COSCO SHIPPING Development Co., Ltd. — Proxy Solicitation & Information Statement 2004

Nov 30, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional advisor.

If you have sold or transferred all your shares in China Shipping Container Lines Company Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected, for transmission to the purchaser.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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China Shipping Container Lines Company Limited (A joint stock limited company incorporated in the People’s Republic of China) (Stock code: 2866)*

Discloseable Transaction Construction of Vessels

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

29 November 2004

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Terms of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Terms of the Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Finance Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Information about the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Discloseable Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

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DEFINITIONS

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

“Agreement” an agreement dated 8 November 2004 entered into between Hudong-Zhonghua and CSSC (as the sellers) and the Company (as the buyer) for the construction of four 8530 TEU container vessels “Board” the board of Directors

“Business Day” a day other than Saturdays, Sundays and public holidays in the PRC

“Company” China Shipping Container Lines Company Limited ( ), a joint stock limited company established in the PRC, the shares of which are listed on the Stock Exchange “CSSC” China State Shipbuilding Corporation ( ), the ultimate beneficial owner of Hudong-Zhonghua which, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, is an independent third party that is not a connected person of the Company, and is not connected with the Directors, chief executive(s) or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined under the Listing Rules) “Directors” the directors of the Company “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Hudong-Zhonghua” Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. ( ), a Chinese shipbuilder which, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, is an independent third party that is not a connected person of the Company, and is not connected with the Directors, chief executive(s) or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined under the Listing Rules)

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DEFINITIONS

“Latest Practicable Date”	25 November 2004, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining
	certain information contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“Model Code”	the Model Code for Securities Transactions by Directors of
	Listed Issuers, as set out in Appendix 10 to the Listing Rules
“Option Agreement”	an option agreement dated 8 November 2004 entered into
	between the Company (as the buyer) and Hudong-Zhonghua
	and CSSC (as the sellers) for the construction of a fifth 8530
	TEU container vessel, the detailed terms of which shall be
	agreed between the Company, Hudong-Zhonghua and CSSC
	within three months of the signing of the Agreement
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	The Securities and Futures Ordinance, Chapter 571 of the
	Laws of Hong Kong, as amended and supplemented from time
	to time
“Shareholders”	holders of share(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“TEU”	twenty-foot equivalent unit, a standard unit of measurement
	of the volume of a container with a length of 20 feet, a height
	of 8 feet and 6 inches and a width of 8 feet
“US$”	United States dollars, the lawful currency of the United States
	of America

The exchange rate adopted in this circular for illustration purpose only is US$1.00 = HK$7.80.

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LETTER FROM THE BOARD

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China Shipping Container Lines Company Limited (A joint stock limited company incorporated in the People’s Republic of China)

(Stock code: 2866)

Directors:

Mr. Li Kelin (Executive Director)

• Mr. Jia Hongxiang (Executive Director)

Mr. Li Shaode (Non-executive Director)

• Mr. Zhang Jianhua (Non-executive Director)

• Mr. Wang Daxiong (Non-executive Director)

• Mr. Wang Xiangyun (Non-executive Director)

• Mr. Hu Hanxiang (Independent non-executive Director)

Legal address and principal place of business in the PRC: Rooms A, B, C and D 27th Floor 450 Fu Shan Lu Pudong New District Shanghai The PRC

• Mr. Gu Nianzu (Independent non-executive Director)

• Mr. Wang Zongxi (Independent non-executive Director)

• Mr. Lam Siu Wai, Steven (Independent non-executive Director)

Place of business in Hong Kong:

Level 69 The Center 99 Queen’s Road Central Hong Kong

29 November 2004

To the Shareholders

Dear Sirs,

Discloseable Transaction Construction of Vessels

Introduction

On 8 November 2004, the Board announced that the Company (as the buyer) had entered into the Agreement and the Option Agreement with Hudong-Zhonghua and CSSC (as the sellers) for the construction of 8530 TEU container vessels.

The purpose of this circular is to provide Shareholders with further details of the transaction.

General

On 8 November 2004, the Company (as the buyer) entered into an unconditional agreement with Hudong-Zhonghua and CSSC (as the sellers) for the construction of four 8530 TEU container vessels.

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LETTER FROM THE BOARD

The total consideration for the construction of the four vessels is approximately US$372 million (equivalent to approximately HK$2,901.6 million). The entering into of the Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

On the same day, the Company entered into an option agreement with Hudong-Zhonghua and CSSC, whereby an option has been granted to the Company for the construction of a fifth 8530 TEU container vessel. The detailed terms of the construction of the fifth vessel shall be agreed between the Company, Hudong-Zhonghua and CSSC within three months of the signing of the Agreement.

Hudong-Zhonghua is a Chinese shipbuilder and to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, CSSC is a state-authorised investment institution holding various Chinese shipbuilders with Hudong-Zhonghua being one of them. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, Hudong-Zhonghua and CSSC, its ultimate beneficial owner, are independent third parties that are not connected persons of the Company, and are not connected with the Directors, chief executive(s) or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined under the Listing Rules).

The terms of the Agreement and the Option Agreement were determined on an arm’s length basis and on normal commercial terms, and the Directors, including the independent non-executive Directors, consider them to be fair and reasonable and to be in the interests of the Company and the Shareholders as a whole based on their experience in the container shipping industry.

Terms of the Agreement

The price of each of the four vessels will be payable in Renminbi in four instalments. The first instalment for the four vessels, amounting to 20% of the total price (being a total sum of approximately US$74.4 million (equivalent to approximately HK$580.3 million)), is payable within 15 Business Days upon the signing of the Agreement. The second and third instalments for each vessel, each of which amounting to 15% of the total price (being a sum of approximately US$13.95 million (equivalent to approximately HK$108.8 million)), is payable at various stages of the construction of each vessel and within five Business Days of receipt of the relevant invoice by the Company. The final instalment for each vessel, each of which amounting to 50% of the total price (being a sum of approximately US$46.5 million (equivalent to approximately HK$362.7 million)), is payable within five Business Days of the receipt by the Company of all documentation in relation to the completion of construction of each vessel.

The first vessel is expected to be delivered on or before 31st October, 2007 with the others to be delivered on or before 28th February, 2008, 30th June, 2008 and 31st October, 2008 respectively.

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LETTER FROM THE BOARD

Terms of the Option Agreement

On the same day, the Company entered into the Option Agreement with Hudong-Zhonghua and CSSC, whereby an option with no premium has been granted to the Company for the construction of a fifth 8530 TEU container vessel. The detailed terms of the construction of the fifth vessel, including consideration payable and payment terms, shall be agreed between the Company, Hudong-Zhonghua and CSSC within three months of the signing of the Agreement. As at the Latest Practicable Date, the relevant terms of the construction of the fifth vessel were not yet finalised. Should the Company, Hudong-Zhonghua and CSSC fail to reach an agreement in relation to the construction of the fifth vessel within three months of the signing of the Agreement, the Option Agreement shall terminate and cease to have any effect. Further announcement in compliance with the requirements under the Listing Rules will be made upon entering into the agreement in relation to the construction of the fifth vessel.

Finance Terms

The Company intends to arrange for bank borrowings for approximately 70% of the total consideration for the construction of the four vessels with the balance to be funded by internal resources. It is expected that the financing will be finalized in the near future. Should such financing not be arranged, the full purchase price of each vessel will be funded from internal resources.

The Group’s fixed assets will increase by approximately US$372 million following the delivery of the vessels, whilst current assets will decrease and long-term liabilities will increase depending on the proportion of the purchase price funded from internal resources and external finance. The effect of the construction of the container vessels on the earnings of the Group cannot be ascertained at present, which will depend on the conditions of the shipping market at the time of delivery of the container vessels.

Reasons for the Transaction

Since the first quarter of 2004, the container market has been very busy and the Directors are optimistic of the demand in the shipping market in the remainder of 2004. The Directors also believe that the shipping market will maintain persistent growth in 2005. The Directors are of the view that the construction and ownership of the four 8530 TEU container vessels will enable the Group to take advantage of the business opportunities in the shipping market, enjoy economies of scale, optimize its overall route arrangements and improve its operating efficiency and profitability. As the container vessels will be registered in the PRC, they can be used in the Group’s domestic trade lanes as well as its international trade lanes, thereby allowing the Group the flexibility in the deployment of resources to satisfy international shipping and domestic demand growth, which is one of the Group’s principal strengths as a container shipping company in the PRC.

Information about the Group

The Group is principally engaged in the operation and management of international and domestic container marine transportation.

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LETTER FROM THE BOARD

Discloseable Transaction

Under the Listing Rules, the entering into of the Agreement for the construction of the four vessels constitutes a discloseable transaction of the Company. This document constitutes the circular which the Company is required to send to the Shareholders pursuant to the Listing Rules in respect of the construction of the vessels.

Additional Information

Your attention is also drawn to the additional information contained in the appendix to this circular.

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

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’, SUPERVISORS’ AND CHIEF EXECUTIVES’ INTERESTS

As at the Latest Practicable Date, none of the directors, supervisors or chief executive(s) of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such directors, supervisors or chief executive(s) is taken or deemed to have under such provisions of the SFO) or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code (which shall be deemed to apply to the Company’s supervisors to the same extent as it applies to the Company’s directors).

3. DIRECTORS’ SERVICE CONTRACTS

None of the Directors has entered into any service contract with the Company or any of its subsidiaries which is not determinable by the Company within one year without any payment of compensation, other than statutory compensation.

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

To the best knowledge of the Directors, none of the Directors or their respective associates has any interests in a business, which competes or may compete with the business of the Group.

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GENERAL INFORMATION

APPENDIX

5. SHAREHOLDINGS OF OTHER SHAREHOLDERS WITH NOTIFIABLE INTERESTS

As at the Latest Practicable Date, so far as is known to the directors, supervisors or chief executive(s) of the Company, the following persons (other than a director, supervisor or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

				Percentage in
		Number of		the relevant	Percentage
		shares/underlying		class of share	in total
Name of shareholder	Class of shares	shares held	Capacity	capital	share capital
China Shipping (Group)	Domestic shares	3,610,000,000	Beneficial owner	100%	59.87%
Company (Note 1)		(Long position)
Li Ka-Shing (Note 2)	H shares	362,637,000	Interest of controlled	14.98%	6.01%
		(Long position)	corporation and
			founder of a
			discretionary trust
Li Ka-Shing Unity	H shares	362,637,000	Trustee	14.98%	6.01%
Trustee Company		(Long position)
Limited
(Note 2)
Li Ka-Shing Unity	H shares	362,637,000	Trustee and	14.98%	6.01%
Trustcorp Limited		(Long position)	beneficiary of a trust
(Note 2)
Li Ka-Shing Unity	H shares	362,637,000	Trustee and	14.98%	6.01%
Trustee Corporation		(Long position)	beneficiary of a trust
Limited (Note 2)
Cheung Kong (Holdings)	H shares	362,637,000	Interest of controlled	14.98%	6.01%
Limited (Note 2)		(Long position)	corporation
Hutchison Whampoa	H shares	241,758,000	Interest of controlled	9.99%	4.01%
Limited (Note 3)		(Long position)	corporation
Hutchison International	H shares	241,758,000	Beneficial owner	9.99%	4.01%
Limited (Note 3)		(Long position)

Note 1: As at the Latest Practicable Date, Mr. Li Kelin, an executive Director, is the president of China Shipping (Group) Company and each of Mr. Li Shaode, Mr. Zhang Jianhua and Mr. Wang Daxiong, the non-executive Directors, is the vice-president of China Shipping (Group) Company.

Note 2: The 362,637,000 shares referred to herein is the same batch of shares.

Note 3: Hutchison International Limited is a wholly owned subsidiary of Hutchison Whampoa Limited. The 241,758,000 shares referred to herein is the same batch of shares, which forms part of the 362,637,000 shares referred to in Note 2.

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APPENDIX

GENERAL INFORMATION

Save as disclosed above and so far as the directors, supervisors or chief executive(s) of the Company are aware, as at the Latest Practicable Date, no other person had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company.

As at the Latest Practicable Date, so far as the directors, supervisors or chief executive(s) are aware, each of the following persons, not being a director, supervisor or chief executive of the Company or a member of the Group, were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

		Percentage of
Name of subsidiary (Note)	Name of shareholder (Note)	shareholding
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Dailian Co., Ltd.
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Guangzhou Co., Ltd.
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Hainan Company Limited	China Shipping Agency Co., Ltd.	20%
	China Shipping Hainan Logistics Co., Ltd.	30%
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Qingdao Company Limited
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Shanghai Co., Ltd.
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Shenzhen Co., Ltd
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Tianjin Company Limited
China Shipping Container Lines	China Shipping Group Investment Co. Ltd.	10%
Xiamen Co., Ltd.
China Shipping (Yangpu)	China Shipping Logistics Co., Ltd.	30%
Refrigeration Storage &	Suzhou China Shipping Containers Lines	30%
Transportation Co., Ltd.	Storage and Transportation Co., Ltd.
China Shipping Container Lines	China Shipping Agency Co., Ltd.	10%
(Haikou) Co., Ltd.

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GENERAL INFORMATION

APPENDIX

		Percentage of
Name of subsidiary (Note)	Name of shareholder (Note)	shareholding
Shanghai Puhai Shipping	China Shipping Logistics Co., Ltd	20%
Co., Ltd.	China Shipping Agency Co., Ltd	20%
	China Shipping Industry Co., Ltd	10%
Shanghai HaiXin YuanCang	Bermuda YuanCang International Co., Ltd.	40%
International Logistics Co.,
Ltd.	Shanghai YiHua Enterprises Company	20%

• Note: The English names of certain companies referred herein represent management’s best efforts at translating the Chinese names of these companies as no English names have been registered.

Save as disclosed above and so far as the directors, supervisors or chief executive(s) are aware, as at the Latest Practicable Date, no other person, not being a director, supervisor or chief executive of the Company, were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

6. LITIGATION

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

7. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Ye Yu Mang.

• (b) The qualified accountant of the Company pursuant to Rule 3.24 of the Listing Rules is Mr. Lau Wai Yip, who is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.

• (c) The Hong Kong H Share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (d) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

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