity
holders of the Company during the year
(expressed in RMB per share)
9

Year ended 31 December
2005
2004
Restated
RMB’000
RMB’000
28,374,680
22,363,851
(23,331,132)
(16,879,582)
5,043,548
5,484,269
238,262
52,634
(551,234)
(335,680)
4,730,576
5,201,223
(427,273)
(512,495)
5,960
5,840
4,309,263
4,694,568
(724,168)
(674,177)
3,585,095
4,020,391
3,582,782
4,013,622
2,313
6,769
3,585,095
4,020,391
723,600
1,686,098
RMB0.59
RMB0.80

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CONSOLIDATED BALANCE SHEET

As at 31 December, 2005

Note ASSETS Non-current assets Fixed assets Land use rights Goodwill Interest in an associate company Current assets Bunkers Trade and notes receivables 11 Prepayments and other receivables Cash and cash equivalents Total assets EQUITY Capital and reserves attributable to the Company’s equity holders Share capital Other reserves Retained earnings – Proposed final dividend – Others Minority interest Total equity LIABILITIES Non-current liabilities Long-term bank loans Finance lease obligations Deferred tax liabilities Current liabilities Trade and notes payables 12 Accrual and other payables Short-term bank loans Long-term bank loans – current portion Finance lease obligations – current portion Income tax payable Special dividend to ultimate holding company Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at 31 D 2005 RMB’000 20,770,813 13,686 13,281 47,596 20,845,376 553,080 4,054,345 129,154 3,423,373 8,159,952 29,005,328 6,030,000 6,128,838 723,600 3,709,426 37,460 16,629,324 5,107,112 2,404,974 637,120 8,149,206 2,759,412 305,702 – 501,053 458,681 201,950 – 4,226,798 12,376,004 29,005,328 3,933,154 24,778,530	ecember 2004 Restated RMB’000 15,190,586 – 13,281 46,892
		15,250,759
		250,051 3,357,071 313,488 5,863,491
		9,784,101
		25,034,860
		6,030,000 5,613,174 1,206,000 1,463,665 32,349
		14,345,188
		4,569,928 1,616,829 149,957
		6,336,714
		2,140,778 338,569 381,520 445,030 438,948 128,015 480,098
		4,352,958
		10,689,672
		25,034,860
		5,431,143
		20,681,902

NOTES:

1. GENERAL INFORMATION

The Company was established in the People’s Republic of China (the “PRC”) on 28 August, 1997 as a company with limited liability under the Company Law of the PRC. On 3 March, 2004, the Company was transformed into a joint stock limited company under the Company Law of the PRC (the “Transformation”) by converting its registered capital and reserves as at 31 October, 2003 into 3,830,000,000 shares of RMB1 each. The Company’s H shares (the “Share Issue”) have been listed on the Main Board of the Stock Exchange of Hong Kong Limited (the “Main Board”) since 16 June, 2004.

2. BASIS OF PREPARATION AND CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

The consolidated accounts of the Company have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). The consolidated accounts have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities at fair value through profit or loss, which are carried at fair value. The adoption of new/revised HKFRS

In 2005, the Group adopted the new/revised standards and interpretations of HKFRS below, which are relevant to its operations. The 2004 comparatives have been amended as required, in accordance with the relevant requirements.

HKAS 1	Presentation of Financial Statements
HKAS 2	Inventories
HKAS 7	Cash Flow Statements
HKAS 8	Accounting Policies, Changes in Accounting Estimates and Errors
HKAS 10	Events after the Balance Sheet Date
HKAS 16	Property, Plant and Equipment
HKAS 17	Leases
HKAS 21	The Effects of Changes in Foreign Exchange Rates
HKAS 23	Borrowing Costs
HKAS 24	Related Party Disclosures
HKAS 27	Consolidated and Separate Financial Statements
HKAS 28	Investments in Associates
HKAS 32	Financial instruments: Disclosures and Presentation
HKAS 33	Earnings per Share
HKAS 36	Impairment of Assets
HKAS 38	Intangible Assets
HKAS 39	Financial Instruments: Recognition and Measurement
HK(SIC)-Int 15	Operating Leases – Incentives
HKFRS 2	Share–based Payments
HKFRS 3	Business Combinations

The adoption of new/revised HKASs 1, 2, 7, 8, 10, 21, 23, 24, 27, 28, 33, 36 and HK(SIC)-Int 15 did not result in substantial changes to the Group’s accounting policies. In summary: (i) HKAS 1 has affected the presentation of minority interest, share of net after-tax results of associated companies and other disclosures.

(ii) HKASs 2, 7, 8, 10, 23, 27, 28, 33 and HK(SIC)-Int 15 had no material effect on the Group’s policies.

(iii) HKAS 21 had no material effect on the Group’s policy. The functional currency of each of the consolidated entities has been re-evaluated based on the guidance to the revised standard.

(iv) HKAS 24 has affected the identification of related parties and some other related-party disclosures.
(v) HKAS 16

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Vessel repairs and surveys

The adoption of HKAS 16 has resulted in a change in the accounting policy relating to the vessel repairs and surveys. Upon acquisition of a vessel, the components of the vessel which are required to be replaced at the next dry-docking are identified and these costs are depreciated over the period to the next estimated dry-docking date. Costs incurred on the subsequent dry-docking of vessels are capitalised and depreciated over the period to the next estimated dry-docking date. When significant dry-docking costs are incurred prior to the expiry of the depreciation period, the remaining costs of the previous dry-docking are written off immediately.

In previous years, the components of the vessels which are required to be replaced at the next dry-docking are not separately identified and are depreciated over the estimated useful life of the vessels and dry-docking costs for vessels are charged to the profit and loss account as incurred. This accounting policy has been changed to conform with HKAS 16 and the change has been applied retrospectively. The effect of the changes is summarised below:

change has been applied retrospectively. The effect of the changes is summarised below:
	As at 31 December
	2005		2004
	RMB’000	RMB’000
Decrease in opening retained earnings	15,874		7,087
Decrease in fixed assets	25,627	23,693
Decrease in deferred tax liabilities	8,458		7,819
	Year ended 31 December
	2005		2004
	RMB’000	RMB’000
Increase in operating cost	1,933	13,115
Decrease in income tax expense	638		4,328

Residual values of the assets

The residual values of assets and their useful lives are reviewed and adjusted if appropriate, at each balance sheet date.

During the year, the residual values of fixed assets were reassessed, and accordingly, depreciation charge of fixed assets for the year ended 31 December, 2005 has been calculated based on the revised estimated residual values. This represented a change in accounting estimate and the depreciation charge for the year has been reduced by RMB111 million. (vi) HKAS 17

The adoption of revised HKAS 17 has resulted in a change in the accounting policy relating to the reclassification of land use rights from fixed assets to operating leases. The up-front prepayments made for the land use rights are expensed in the profit and loss account on a straight-line basis over the period of the lease or when there is impairment, the impairment is expensed in the profit and loss account. In prior years, the land use rights were accounted for at cost less accumulated depreciation and accumulated impairment. The adoption of HKAS 17 has resulted in restatement of the cost of the land use rights of RMB13,686,000 as at 31 December, 2005 and a corresponding decrease in fixed assets of the same amount. (vii) HKASs 32 and 39

The adoption of HKASs 32 and 39 has resulted in a change in the accounting policy relating to the classification of financial assets at fair value through profit or loss and change in recognition and measurement of loans and receivables and borrowings.

(viii) HKFRS 3, HKAS 36 and HKAS 38

The adoption of HKFRS 3, HKAS 36 and HKAS 38 results in a change in the accounting policy for goodwill. Until 31 December, 2004, goodwill was:

Amortised on a straight line basis over a period of 10 years; and
Assessed for an indication of impairment at each balance sheet date.

In accordance with the provisions of HKFRS 3:

The Group ceased amortisation of goodwill from 1 January, 2005;
Accumulated amortisation as at 31 December, 2004 has been eliminated with a corresponding decrease in the cost of goodwill;
From the year ended 31 December, 2005 onwards, goodwill is tested annually for impairment, as well as when there is indication of impairment.
HKFRS 3 is applied prospectively from 1 January, 2005.
(ix) HKFRS 2

The adoption of HKFRS 2 has resulted in a change in the accounting policy for share-based payments. Until 31 December, 2004, there was no share-based scheme in place. Effective on 1 January, 2005, the Group expenses the cost of share appreciation rights in the profit and loss account. The share appreciation rights scheme of the Group was introduced on 12 October, 2005.

All changes in the accounting policies have been made in accordance with the transitional provisions in the respective HKFRS. All standards adopted by the Group are applied prospectively on or after 1 January, 2005 other than HKAS16, which requires retrospective application.

Standards, interpretation and amendments to published standards that are not yet effective

Certain new standards, amendments and interpretations to existing standards (collectively “New Standards”) have been published by the HKICPA that are effective for accounting periods beginning on or after 1 January, 2006 or later periods.

The Group does not early adopt these New Standards in the accounts for the year ended 31 December, 2005. The Group has already commenced an assessment of the impact of these New Standards but is not yet in a position to state whether these New Standards would have a significant impact on its results of operations and financial position.

3. TURNOVER AND SEGMENT INFORMATION

The principal activities of the Group are owning, chartering and operating container vessels for the provision of international and domestic container marine transportation service. Turnover represents gross revenues from liner and chartering services, net of discounts allowed, where applicable.

Turnover Liner Chartering	2005 RMB’000 28,126,526 248,154 28,374,680	2004 RMB’000 22,038,357 325,494
		22,363,851

In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical segments as the secondary reporting format.

The business segment reporting includes provisions of liner service and chartering of vessels. In respect of the geographical segment reporting, segment revenues from liner and chartering services cover the world’s major trade lanes.

Primary reporting format – business segments The Group’s business is organised into two business segments: liner and chartering. The Group’s business is dominated by provision of liner services. The chartering business is of insufficient size to be reported separately.

Secondary reporting format – geographical segments

The Group’s liner and chartering businesses are managed on a worldwide basis. The turnover generated from the world’s major trade lanes includes America, Europe/Mediterranean, Australia, East and Southeast Asia, China domestic and others.

The directors of the Company consider that the nature of the Group’s business precludes a meaningful allocation of the Group’s assets to specific geographical segments as defined under HKAS 14 “Segment Reporting”. Accordingly, geographical segment information is only presented for turnover:

4.

5.

America Europe/Mediterranean Australia East and Southeast Asia China Domestic Others OPERATING COSTS Operating costs Container and cargo Veswsel and voyage Sub-route and others OTHER INCOME Information technology services fees Recovery of payment for claims Compensation income_(note (i))_ Interest income	2005 RMB’000 11,341,455 10,451,232 1,378,370 1,758,694 1,938,820 1,506,109 28,374,680 2005 RMB’000 10,473,989 7,752,946 5,104,197 23,331,132 2005 RMB’000 25,825 28,305 99,331 84,801 238,262	2004 RMB’000 8,687,942 7,806,185 1,215,417 1,527,992 1,668,410 1,457,905
		22,363,851
		2004 Restated RMB’000 8,003,143 5,646,923 3,229,516
		16,879,582
		2004 Restated RMB’000 24,029 14,565 – 14,040
		52,634

Note:

(i) Pursuant to an agreement between a fellow subsidiary and the City of Los Angeles on 21 May, 2005, the City of Los Angeles will make compensation to the fellow subsidiary for the delay in providing premises at Berths 100-102. Out of the aforementioned compensation receivable from the City of Los Angeles, the fellow subsidiary agreed to pay US$12,000,000 to the Company to compensate the Company for the additional costs incurred by the Group due to the delay in the provision of port related services.

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6. EXPENSES BY NATURE

7.

8.

Auditor’s remunerations Cost of bunkers consumed Depreciation: – Owned container vessels chartered-out under operating leases – Other owned assets – Containers under finance leases Amortisation of goodwill Loss on disposal of fixed assets Operating lease rental: – Container vessels – Containers – Buildings Provision/(reversal of provision) for impairment of receivables Staff costs, including directors’ and supervisors’ emoluments Foreign exchange losses/(gains) Bank charges FINANCE COSTS Interest expenses: – bank loans – finance lease obligations Total interest expense Less: amount capitalised in vessels under construction The capitalisation rate applied to funds borrowed generally and utilised for the vessels under construction is 5.46% (2004: 5.25%) per annum fo INCOME TAX EXPENSE Current income tax – Hong Kong profits tax_(note (i)) – PRC enterprise income tax(note (ii))_ Deferred taxation	2005 RMB’000 4,500 4,383,763 20,316 414,101 441,202 875,619 – 5,034	2005 RMB’000 4,500 4,383,763 20,316 414,101 441,202 875,619 – 5,034	2004 Restated RMB’000 3,145 2,594,842
			10,939 452,599 350,052
			813,590 458 270
	2,360,813 587,459 32,809		2,557,456 409,826 29,503
	2,981,081 6,211 605,171 58,699 1,598 2005 RMB’000 278,404 288,520 566,924 (139,651 ) 427,273 r the year ended 31 Decembe 2005 RMB’000 2,198 234,807 487,163 724,168		2,996,785 (4,623) 516,241 (49,821 ) 3,638 2004 Restated RMB’000 341,660 266,549 608,209 (95,714 ) 512,495 r, 2005. 2004 Restated RMB’000 7,214 425,956 241,007 674,177

(i) Hong Kong profits tax

Hong Kong profits tax has been provided at the rate of 17.5% (2004: 17.5%) on the estimated assessable profits for year ended 31 December, 2005.

(ii) PRC enterprise income tax (“EIT”)

Pursuant to notifications issued by the State Tax Bureau on 2 September, 2004, the Company and certain of its subsidiaries (“Tax Entities”) were assessed for EIT on a consolidated basis with China Shipping (Group) Company for the period from 1 January, 2004 to 2 March, 2004. China Shipping (Group) Company did not allocate any EIT to the Tax Entities for the period. Accordingly, the Tax Entities did not have any EIT payable for the period from 1 January, 2004 to 2 March, 2004.

On 3 March, 2004 the Company was converted into a joint stock limited company under the Company Law of the PRC and was registered in the Pudong New District. According to the relevant laws and regulations, the EIT rate applicable to the Company from 3 March, 2004 onwards is 15%. The Company’s subsidiaries previously included in the Tax Entities are subject to EIT at a rate of 33% from 3 March, 2004 onwards.

The Company’s other subsidiaries incorporated in the PRC are subject to EIT at a rate ranging from 0% to 33% for the year ended 31 December, 2005 (2004: 0% – 33%). Pursuant to relevant EIT regulations, the profits derived by the Company’s overseas subsidiaries are subject to EIT. The Company has obtained approval from the tax bureau to adopt a fixed rate of 16.5% on the profits of the overseas subsidiaries for EIT purposes.

9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company RMB3,582,782,000 (2004: RMB 4,013,622,000) by the weighted average number of 6,030,000,000 (2004: 5,026,174,863) shares in issue during the year.

10.

Profit attributable to equity holders of the Company Weighted average number of ordinary shares in issue (thousands) Basic earnings per share (RMB per share) Diluted earnings per share has not been presented as the Company has no potential dilutive shares during the year. DIVIDENDS Special dividend to ultimate holding company_(note (i)) Final, proposed of RMB0.12 (2004: RMB0.2)(note (ii))_ – per domestic share – per H share	2005 RMB’000 3,582,782 6,030,000 RMB0.59 2005 RMB’000 – 433,200 290,400 723,600 723,600	2004 RMB’000 4,013,622
		5,026,175
		RMB0.80
		2004 RMB’000 480,098 722,000 484,000
		1,206,000
		1,686,098

(i) Special dividend to ultimate holding company

In accordance with the “Provisional Regulation relating to Corporate Reorganization of Enterprises and Related Management of State-owned Capital and Financial Treatment”, which was issued by the Ministry of Finance of the PRC and became effective from 27 August, 2002, the Company is required to distribute to China Shipping (Group) Company the Company’s net profit for the period from 1 November, 2003 (being the first day after the date of the valuation of the assets of the Company) to 2 March, 2004 (being the day immediately prior to the conversion of the Company into a joint stock limited company) (the “Special Period”), determined in accordance with Accounting Standards for Business Enterprises and Accounting Systems for Business Enterprises of the PRC, payable out of the Company’s internal resources and/or cash generated from the Company’s operating activities (the “Profit Appropriation”). Holders of H Shares are not entitled to participate in the distribution arising from the Profit Appropriation.

The Company has engaged BDO Zhong Hua Certified Public Accountants上海眾華滬銀會計師事務所 to perform a special audit on the Company’s accounts for the Special Period to determine the profit for the Special Period for distribution to China Shipping (Group) Company. According to the audited accounts, the net profit for the Special Period amounted to RMB480,098,000.

(ii) The dividends paid during the year ended 2005 were special dividend to ultimate holding company of RMB480,098,000 and 2004 final proposed dividend of RMB 1,206,000,000 (RMB 0.2 per share). A dividend in respect of 2005 of RMB0.12 per share, amounting to a total dividend of RMB723,600,000 was proposed at the Board of Directors’ Meeting held on 18 April, 2006. These accounts do not reflect this dividend payable.

– 5 –

11. TRADE AND NOTES RECEIVABLES

Trade receivables – Fellow subsidiaries – Others Notes receivables The ageing analysis of the trade and notes receivables is as follows: 1 to 3 months 4 to 6 months 7 to 9 months 10 to 12 months Over 1 year Less: provision for impairment of receivables	The Group As at 31 December 2005 2004 RMB’000 RMB’000 1,997,785 1,955,125 1,933,858 1,283,123 3,931,643 3,238,248 122,702 118,823 4,054,345 3,357,071 The Group As at 31 December 2005 2004 RMB’000 RMB’000 2,547,888 3,146,994 699,593 313,935 428,547 – 499,913 11,527 8,463 8,463 4,184,404 3,480,919 (130,059 ) (123,848 4,054,345 3,357,071	The Group As at 31 December 2005 2004 RMB’000 RMB’000 1,997,785 1,955,125 1,933,858 1,283,123 3,931,643 3,238,248 122,702 118,823 4,054,345 3,357,071 The Group As at 31 December 2005 2004 RMB’000 RMB’000 2,547,888 3,146,994 699,593 313,935 428,547 – 499,913 11,527 8,463 8,463 4,184,404 3,480,919 (130,059 ) (123,848 4,054,345 3,357,071
		3,480,919 (123,848
		3,357,071

Credit policy

Credit terms in the range between 30 to 50 days are granted to those customers with good payment history. Invoices to other customers are due for payment upon presentation.

12. TRADE AND NOTES PAYABLES

Trade payables – Fellow subsidiaries – Others Notes payables The ageing analysis of the trade and notes payables is as follows: 1 to 3 months 4 to 6 months 7 to 9 months	The Group As at 31 December 2005 2004 RMB’000 RMB’000 467,858 268,862 2,281,554 1,852,116 2,749,412 2,120,978 10,000 19,800 2,759,412 2,140,778 The Group As at 31 December 2005 2004 RMB’000 RMB’000 1,954,087 1,600,936 697,283 525,038 108,042 14,804 2,759,412 2,140,778	The Group As at 31 December 2005 2004 RMB’000 RMB’000 467,858 268,862 2,281,554 1,852,116 2,749,412 2,120,978 10,000 19,800 2,759,412 2,140,778 The Group As at 31 December 2005 2004 RMB’000 RMB’000 1,954,087 1,600,936 697,283 525,038 108,042 14,804 2,759,412 2,140,778
		2,140,778

The figures above in respect of the preliminary announcement of the Group’s results for the year ended 31 December, 2005 have been agreed by the Group’s auditors, PricewaterhouseCoopers, to the amounts set out in the Group’s consolidated accounts for the year. The work performed by PricewaterhouseCoopers in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by PricewaterhouseCoopers on the preliminary announcement.

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

For the year ended 31 December, 2005, the Group recorded a turnover of RMB28,374,680,000, representing an increase of 26.9% as compared to the previous year; profit before income tax was RMB4,309,263,000, representing a decrease of 8.2% as compared to the last year; profit attributable to equity holders amounted to RMB3,582,782,000, representing a decrease of 10.7% as compared to the last year; loaded cargo volume for the whole year amounted to 4,597,395 TEU, representing an increase of 25.8% as compared to the last year. For the year ended 31 December, 2005, the average freight rate per TEU of the Group amounted to RMB6,049.8, representing an increase of 0.8% as compared to the previous year.

As at 31 December, 2005, the total shipping capacity of the Group reached 347,851 TEU. The average shipping capacity for the year increased 30.4% as compared to last year.

FINANCIAL REVIEW

Turnover

The Group’s turnover increased by RMB6,010,829,000 or 26.9% from RMB 22,363,851,000 for the year ended 31 December, 2004 to RMB28,374,680,000 for the year ended 31 December, 2005. The increase in turnover was primarily due to:

Increased volume of loaded cargoes The volume of loaded cargoes for the year ended 31 December, 2005 amounted to 4,597,395 TEU, representing an increase of 25.8% as compared to year 2004 as a result of the enhanced shipping capacity on major trade lanes and the improving of the overall structure of the global trade lanes through the deployment of new and large container vessels.

Analysis of loaded container volume by trade lanes

Principal market America Europe/Mediterranean Australia East and Southeast Asia China domestic Others Total	2005 TEU 1,124,841 1,229,289 194,216 572,215 1,402,272 74,562 4,597,395	2004 TEU Change 892,838 26.0% 885,981 38.7% 163,883 18.5% 488,017 17.3% 1,101,882 27.3% 122,166 –39.0% 3,654,767 25.8%

Freight rate:

The Group’s average freight rate per TEU amounted to RMB6,049.8, representing an increase of 0.8% as compared to year 2004. In particular, the average freight rate per TEU for international trade lanes recorded an increase of about 2.0% as compared to year 2004 to RMB8,098.2. The main reason for the slow down in growth rate of international trade lanes was that from the fourth quarter of year 2005, the decrease of freight rates for Europe/Mediterranean and Australian trade lanes dragged down the average freight rate for the whole year. The average freight rate per TEU for domestic trade lanes decreased by RMB131.5 as compared to the same period last year to RMB1,382.6 as a result of the PRC’s macroeconomic control and the more severe competition in the domestic market.

– 6 –

Operating costs

For the year ended 31 December, 2005, total operating costs amounted to RMB23,331,132,000, representing an increase of 38.2% as compared to year 2004. However, operating costs, on a per TEU basis, increased by 9.9% as compared to year 2004 to RMB4,996.2. The increase in operating costs was mainly due to:

Container and cargo costs increased by 30.9% from RMB 8,003,143,000 in 2004 to RMB10,473,989,000 mainly due to the increase in the volume of loaded cargoes. Port charges amounted to RMB1,856,747,000, representing an increase of 51.9% as a result of extended services, higher voyage frequencies and increase in port calling and canal passing frequency. The stevedore charges for loaded and empty containers amounted to RMB6,506,474,000, representing an increase of 26.6%, principally due to the increase in the volume of loaded cargoes in the international and domestic trade lanes and repositioning of empty containers.
Vessel and voyage costs amounted to RMB7,752,946,000 for the year ended 31 December, 2005, representing an increase of 37.3% as compared to year 2004. To a certain extent, vessel and voyage costs per TEU decreased with the deployment of large vessels which were ordered by the Group at low costs during the down cycle of the shipping industry. However, with the rapid rise in fuel price in 2005, the annual average closing price of crude oil in the New York commodity exchange was US$56.4 per barrel, representing an increase of 37.2% as compared to year 2004. As a result, the average unit price of fuel increased by US$69.8 per ton or 37.9% as compared to last year to US$253.9 per ton in 2005 and accordingly fuel and oil costs increased by RMB1,154,000,000. As a result, the Group’s vessel and voyage costs per TEU increased by RMB141.3 from RMB1,545.1 in 2004 to RMB1,686.4 in 2005.
Sub-route and other costs amounted to RMB5,104,197,000, representing an increase of 58.0% as compared to year 2004. The increase was mainly due to an increase in volume of sub-route services and the amount of inland cargo.

Gross profit

Due to the above reasons, the Group recorded a gross profit of RMB5,043,548,000 in 2005, representing a decrease of RMB440,721,000 or 8.0% as compared to year 2004.

Income tax expense

Before 3 March, 2004, the Tax Entities were covered in the consolidated enterprise income tax filing of China Shipping (Group) Company, the Tax Entities’ parent company and hence were exempt from enterprise income tax (“EIT”). With effect from 3 March, 2004, on which date the Company was converted into a joint stock limited company under the Company Law of the PRC in the Pudong New District, the EIT rate applicable to the Company has been 15% and the Company’s subsidiaries previously covered by the consolidated EIT filing have been subject to EIT at a rate of 33%. The Company’s other subsidiaries incorporated in the PRC are subject to EIT at a rate ranging from 0% to 33% for the year ended 31 December, 2005. The profits derived by the Company’s overseas subsidiaries are subject to EIT at a fixed rate of 16.5%, as approved by the tax bureau, on the profits of the overseas subsidiaries for EIT purpose. Accordingly, the effective tax rate of the Group increased from 14.4% in 2004 to 16.8%.

Administrative and general expenses

As at 31 December, 2005, the Group’s administrative and general expenses were RMB551,234,000, representing an increase of 64.2% as compared to year 2004. This is mainly due to exchange losses of RMB58,699,000 recorded in the year as a result of RMB appreciation.

Profit attributable to equity holders

Due to the above reasons, the profit attributable to the equity holders of the Company decreased by RMB430,840,000 or 10.7% from RMB 4,013,622,000 in 2004 to RMB3,582,782,000 in 2005.

Liquidity and financial resources

The Group’s principal sources of working capital have been the cash flow from operations and bank borrowings. Cash is mainly used in financing operating costs, new vessels, purchase of containers, payment of dividends and the repayment of principal and interest for bank borrowings and finance leases.

As at 31 December, 2005, the Group’s total bank loans were RMB5,608,165,000. The maturity profile spreads over a period between 2006 and 2015, with RMB501,053,000 repayable within one year, RMB753,461,000 between one to two years, RMB2,543,910,000 between two to five years, and RMB1,809,741,000 over five years. The Group’s long-term bank loans are mainly used for the purchase of new vessels and containers.

As at 31 December, 2005, the long-term bank loans were secured by mortgages over several container vessels and vessels under construction with a net book value, RMB6,727,496,000 (31 December, 2004: RMB 4,061,047,000), assignment of shipbuilding contracts and charges over shares of certain vessel owning subsidiaries. As at 31 December, 2005, the Group had fixed interest loans in the amount of RMB3,996,800,000 and USD loans at floating interest rates in the amount of RMB1,611,365,000. The Group’s loans are primarily denominated in Renminbi and US dollars while cash and cash equivalents are also denominated in these two currencies.

Net current assets

As at 31 December, 2005, the Group’s net current assets amounted to RMB3,933,154,000.

Current assets mainly comprised bunker inventory of RMB553,080,000, trade and notes receivables of RMB4,054,345,000, prepayments and other receivables of RMB129,154,000 and cash and bank balances of RMB3,423,373,000.

Current liabilities mainly comprised trade and notes payables of RMB2,759,412,000, accrual and other payables of RMB305,702,000, income tax payable of RMB201,950,000, long-term borrowing due within one year of RMB501,053,000 and finance lease obligations payable within one year of RMB458,681,000.

Cash flows

As at 31 December, 2005, the Group’s net cash generated from operating activities was RMB5,141,148,000, denominated principally in RMB, US dollars and Hong Kong dollars, and which represented a decrease of RMB19,457,000 from the year 2004. Cash balances at the end of year 2005 decreased by RMB2,440,118,000 as compared to the same period last year, mainly reflecting the net cash used in financing activities and investing activities in construction of vessels and containers, payment of dividends, repayment of principal and interest for bank borrowings and repayment of finance leases obligations exceeded the net cash generated from operating activities. Net cash generated from operations, when not needed for working capital requirements, is principally held as short-term and demand deposits. The following table provides information regarding the Group’s cash flows for the reporting periods.

	For the year ended
	31 December
	2005 2004
	RMB RMB
Net cash generated from operating activities	5,141,148,000 5,160,605,000
Net cash used in investing activities	(4,997,605,000) (6,285,895,000)
Net cash (used in)/generated from financing activities	(2,583,661,000) 5,504,317,000
Net (decrease)/increase in cash and cash equivalents	(2,440,118,000) 4,379,027,000
Net cash generated from operating activities
For the year ended 31 December, 2005, the net cash generated from operating activities was RMB5,141,148,000, representing a decrease of RMB19,457,000 from
RMB 5,160,605,000 in 2004. The decrease was mainly due to the increase in operating costs and decrease in the gross profit. The net cash generated from operations for
2005 was RMB5,304,218,000, representing a decrease of 3.2% as compared with RMB 5,479,183,000 in 2004. Whereas, the payment of income tax within the stipulated
period decreased by RMB155,508,000 or 48.8% as compared to last year.

Net cash used in investing activities For the year ended 31 December, 2005, net cash used in investing activities was RMB4,997,605,000, representing a decrease of RMB1,288,290,000 from RMB6,285,895,000 in 2004. The decrease was mainly due to decrease in the Group’s capital expenditure on vessels and other construction in progress of RMB5,088,539,000 (2004: RMB6,277,173,000).

Net cash (used in)/generated from financing activities

For the year ended 31 December, 2005, net cash used in financing activities was RMB2,583,661,000, representing a net decrease of RMB8,087,978,000 as compared to the net cash generated from financing activities of RMB 5,504,317,000 in 2004. The main reason for this change was in 2004, cash proceeds of RMB7,159,713,000 were raised upon the listing of the Group. Another main reason was in this year, dividends of RMB1,686,098,000 were paid. Average debtor turnover The Group’s average debtor turnover days were similar to last year, mainly due to management’s effort to strengthen credit control over settlement from customers. Gearing ratio

As at 31 December, 2005, the Group’s gearing ratio (i.e. the ratio of net debt over shareholder’s equity) was 30%, which is higher than the 11% for 2004. The main reason for the higher level of the gearing was capital expenditure on construction of vessels and containers and payment of dividends exceeded net cash inflow from operating activities. Foreign exchange risk and hedging

Most of the revenue of the Group are settled or denominated in US dollars and most of the operating expenses are also settled or denominated in US dollars. As a result, the negative impact on the operating income due to the RMB appreciation since July, 2005 can be offset by each other to a certain extent. With the RMB appreciation, monetary net assets including cash and cash equivalents in US dollars and HK dollars continued to depreciate. During the year, the Group devoted much efforts to improve the currency structure of such assets and the exchange losses of the Group amounted to RMB 58,699,000. The Group continues to monitor the exchange rate fluctuation of RMB, timely convert net cash inflow from operating activities into RMB so as to minimize foreign currency risk. The Group will continue to implement the policy of timely conversion of foreign currency assets into RMB, reducing the net currency assets denominated in foreign currency and consider appropriate measures including making hedging arrangements (e.g. forward exchange contracts), based on its operating needs to mitigate the Group’s currency exposure. However, as at 31 December, 2005, the Group had not entered into any hedging arrangement including any forward exchange contracts.

– 7 –

Capital expenditure

During the year ended 31 December, 2005, capital expenditure on vessels and vessels under construction amounted to RMB4,020,253,000, improvement on vessels under operating leases RMB8,456,000, development of information system RMB13,022,000, containers RMB2,492,475,000, motor vehicles RMB6,571,000 and office equipment RMB40,415,000. Capital commitments As at 31 December, 2005, the Group had contracted but not provided for capital commitments of approximately RMB4,315,787,000 for vessels under construction and RMB160,036,000 for containers. It is expected that part of the commitments will be financed by cash generated from operating activities, with the remaining portion by bank borrowings. Acquisition In 2005, the Group did not enter into any acquisition activities. Contingent liabilities As at 31 December, 2005, the Group did not have any material contingent liabilities. Employees, training and benefits As at 31 December, 2005, the Group had 3,447 employees, representing an increase of 305 employees compared to year 2004. Staff cost was approximately RMB605,171,000 (including a provision for the year of RMB1,451,000 in relation to the H share share appreciation rights granted to the Company’s Directors (the “Directors”) and employees). In addition, the Group entered into contracts with a number of subsidiaries of China Shipping (Group) Company, pursuant to which those companies provided the Group with approximately 3,058 crew members in aggregate who mainly worked on the Group’s self-owned or bare-boat chartered vessels. Remuneration of the Group’s employees includes basic salaries, other allowances and performance bonuses. The Group also adopts a performance discretionary incentive scheme for its staff. The scheme links up the financial benefits of the Group’s staff with certain business performance indicators. Such indicators may include but not limited to the profit target of the Group. Details of the performance discretionary incentive scheme vary among the members of the Group. The Group sets out certain performance indicators for each of its subsidiaries to achieve. Each subsidiary has the discretion to formulate its own detailed performance related remuneration policies according to its local circumstances. The Group has adopted a compensation scheme, which is to be satisfied by cash payments and is share-based, known as the “H Share Share Appreciation Rights Scheme”. The fair value of services provided by the employees of the Company who are granted appreciation rights is recognised as an expense of the Company. Employees might in the future be entitled to a compensation in the form of a cash payment, which is calculated based on the appreciation in the price of the Company’s share from the date of grant to the date of exercise. OTHER INFORMATION CLOSURE OF REGISTER OF MEMBERS The Register of Members will be closed from Sunday, 21 May, 2006 to Tuesday, 20 June, 2006, both days inclusive. In order to be eligible for the final dividend, all completed transfer forms accompanied by the relevant share certificates must be lodged with the share registrar of CSCL, Computershare Hong Kong Investor Services Limited at 46th floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, by 4:00 p.m. on Friday, 19, May, 2006. PURCHASE, SALE AND REDEMPTION OF SHARES During the period from 1 January, 2005 to the date of this announcement, the Company had not redeemed any of its shares. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s shares in the aforesaid period. AUDIT COMMITTEE The financial statements for the year ended 31 December, 2005 of the Group have been reviewed by the Company’s audit committee. COMPLIANCE WITH THE “CODE ON CORPORATE GOVERNANCE PRACTICES” OF THE LISTING RULES The Board is pleased to confirm that none of the Directors is aware of any information that would reasonably indicate that the Group was not, at any time during year 2005, in compliance with the applicable code provisions of the “Code on Corporate Governance Practices” as set out in Appendix 14 to the Listing Rules. The Company has adopted a code of conduct regarding directors’ and supervisors’ securities transactions on terms no less exacting than the required standard stipulated in the “Model Code for Securities Transactions by Directors of Listed Companies” (the “Model Code”) as set out in Appendix 10 to the Listing Rules. The Company confirms, having made specific enquiries with all its directors and supervisors, that its directors and supervisors have complied with the required standard of securities transactions as set out in the Model Code. RESIGNATION AND APPOINTMENT OF DIRECTORS The Company passed resolution at the Special General Meeting held on 18 February, 2005 and it is hereby confirmed that Mr. Wang Xiangyun has resigned as a director of the Company, with effect from the conclusion of that Special General Meeting. The Company passed resolution at the Special General Meeting held on 12 October, 2005 and it is hereby confirmed that Mr. Yan Mingyi has resigned as a director of the Company, with effect from the conclusion of that Special General Meeting. The Board and Mr. Wang Xiangyun confirm that (i) there has been no dispute between Mr. Wang Xiangyun, the Board and the Company; and (ii) there are no matters that need to be brought to the attention of the shareholders in relation to his resignation. The Board and Mr. Yan Mingyi confirm that (i) there has been no dispute between Mr. Yan Mingyi, the Board and the Company; and (ii) there are no matters that need to be brought to the attention of the shareholders in relation to his resignation. The Board would like to take this opportunity to express its thanks to Mr. Wang Xiangyun and Mr. Yan Mingyi for their valuable contribution to the Company during their tenure of service. The Board further announces that Mr. Huang Xiaowen, Mr. Zhao Hongzhou and Mr. Zhang Guofa were formally appointed as the Company’s executive Director, executive Director and non-executive Director respectively at the Special General Meeting held on 18 February, 2005, with effect from the conclusion of that Special General Meeting. The Board further announces that Mr. Xu Hui was formally appointed as the Company’s non-executive Director at the Special General Meeting held on 12 October, 2005, with effect from the conclusion of that Special General Meeting. RESIGNATION AND APPOINTMENT OF SUPERVISORS The Company passed resolution at the Special General Meeting held on 18 February, 2005 and it is hereby confirmed that Mr. Zhao Shijiang has resigned as a supervisor of the Company, with effect from the conclusion of that Special General Meeting. The Company passed resolution at the Special General Meeting held on 12 October, 2005 and it is hereby confirmed that Mr. Zhang Rongbiao has resigned as a supervisor of the Company, with effect from the conclusion of that Special General Meeting. The Board and Mr. Zhao Shijiang confirm that (i) there has been no dispute between Mr. Zhao Shijiang, the Board and the Company; and (ii) there are no matters that need to be brought to the attention of the shareholders in relation to his resignation. The Board and Mr. Zhang Rongbiao confirm that (i) there has been no dispute between Mr. Zhang Rongbiao, the Board and the Company; and (ii) there are no matters that need to be brought to the attention of the shareholders in relation to his resignation.

The Board would like to take this opportunity to express its thanks to Mr. Zhao Shijiang and Mr. Zhang Rongbiao for their valuable contribution to the Company during their tenure of service. The Board further announces that Mr. Huang Xinming and Mr. Tu Shiming were formally appointed as the Company’s supervisors at the Special General Meeting held on 18 February, 2005 and 12 October, 2005 respectively, with effect from the conclusion of those respective Special General Meetings.

DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

The electronic version of this announcement will be published on the website of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (http://www.hkex.com.hk). An annual report for the year ended 31 December, 2005 containing all the information required by Appendix 16 to the Listing Rules will be dispatched to shareholders and published on the website of the Stock Exchange in due course.

By Order of the Board of Directors China Shipping Container Lines Company Limited Li Kelin Chairman

Shanghai, the People’s Republic of China 18 April, 2006

The Board as at the date of this announcement comprises of Mr. Li Kelin and Mr. Jia Hongxiang, Mr. Huang Xiaowen and Mr. Zhao Hongzhou, being executive directors, Mr. Li Shaode, Mr. Zhang Jianhua, Mr. Wang Daxiong, Mr. Zhang Guofa ,and Mr. Xuhui, being non-executive directors, and Mr. Hu Hanxiang, Mr. Gu Nianzu, Mr. Wang Zongxi and Mr. Lam Siu Wai, Steven, being independent non-executive directors.

* The Company is registered as an oversea company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under its Chinese name and the English name “China Shipping Container Lines Company Limited”.

– 8 –

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the annual general meeting for the year 2005 (the “AGM”) of China Shipping Container Lines Company Limited (the “Company”) will be held at 14:00 p.m. on Tuesday, 20 June, 2006 at conference room 1, 3rd Floor, 450 Fu Shan Road, Pudong New District, Shanghai, the People’s Republic of China (the “PRC”) for the following purposes:

by way of ordinary resolutions:

by	way of ordinary resolutions:	way of ordinary resolutions:
1.	to consider and approve the report of the board of directors of the Company for the year ended 31 December, 2005;
2.	to consider and approve the report of the supervisory committee of the Company for the year ended 31 December, 2005;
3.	to consider and approve the audited financial statements and the auditors’ report of the Company and of the Group as at and for the year ended 31 December,
	2005;
4.	to consider and approve the proposed profit distribution plan and the final dividend distribution plan of the Company for the year ended 31 December, 2005 and to
	authorise the board of directors of the Company to distribute such dividend to its shareholders;
5.	to consider and determine the remuneration of the directors and supervisors of the Company for the year ending 31 December, 2006;
6.	to consider and approve the appointments of PricewaterhouseCoopers, Hong Kong, Certified Public Accountants, and BDO Zhong Hua Certified Public Accountants
	as the	Company’s international and PRC auditors, respectively, to hold office until the conclusion of the following annual general meeting, and to authorise the
	audit committee of the board of directors of the Company to determine their remuneration;
7.	to consider and approve the adoption of each code provision in the Code on Corporate Governance Practices as set out in Appendix 14 to the Rules Governing the
	Listing of Securities on The Stock Exchange of Hong Kong Limited as the Company’s corporate governance code.
8.	to consider and approve amendments to parts of the methods for the implementation of the H share share appreciation rights scheme of the Company (the
	“Implementation Methods”), including:
	(i)	adding to the procedures for the exercise of the rights in the original Implementation Methods that the person exercising the rights can directly exercise the
		rights through the special window for exercising rights on the Company’s website;
	(ii)	changing the definition of “Unit Exercise Proceeds” in the original Implementation Methods to:
		“if the person exercising the rights exercises the rights on the special window for exercising the rights on the Company’s website, the Unit Exercise
		Proceeds shall be the amount of appreciation between the Exercise Price and the target price inputted by the person exercising the rights in the special
		window for exercising the rights on the Company’s website, if the target price does not exceed the highest traded price per H share of the Company on the
		Stock Exchange on the Date of Exercise; if the person exercising the rights exercises the rights by submitting the “Application to Exercise the Rights”, the
		Unit Exercise Proceeds shall be the amount of appreciation between the Exercise Price and the target price inserted by the person exercising the rights in
		the “Application to Exercise the Rights”, if the target price does not exceed the highest traded price per H share of the Company on the Stock Exchange on
		the Date of Exercise”; and
	(iii)	other amendments related to (i) and (ii) above.
by	way of a special resolution:
9.	to consider and, if thought fit, approve the following:
	“THAT:
	(1)	there be granted to the board of directors of the Company an unconditional general mandate to issue, allot and deal with additional shares in the capital of
		the Company, whether Domestic Shares or H Shares, and to make or grant offers, agreements and options in respect thereof, subject to the following
		conditions:
		(a) such mandate shall not extend beyond the Relevant Period save that the board of directors of the Company may during the Relevant Period make or
		grant offers, agreements or options which might require the exercise of such powers after the end of the Relevant Period;
		(b) the aggregate nominal amount of shares allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or
		otherwise) by the board of directors of the Company shall not exceed:
		(i) 20 per cent of the aggregate nominal amount of Domestic Shares of the Company in issue; and/or
		(ii) 20 per cent of the aggregate nominal amount of H Shares of the Company in issue,
		in each case as of the date of this Resolution; and
		(c) the board of directors of the Company, will only exercise its power under such mandate in accordance with the Company Law of the PRC and the
		Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as the same may be amended from time to time) and only
		if all necessary approvals from the China Securities Regulatory Commission and/or other relevant PRC government authorities are obtained;
		For the purposes of this Resolution:
		“Domestic Shares” means domestic invested shares in the share capital of the Company with par value of RMB 1.00 each, which are held in
		Renminbi by PRC investors;
		“H Shares” means the overseas-listed foreign invested shares in the share capital of the Company with a par value of RMB 1.00 each, which are
		subscribed for and traded in Hong Kong Dollars;
		“Relevant Period” means the period from the passing of this Resolution until the earliest of:
		(A) the conclusion of the next annual general meeting of the Company following the passing of this Resolution; or
		(B) the expiration of the 12-month period following the passing of this Resolution; or
		(C) the date on which the authority set out in this Resolution is revoked or varied by a special resolution of the shareholders of the Company in a
		general meeting; and
	(2)	contingent on the board of directors of the Company resolving to issue shares pursuant to sub-paragraph (1) of this Resolution, the board of directors of the
		Company be authorised to:
		(a) approve, execute and do or procure to be executed and done, all such documents, deeds and things as it may consider necessary in connection with
		the issue of such new shares including, without limitation, the time and place of issue, making all necessary applications to the relevant authorities,
		entering into an underwriting agreement (or any other agreement);
		(b) to determine the use of proceeds and to make all necessary filings and registrations with the relevant PRC, Hong Kong and other authorities; and
		(c) to increase the registered capital of the Company in accordance with the actual increase of capital by issuing shares pursuant to sub-paragraph (1) of
		this Resolution, to register the increased capital with the relevant authorities in the PRC and to make such amendments to the Articles of Association
		of the Company as it thinks fit so as to reflect the increase and any other resultant changes in the registered capital of the Company.”; and

by way of an ordinary resolution:

to consider and approve proposals (if any) put forward at such meeting by any shareholder(s) holding 5 per cent or more of the shares carrying the right to vote at such meeting.

By order of the board of directors of China Shipping Container Lines Company Limited Li Kelin Chairman

Shanghai, the People’s Republic of China 18 April, 2006

Notes:

(A) The board of directors has recommended a final dividend for the year ended 31 December, 2005 of RMB0.12 per share and, if such relevant resolution regarding the payment of dividend is approved and passed by the shareholders of the Company, it is expected to be paid on or about 30 June, 2006 to those shareholders of the Company whose names appear on the Company’s register of members on 20 June, 2006.

For the purpose of holding the AGM, the register of members of the Company (the “Register of Members”) will be closed from Sunday, 21 May, 2006 to Tuesday, 20 June, 2006 (both days inclusive), during which period no transfer of shares of the Company will be registered. Shareholders of the Company whose names appear on the Register of Members at the close of business on Monday, 22 May, 2006 are entitled to attend and vote at the AGM.

In order to attend the AGM, holders of the Company’s H shares shall lodge all transfers together with the relevant share certificates to Computershare Hong Kong Investor Services Limited, the Company’s H shares registrar, not later than 4:00 p.m. on Friday, 19 May, 2006.

The address of Computershare Hong Kong Investor Services Limited is as follows:

46th Floor

Hopewell Centre 183 Queen’s Road East Hong Kong

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(B) Holders of domestic shares or H shares, who intend to attend the AGM, must complete the reply slips and return them to the Directorate Secretary Office of the Company not later than 20 days before the date of the AGM, i.e. no later than Wednesday, 31 May, 2006. Details of the Directorate Secretary Office of the Company are as follows:
3rd Floor

450 Fu Shan Road

Pudong New District

Shanghai the People’s Republic of China

200122
Tel: (86) 21 6596 6666

Fax: (86) 21 6596 6813

(C) Each holder of H shares who has the right to attend and vote at the AGM is entitled to appoint in writing one or more proxies, whether a shareholder or not, to attend and vote on his behalf at the AGM. A proxy of a shareholder who has appointed more than one proxy may only vote on a poll.
(D) The instrument appointing a proxy must be in writing under the hand of the appointor or his attorney duly authorised in writing. If that instrument is signed by an attorney of the appointor, the power of attorney authorising that attorney to sign, or other documents of authorisation, must be notarially certified.
(E) To be valid, for holders of H shares, the form of proxy, and if the form of proxy is signed by a person under a power of attorney or other authority on behalf of the appointor, a notarially certified copy of that power of attorney or other authority, must be delivered to the Company’s H share registrar, Computershare Hong Kong Investor Services Limited, the address of which is set out in Note (A) above, not less than 24 hours before the time for holding the AGM or any adjournment thereof in order for such documents to be valid.
(F) Each holder of domestic shares is entitled to appoint in writing one or more proxies, whether a shareholder or not, to attend and vote on its behalf at the AGM. Notes (C) to (E) also apply to holders of domestic shares, except that the proxy form or other documents of authority must be delivered to the Directorate Secretary Office of the Company, the address of which is set out in Note (B) above, not less than 24 hours before the time for holding the AGM or any adjournment, thereof in order for such documents to be valid.
(G) If a proxy attends the AGM on behalf of a shareholder, he should produce his identity card and the instrument signed by the proxy or his legal representative, and specifying the date of its issuance. If a legal person shareholder appoints its corporate representative to attend the AGM, such representative should produce his/her identity card and the notarised copy of the resolution passed by the board of directors or other authorities or other notarised copy of the licence issued by such legal person shareholder.
(H) Pursuant to Articles 8.18 to 8.20 of the Articles of Association of the Company, at the AGM, a resolution shall be decided on a show of hands unless a poll is (before or after any vote by show of hands) demanded:
(1) by the chairman of the meeting;
(2) by at least two Shareholders entitled to vote present in person or by proxy;
(3) by one or more Shareholders present in person or by proxy and representing 10% or more of all shares carrying the right to vote at the meeting.

The demand for a poll may be withdrawn by the person who makes such demand. A poll demanded on the election of the chairman of the meeting, or on a question of adjournment of the meeting, shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs, and any business other than that upon which a poll has been demanded may be proceeded with, pending the taking of the poll. The result of the poll shall be deemed to be a resolution of the meeting at which the poll was demanded. On a poll taken at the meeting, a Shareholder (including proxy) entitled to two or more votes need not cast all his or her votes in the same way.

(I) The AGM is expected to last for half a day. Shareholders attending the AGM are responsible for their own transportation and accommodation expenses.

The board of directors of the Company as at the date of this announcement comprises of Mr. Li Kelin, Mr. Jia Hongxiang, Mr. Huang Xiaowen and Mr. Zhao Hongzhou being executive Directors, Mr. Li Shaode, Mr. Zhang Jianhua, Mr. Wang Daxiong, Mr. Zhang Guofa and Mr. Xu Hui, being non-executive Directors, and Mr. Hu Hanxiang, Mr. Gu Nianzu, Mr. Wang Zongxi and Mr. Lam Siu Wai, Steven, being independent non-executive Directors.

“Please also refer to the published version of this announcement in South China Morning Post.”

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