COSCO SHIPPING Development Co., Ltd. — M&A Activity 2011

Oct 28, 2011

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

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

(Stock code: 02866)

MAJOR TRANSACTION ACQUISITION OF VESSELS

The Board is pleased to announce that on 28 October 2011, CSCL (HK), a wholly-owned subsidiary of the Company, entered into the Vessel Acquisition Agreements and the Vessel Option Agreements (collectively, the “Acquisition Agreements”) with the Vendors/Grantors to purchase eight Vessels and to acquire options to purchase four Optional Vessels, respectively. The aggregate consideration payable for the Vessel Acquisition under the Acquisition Agreements is US$754,240,000 (equivalent to approximately RMB4,773,584,960).

The highest applicable percentage ratio set out in the Listing Rules for the Vessel Acquisition is more than 25% but less than 100%, the Vessel Acquisition constitutes a major transaction of the Company under Rule 14.06(3) of the Listing Rules and is therefore subject to reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules. The Acquisition Agreements and the transactions contemplated thereunder are therefore subject to the Shareholders’ approval at the SGM.

The SGM will be convened and held for the Shareholders to consider and, if thought fit, approve (i) the Acquisition Agreements and the transactions contemplated thereunder; and (ii) the Vessel Building Contacts and the transactions contemplated thereunder if CSCL (HK) exercises options to purchase any Optional Vessels as granted under the Vessel Option Agreements. The aforesaid approvals shall be obtained by way of a poll. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholder has a material interest in the Acquisition Agreements and the transactions contemplated thereunder and therefore no Shareholder is required to abstain from voting for the resolutions to approve the Acquisition Agreements and the transactions contemplated thereunder at the SGM.

A circular containing, among other things, further information on the Acquisition Agreements, the Vessel Building Contracts and the transactions contemplated thereunder and the financial information of the Group will be despatched to the Shareholders as soon as practicable in compliance with the Listing Rules. It is currently expected that the circular will be despatched by the Company to the Shareholders on or about 18 November 2011.

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A. ACQUISITION AGREEMENTS

• 1 . Vessel Acquisition Agreements

Date: 28 October 2011 Parties: In respect of Dalian Vessel Acquisition Agreements:

• (a) CSCL (HK) (as purchaser); (b) China Shipbuilding & Offshore International Co., Ltd. (as vendor); and

• (c) Dalian Shipbuilding Industry Co., Ltd. (as vendor).

In respect of Shanghai Vessel Acquisition Agreements:

• (a) CSCL (HK) (as purchaser);

• (b) China Shipbuilding Trading Co., Ltd. (as vendor); and

• (c) Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. (as vendor).

Assets to be Acquired: Pursuant to the Vessel Acquisition Agreements, the Vendors shall design, build, launch, equip, complete and sell, and CSCL (HK) shall purchase, eight Vessels.

Consideration and Payment Term:

• The aggregate consideration payable for eight Vessels under the Vessel Acquisition Agreements is US$754,240,000 (equivalent to approximately RMB4,773,584,960).

The consideration for each Vessel will be payable in US$ by CSCL (HK) to the Vendors under their respective Vessel Acquisition Agreements in four instalments in an aggregate of US$94,280,000 (equivalent to approximately RMB596,698,120) in accordance with the following manner:

• (a) First instalment: within 15 working days after signing of such Vessel Acquisition Agreement, CSCL (HK) shall pay 20% of the consideration for such Vessel in the amount of US$18,856,000 (equivalent to approximately RMB119,339,624) by virtue of the proof of payment issued by the relevant Vendors;

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• (b) Second instalment: when keeling such Vessel, CSCL (HK) shall pay 10% of the consideration for such Vessel in the amount of US$9,428,000 (equivalent to approximately RMB59,669,812) within 7 working days after receipt of the original proof of payment issued by the relevant Vendors;

• (c) Third instalment: when launching such Vessel, CSCL (HK) shall pay 10% of the consideration for such Vessel in the amount of US$9,428,000 (equivalent to approximately RMB59,669,812) within 7 working days after receipt of the original proof of payment issued by the relevant Vendors; and

• (d) Fourth instalment: when delivering such Vessel, CSCL (HK) shall pay 60% of the consideration for such Vessel in the amount of US$56,568,000 (equivalent to approximately RMB358,018,872) within 7 working days after receipt of the full set of the original delivery documents.

The consideration for each Vessel is subject to adjustments in the event of: (i) any delay in the delivery of such Vessel; (ii) insufficient deadweight of such Vessel; (iii) insufficient speed of such Vessel; (iv) over consumption of the fuel by such Vessel; and/or (v) insufficient container capacity of such Vessel. The aforesaid adjustments shall be settled together with the foregoing fourth instalment.

The said consideration was agreed after arm’s length negotiations between the parties by reference to recent transacted prices for similar container vessels in the PRC, which the Group is aware of. The said consideration will be funded from bank financing and internal resources of the Group.

Refund Term:

In the event that CSCL (HK) refuses to accept such Vessel upon terms and conditions of such Vessel Acquisition Agreement, CSCL (HK) shall send a notice of vessel abandonment to the relevant Vendors and the relevant Vendors shall remit all payments for such Vessel paid by CSCL (HK) so far within 5 working days after receipt of such notice by means of telegraphic transfer to the bank accounts designated by CSCL (HK), together with the interest accrued from respective dates for the said payment to the refund dates (the interest rate shall be calculated by one-year US$ Libor plus 1%). If the relevant Vendors fail to refund on time, in addition to refunding all payments aforesaid together with the interest accrued, the relevant Vendors shall also pay to CSCL (HK) all interest accrued from the past due dates to the actual refund dates (calculated by one-year US$ Libor plus 1%).

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Delivery Time:

Pursuant to the Vessel Acquisition Agreements, the delivery date for each Vessel is no later than 30 November 2013.

Guarantee/Security:

Under each of the Vessel Acquisition Agreements, the Vendors guarantee the principal dimensions and performance (including speed, fuel consumption, deadweight and container capacity) of each Vessel.

Under each of the Vessel Acquisition Agreements, the Vendors guarantee that each Vessel is free from Defect(s), provided that: (i) such Defect(s) arise within 12 months from the date such Vessel is delivered to CSCL (HK); and (ii) such Defect(s) are not the result of any misuse by CSCL (HK).

2. Vessel Option Agreements

Date:

28 October 2011

Parties:

In respect of Dalian Vessel Option Agreement:

• (a) CSCL (HK) (as grantee);

• (b) China Shipbuilding & Offshore International Co., Ltd. (as grantor); and

• (c) Dalian Shipbuilding Industry Co., Ltd. (as grantor).

In respect of Shanghai Vessel Option Agreement:

• (a) CSCL (HK) (as grantee);

• (b) China Shipbuilding Trading Co., Ltd. (as grantor); and

• (c) Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. (as grantor).

Option to be Acquired: Pursuant to each of the Vessel Option Agreements, the Grantors shall grant, and CSCL (HK) shall acquire, an option to purchase two Optional Vessels.

Exercise of Option: Pursuant to each of the Vessel Option Agreements, CSCL (HK) shall notify the Grantors in writing of whether to exercise such option to purchase one or two Optional Vessels on or before 27 April 2012, failing which such option shall automatically lapse.

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Vessel Building Contract:

Consideration and Payment Term:

Pursuant to each of the Vessel Option Agreements, if such option to purchase one or two Optional Vessels is exercised, CSCL (HK) and the relevant Grantors shall enter into one Vessel Building Contract for each Optional Vessel within 30 days after CSCL (HK) notifies the Grantors in writing to exercise such option, and the terms and conditions of which shall be based on the Vessel Acquisition Agreements, with the necessary amendments being made.

There is no premium paid and/or payable by CSCL (HK) to the Grantors to acquire such options under the Vessel Option Agreements.

Pursuant to each of the Vessel Option Agreements, if such option to purchase one or two Optional Vessels is exercised, the consideration for each Optional Vessel will be payable by CSCL (HK) to the Grantors under their respective Vessel Option Agreements and Vessel Building Contacts in four instalments in an aggregate of US$94,280,000 (equivalent to approximately RMB596,698,120) in accordance with the following manner:

• (a) First instalment: within 15 working days after signing of such Vessel Building Contract, CSCL (HK) shall pay 20% of the consideration for such Optional Vessel in the amount of US$18,856,000 (equivalent to approximately RMB119,339,624);

• (b) Second instalment: within 7 working days after the first section of keeling such Optional Vessel, CSCL (HK) shall pay 10% of the consideration for such Optional Vessel in the amount of US$9,428,000 (equivalent to approximately RMB59,669,812);

• (c) Third instalment: within 7 working days after launching such Optional Vessel, CSCL (HK) shall pay 10% of the consideration for such Optional Vessel in the amount of US$9,428,000 (equivalent to approximately RMB59,669,812); and

• (d) Fourth instalment: within 7 working days after delivery of such Optional Vessel, CSCL (HK) shall pay 60% of the consideration for such Optional Vessel in the amount of US$56,568,000 (equivalent to approximately RMB358,018,872).

The said consideration was agreed after arm’s length negotiations between the parties by reference to recent transacted prices for similar container vessels in the PRC, which the Group is aware of. The said consideration will be funded from bank financing and internal resources of the Group.

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Delivery Time:

The delivery dates for the first Optional Vessel and the second Optional Vessel as specified in each of the Vessel Option Agreements are no later than 31 July 2014 and no later than 30 September 2014, respectively.

B. REASONS FOR AND BENEFITS OF ENTERING INTO THE ACQUISITION AGREEMENTS

The acquisition of the Vessels, each with a more modern design and a larger capacity, will significantly improve the economies of scale enjoyed by the Group, satisfy the development plan and operational needs of the Group, improve the Group’s economic benefits, strengthen the Group’s market competitiveness and further expand the Group’s service network around the globe.

In light of the above, the Board (including the independent non-executive Directors) believes that the terms of the transactions contemplated under the Acquisition Agreements are fair and reasonable, on normal commercial terms and in the interest of the Company and the Shareholders as a whole.

C. INFORMATION ON THE PARTIES TO THE ACQUISITION AGREEMENTS

1. CSCL (HK)

CSCL (HK) is principally engaged in the international container transportation.

2. China Shipbuilding & Offshore International Co., Ltd.

China Shipbuilding & Offshore International Co., Ltd. is principally engaged in the business of design, development, production, maintenance, lease and sale of ships, marine equipments, ocean engineering and equipments.

3. Dalian Shipbuilding Industry Co., Ltd.

Dalian Shipbuilding Industry Co., Ltd. is principally engaged in the business of development, design, construction, repair, modification and sale of all types of ships, ocean engineering and its supporting equipments.

4. China Shipbuilding Trading Co., Ltd.

China Shipbuilding Trading Co., Ltd. is principally engaged in the business of import and export of goods and technology; international ship-repairing, ship-dismantling and technology exchange; contracting of projects.

5. Hudong-Zhonghua Shipbuilding (Group) Co., Ltd.

Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. is principally engaged in the business of design, manufacturing, service and repair of military and civil ships, ocean engineering and diesel engines for ships.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Vendors/Grantors and their respective ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

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D. IMPLICATIONS UNDER THE LISTING RULES

The highest applicable percentage ratio set out in the Listing Rules for the Vessel Acquisition is more than 25% but less than 100%, the Vessel Acquisition constitutes a major transaction of the Company under Rule 14.06(3) of the Listing Rules and is therefore subject to reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules. The Acquisition Agreements and the transactions contemplated thereunder are therefore subject to the Shareholders’ approval at the SGM.

The SGM will be convened and held for the Shareholders to consider and, if thought fit, approve (i) the Acquisition Agreements and the transactions contemplated thereunder; and (ii) the Vessel Building Contacts and the transactions contemplated thereunder if CSCL (HK) exercises options to purchase any Optional Vessels as granted under the Vessel Option Agreements. The aforesaid approvals shall be obtained by way of a poll. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholder has a material interest in the Acquisition Agreements and the transactions contemplated thereunder and therefore no Shareholder is required to abstain from voting for the resolutions to approve the Acquisition Agreements and the transactions contemplated thereunder at the SGM.

A circular containing, among other things, further information on the Acquisition Agreements, the Vessel Building Contracts and the transactions contemplated thereunder and the financial information of the Group will be despatched to the Shareholders as soon as practicable in compliance with the Listing Rules. It is currently expected that the circular will be despatched by the Company to the Shareholders on or about 18 November 2011.

E. DEFINITIONS

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

“A Shares”	the domestic invested shares of the Company, with a
	nominal value of RMB1.00 each
“Acquisition Agreements”	Vessel Acquisition Agreements and Vessel Option
	Agreements
“Board”	the board of Directors
“Company”	China Shipping Container Lines Company Limited (中海
	集裝箱運輸股份有限公司), a joint stock limited company
	established in the PRC, of which 3,751,000,000 H Shares
	are listed on the Stock Exchange and 7,932,125,000 A
	Shares are listed on the Shanghai Stock Exchange
“connected person”	has the meaning ascribed thereto under the Listing Rules
“CSCL (HK)”	China Shipping Container Lines (Hong Kong) Co.,
	Limited (中海集裝箱運輸（香港）有限公司), a limited
	company incorporated in Hong Kong and a wholly-owned
	subsidiary of the Company

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“Dalian Vessel Acquisition Agreements”

four 10,000 TEU container vessel construction contracts entered into between CSCL (HK), China Shipbuilding & Offshore International Co., Ltd. and Dalian Shipbuilding Industry Co., Ltd. on 28 October 2011, pursuant to each of which China Shipbuilding & Offshore International Co., Ltd. and Dalian Shipbuilding Industry Co., Ltd. agreed to design, build, launch, equip, complete and sell, and CSCL (HK) agreed to purchase, a Vessel

“Dalian Vessel Option Agreement”

• a vessel option agreement entered into between CSCL (HK), China Shipbuilding & Offshore International Co., Ltd. and Dalian Shipbuilding Industry Co., Ltd. on 28 October 2011, pursuant to which China Shipbuilding & Offshore International Co., Ltd. and Dalian Shipbuilding Industry Co., Ltd. agreed to grant, and CSCL (HK) agreed to acquire, an option to purchase, two Optional Vessels

“Defect(s)”

• all damage and breakdown to the hull structure, materials, mechanical equipments and electronic devices caused by design error, shipbuilding quality issue and deficiency of material and equipment of the Vendors and/or their subcontractors

“Directors”

the directors of the Company

• “Group” the Company and its subsidiary

• “H Shares” overseas listed foreign shares of the Company, with a nominal value of RMB1.00 each

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Libor” London Interbank Offered Rate

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Optional Vessel” a Vessel to be purchased by CSCL (HK) when it exercises option(s) to purchase such Vessel(s) as granted by the relevant Grantors under their respective Vessel Option Agreements

• “percentage ratios” has the meaning ascribed to such term under the Listing Rules

• “PRC” the People’s Republic of China

• “RMB” Renminbi, the lawful currency of the PRC

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“Shanghai Vessel Acquisition Agreements”

“Shanghai Vessel Option Agreement”

“SGM”

“Shareholders”

• “Stock Exchange”

“TEU”

“US$”

“Vendors” or “Grantors”

• four 10,000 TEU container vessel construction contracts entered into between CSCL (HK), China Shipbuilding Trading Co., Ltd. and Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. on 28 October 2011, pursuant to each of which China Shipbuilding Trading Co., Ltd. and Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. agreed to design, build, launch, equip, complete and sell, and CSCL (HK) agreed to purchase, a Vessel

• a vessel option agreement entered into between CSCL (HK), China Shipbuilding Trading Co., Ltd. and Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. on 28 October 2011, pursuant to which China Shipbuilding Trading Co., Ltd. and Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. agreed to grant, and CSCL (HK) agreed to acquire, an option to purchase, two Optional Vessels

• the special general meeting of the Company to be convened and held for the Shareholders to consider and, if thought fit, approve the Acquisition Agreements and the transactions contemplated thereunder

• shareholders of the Company, including holders of H Shares and holders of A Shares

The Stock Exchange of Hong Kong Limited

• twenty-foot equivalent units, a standard unit of measurement of the volume of a container with a length of 20 feet, height of 8 feet and 6 inches and width of 8 feet

United States Dollar, the lawful currency of the United States of America

• (i) China Shipbuilding & Offshore International Co., Ltd. (中國船舶重工國際貿易有限公司), a limited liability company incorporated in the PRC

• (ii) Dalian Shipbuilding Industry Co., Ltd. (大連船舶 重工集團有限公司), a limited liability company incorporated in the PRC

• (iii) China Shipbuilding Trading Co., Ltd. (中國船舶工 業貿易公司), a company incorporated in the PRC

• (iv) Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. (滬東中華造船（集團）有限公司), a limited liability company incorporated in the PRC

“Vessel”

a container vessel with a capacity of 10,000 TEU to be acquired by CSCL (HK) from the Vendors under the Acquisition Agreements

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“Vessel Acquisition”

(i) the acquisition of eight Vessels by CSCL (HK) from the Vendors pursuant to the Vessel Acquisition Agreements; and (ii) the acquisition of the options to purchase four Optional Vessels by CSCL (HK) from the Grantors pursuant to the Vessel Option Agreements

• “Vessel Acquisition Agreements”

Dalian Vessel Acquisition Agreements and Shanghai Vessel Acquisition Agreements

• “Vessel Building Contract”

a vessel building contract to be entered into between CSCL (HK) and the relevant Grantors when CSCL (HK) exercises option(s) to purchase such Optional Vessel(s) as granted by the relevant Grantors under their respective Vessel Option Agreements

“Vessel Option Agreements”

• Dalian Vessel Option Agreement and Shanghai Vessel Option Agreement

By Order of the Board

China Shipping Container Lines Company Limited Ye Yumang Company Secretary

Shanghai, the PRC 28 October 2011

The Board as at the date of this announcement comprises of Mr. Li Shaode, Mr. Zhang Guofa, Mr. Huang Xiaowen and Mr. Zhao Hongzhou, being executive Directors, Mr. Zhang Jianhua, Mr. Lin Jianqing, Mr. Wang Daxiong, Mr. Zhang Rongbiao and Mr. Xu Hui, being non-executive Directors, and Mr. Shen Kangchen, Mr. Jim Poon (also known as Pan Zhanyuan), Mr. Shen Zhongying, Mr. Wu Daqi and Ms. Zhang Nan, being independent non-executive Directors.

The exchange rate adopted in this announcement for illustration purposes only is US$1.00 = RMB6.329.

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

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