COSCO SHIPPING Development Co., Ltd. — Proxy Solicitation & Information Statement 2007

Feb 16, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about any of the contents of this Circular, you should obtain independent professional advice.

If you have sold or transferred all your shares in China Shipping Container Lines Company Limited , you should at once hand this Circular together with the attached form of proxy and reply slip to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

(Stock code: 2866)

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Independent financial adviser to the independent board committee and independent shareholders of China Shipping Container Lines Company Limited

A letter from the Board of the Company is set out on pages 8 to 33 of this Circular and a letter from the Independent Financial Adviser is set out on pages 37 to 75. A notice convening the SGM to be held at 2:30 p.m. on 10 April 2007 at Conference Room 1, 3rd Floor, 450 Fu Shan Road, Pudong New District, Shanghai, the People’s Republic of China is set out on pages 84 to 86 of this Circular.

If you intend to attend the SGM, please complete and return the enclosed reply slip in accordance with the instructions printed thereon as soon as possible and in any event by no later than 21 March 2007.

Whether or not you are able to attend the SGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon. The form of proxy must be signed by you or your attorney duly authorized in writing or, in case of a legal person, must either be executed under its seal or under the hand of a legal representative or other attorney duly authorized to sign the same. If the form of proxy is signed by an attorney of the appointor, the power of attorney authorizing that attorney to sign, or other document of authorization, must be notarially certified.

For holders of H shares of the Company, please return the proxy form together with any documents of authority to Computershare Hong Kong Investor Services Limited at Room 1806-1807, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible; and for holders of domestic shares of the Company, please return the above documents to the Directorate Secretary Office of the Company at 3rd Floor, 450 Fu Shan Road, Pudong New District, Shanghai, the People’s Republic of China as soon as possible, and in both cases in any event not later than 24 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM should you so wish.

• 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”.

16 February 2007

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
I.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
II.	Historical Caps, Historical Figures and Future Caps . . . . . . . . . . . . . . . . .	10
III.	Renewal of Non-exempt Continuing Connected Transactions . . . . . . . . . . .	12
IV.	Revised Master Provision of Containers Agreement . . . . . . . . . . . . . . . . . .	25
V.	Finance Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
VI.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
VII.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
VIII.	SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .		34
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . .		37
Appendix	– General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
**Notice of **	SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	84

– i –

DEFINITIONS

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

• “associate” has the meaning ascribed thereto under the Listing Rules.

• “Board” the board of directors of the Company.

• “China Shipping” China Shipping (Group) Company ( ), a wholly PRC state-owned enterprise and the

• controlling shareholder of the Company.

• “China Shipping Development , a limited liability company Company Limited” incorporated in the PRC whose H shares and A shares are listed on the Stock Exchange and Shanghai Stock Exchange respectively, and is owned as to about 50.5% by China Shipping as at the Latest Practicable Date. The registered address of CSDC is 168 Yuanshen Road, Shanghai, the PRC.

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

• “Company” China Shipping Container Lines Company Limited ( ), a joint stock limited company incorporated in the PRC, of which 2,420,000,000 H shares are listed on the Stock Exchange.

• “Connected Persons” China Shipping, DFI, CS Agency (Bangkok), CS Agency (Indonesia), CSS, Dalian Terminal, Shanghai Terminal, West Basin, Zhanjiang Terminal, CS (Yangpu) Refrigeration and the Regional Subsidiaries.

• “Container Leases” thirty-four container rental agreements entered into prior to the Listing between the Company and DFI and one container rental agreement entered into between the Company and China Shipping, for the lease of containers of various types and sizes to the Company.

“CS Agency (Bangkok)” China Shipping (Bangkok) Co., Ltd. ( ), which is owned as to 50% by China Shipping.

• “CS Agency (Indonesia)” PT Zhonghai Indo Shipping ( ), which is owned as to 49% by China Shipping.

– 1 –

DEFINITIONS

“CS (Dalian)” China Shipping Container Lines Dalian Company Limited ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

• “CS (Guangzhou)” China Shipping Container Lines (Guangzhou) Co., Ltd. ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

• “CS (Hainan)” China Shipping Container Lines Hainan Company Limited ( ), a limited liability company incorporated in the PRC owned as to 40% by the Company with the remaining 60% ultimately controlled by China Shipping.

• “CS Logistics” China Shipping Logistics Co., Ltd. ( ), a limited liability company incorporated in

• the PRC and a wholly-owned subsidiary of China Shipping.

• “CS (Qingdao)” China Shipping Container Lines Qingdao Company Limited ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

• “CSS” China Shipping & Sinopec Suppliers Co., Ltd. ( ), a limited liability company incorporated in the PRC jointly controlled by China Shipping and Sinopec Sales Company Limited ( ) (i.e. owned as to 50% by each of them).

“CS (Shanghai)” China Shipping Container Lines Shanghai Co., Ltd. ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

– 2 –

DEFINITIONS

• “CS (Shenzhen)”

China Shipping Container Lines (Shenzhen) Co., Ltd. ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

“CS (Tianjin)” China Shipping Container Lines Tianjin Company Limited ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

• “CS (Xiamen)” China Shipping Container Lines Xiamen Co., Ltd. ( ), a limited liability company incorporated in the PRC and owned as to 90% by the Company with the remaining 10% ultimately controlled by China Shipping.

“CS (Yangpu) Refrigeration” China Shipping (Yangpu) Refrigeration Storage & Transportation Co., Ltd. ( ), a limited liability company incorporated in the PRC with its 40% interest held by the Company, 30% by CS Logistics and 30% by Suzhou China Shipping Containers Lines Storage and Transportation Co., Ltd. ( ) (a limited liability company incorporated in the PRC with its 90% interest ultimately controlled by China Shipping), and is deemed to be a subsidiary of the Company since, pursuant to its articles of association and notwithstanding the above ownership structure, the Company has the power to appoint more than half of the total number of its directors, thus having control of its board of directors.

• “Dalian Terminal”

Dalian Dagang China Shipping Container Terminal Co. Ltd. ( ), which is owned as to 35% by China Shipping.

• “DFI”

Dong Fang International Investment Limited ( ), a limited liability company incorporated in the British Virgin Islands and a whollyowned subsidiary of China Shipping.

“Directors”

the directors of the Company.

– 3 –

DEFINITIONS

“First Master Container the master container management agreement dated 10 Management Agreement” May 2004 entered into between the Company, China Shipping, CS (Yangpu) Refrigeration and Shanghai Puhai. “First Master Liner and Cargo the master liner and cargo agency agreement dated 10 Agency Agreement” May 2004 entered into between the Company, China Shipping, CS Agency (Indonesia), CS Agency (Bangkok) and Shanghai Puhai. “First Master Loading and the master loading and unloading agreement dated 10 Unloading Agreement” May 2004 entered into between the Company, China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal. “Group” the Company and its subsidiaries. “HKICPA” the Hong Kong Institute of Certified Public Accountants. “Hong Kong” Hong Kong Special Administrative Region of the PRC. “Independent Board Committee” a committee of the Board comprising all the independent non-executive Directors, namely, Mr. Hu Hanxiang, Mr. Gu Nianzu, Mr. Wang Zongxi and Mr. Lam Siu Wai, Steven. “Independent Financial Adviser” Guotai Junan Capital Limited. “Independent Shareholders” the shareholders of the Company except the China Shipping Group. “Latest Practicable Date” 1 February 2007, being the latest practicable date prior to the printing of this Circular for the purpose of ascertaining certain information contained in this Circular. “Listing” listing of the H shares of the Company on the Main Board of the Stock Exchange. “Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange.

– 4 –

DEFINITIONS

• “Master Agreements”

the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement, the Master Liner Services Agreement, the Master Ground Container Transport Agreement, the First Master Container Management Agreement, the Second Master Container Management Agreement, the Master Time Charter Agreement, the First Master Loading and Unloading Agreement and the Second Master Loading and Unloading Agreement.

• “Master Ground Container the master ground container transport agreement dated 10 Transport Agreement” May 2004 entered into between the Company and China Shipping.

• “Master Liner Services the master liner services agreement dated 10 May 2004 Agreement” entered into between the Company and China Shipping.

• “Master Supply Agreement” the master supply agreement dated 10 May 2004 entered into between the Company, China Shipping and CSS.

• “Master Time Charter the master time charter agreement dated 10 May 2004 Agreement” entered into between the Company, China Shipping and Shanghai Puhai.

• “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 to the Listing Rules.

“Non-exempt Continuing the transactions under the Master Supply Agreement, the Connected Transactions” First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement, the Master Liner Services Agreement, the Master Ground Container Transport Agreement, the First Master Container Management Agreement, the Second Master Container Management Agreement, the Master Time Charter Agreement, the First Master Loading and Unloading Agreement and the Second Master Loading and Unloading Agreement.

“Original Master Provision of the master provision of containers agreement dated 1 Containers Agreement” April 2006 entered into between the Company and China Shipping for the manufacture and supply of containers by the China Shipping Group to the Group.

– 5 –

DEFINITIONS

“PRC” “Prospectus” “Regional Subsidiaries”

the People’s Republic of China.

the prospectus issued by the Company dated 4 June 2004.

CS (Dalian), CS (Guangzhou), CS (Hainan), CS (Qingdao), CS (Shanghai), CS (Shenzhen), CS (Tianjin) and CS (Xiamen).

“Renewed Container Leases” six addendum agreements, one for each of the six Container Leases numbered DFL9701, DFL9702, DFL9801, DFL9802, DFL9803 and DFL-TRTN-01 respectively, entered into between the Company and DFI for the renewal of the said six Container Leases.

“Revised Master Provision of the agreement proposed to be entered into between the Containers Agreement” Company and China Shipping based on the Original Master Provision of Containers Agreement for the manufacture and supply (including sale and/or lease) of containers by the China Shipping Group to the Group.

“Rights” the H share share appreciation rights granted under the H Share Share Appreciation Rights Scheme adopted by the Company on 12 October 2005. “RMB” Renminbi, the lawful currency of the PRC. “Second Master Container the master container management agreement dated 10 Management Agreement” May 2004 entered into between the Company and the Regional Subsidiaries.

• “Second Master Liner and Cargo the master liner and cargo agency agreement dated 10 Agency Agreement” May 2004 entered into between the Company and the Regional Subsidiaries.

“Second Master Loading and the master loading and unloading agreement dated 10 Unloading Agreement” May 2004 entered into between the Company and West Basin.

• “Sep” September.

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended and supplemented from time to time.

– 6 –

DEFINITIONS

“SGM”

the Company’s special general meeting to be convened for the purposes of: (i) ratifying the respective proposed 2006 annual caps for certain Non-exempt Continuing Connected Transactions; (ii) approving the respective proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for the Non-exempt Continuing Connected Transactions; and (iii) approving the respective proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for transactions under the Revised Master Provision of Containers Agreement.

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----- Start of picture text -----

|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|“Shanghai|Puhai”|Shanghai|Puhai|Shipping|Co.,|Ltd.|(|
|),|a|limited|liability|company|incorporated|in|
|the|PRC|and|owned|as|to|90%|by|the|Company|with|the|
|remaining|10%|by|CS|(Shanghai).|
|“Shanghai|Terminal”|Shanghai|China|Shipping|Container|Terminal|Co.|Ltd.|
|(|),|which|is|owned|as|to|
|50%|by|China|Shipping.|
|“Shareholder(s)”|the|shareholder(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,|height|of|8|feet|and|6|inches|and|width|of|8|
|feet.|
|“USA”|the|United|States|of|America.|
|“US$”|United|States|dollars,|the|lawful|currency|of|the|USA.|
|“West|Basin”|West|Basin|Container|Terminal|LLC.,|which|is|owned|as|
|to|40%|by|China|Shipping.|
|“Zhanjiang|Terminal”|Zhanjiang|China|Shipping|Container|Terminal|Co.|Ltd.|
|(|),|which|is|owned|as|to|
|50%|by|China|Shipping.|

----- End of picture text -----

– 7 –

LETTER FROM THE BOARD

==> picture [307 x 88] intentionally omitted <==

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

Directors:

Mr. Li Shaode

Mr. Jia Hongxiang Mr. Huang Xiaowen Mr. Zhao Hongzhou

Mr. Zhang Jianhua[+]

Mr. Wang Daxiong[+]

Legal address and principal place of business in the PRC: 27th Floor 450 Fu Shan Road Pudong New District Shanghai the PRC

Mr. Zhang Guofa[+]

Mr. Xu Hui[+]

Mr. Yao Zuozhi[+]

• Mr. Hu Hanxiang[++]

Mr. Gu Nianzu[++]

• Mr. Wang Zongxi[++]

• Mr. Lam Siu Wai, Steven[++]

Principal place of business in Hong Kong: Level 69 The Center 99 Queen’s Road Central Hong Kong

+ non-executive Directors

• ++ independent non-executive Directors

16 February 2007

To the Shareholders

Dear Sir or Madam,

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

I. INTRODUCTION

Reference is made to the announcement of the Company dated 24 January 2007 in relation

to:

• (i) the proposed revised 2006 annual caps for the following Non-exempt Continuing Connected Transactions: the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement and the Master Liner Services Agreement;

* 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 –

LETTER FROM THE BOARD

• (ii) the Non-exempt Continuing Connected Transactions and their respective proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009; and

• (iii) transactions under the Revised Master Provision of Containers Agreement and their proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009.

• ((i), (ii) and (iii) collectively, the “ Proposed Transactions ”)

The main purpose of this Circular is to provide you with, among other things:

• (a) further information as is necessary to enable you to make an informed decision on whether to vote for or against the resolutions to be proposed at the SGM relating to the Proposed Transactions;

• (b) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders relating to the Proposed Transactions;

• (c) the letter of recommendation from the Independent Board Committee relating to the Proposed Transactions; and

• (d) the notice of SGM relating to the Proposed Transactions.

– 9 –

LETTER FROM THE BOARD

II. HISTORICAL CAPS, HISTORICAL FIGURES AND FUTURE CAPS

The following tables set out the respective historical caps, historical figures and future caps of: (i) the Non-exempt Continuing Connected Transactions, details of which are set out in Part III, Section C of this Letter; and (ii) the transactions under the Revised Master Provision of Containers Agreement, details of which are set out in Part IV of this Letter.

Table A – Non-exempt Continuing Connected Transactions

					(RMB’000)
		Historical	Historical Figures
		Caps		Proposed	Proposed
	Transactions	for 2004-		Revised Cap	Future Caps
	under the	2006	for 2004-2006	for 2006	for 2007-2009
(1)	Master Supply	350,000	297,685 (2004)	484,000	800,000 (2007)
	Agreement in respect		346,144 (2005)		840,000 (2008)
	of products etc. to be		307,817 (as of 30		850,000 (2009)
	provided to the Group		September 2006)
			483,320 (estimated
			amount for
			2006)
(2)	(i) First Master Liner	455,000	338,548 (2004)	494,000	584,000 (2007)
	and Cargo Agency Agreement; and		268,526 (2005)		691,000 (2008)
	(ii) Second Master		357,812 (as of 30		819,000 (2009)
	Liner and Cargo		September 2006)
	Agency Agreement in respect of services to be provided to the Group		493,806 (estimated amount for 2006)
(3)	Master Liner Services	1,281,000	1,137,246 (2004)	1,882,000	2,259,000 (2007)
	Agreement in respect		941,774 (2005)		2,710,000 (2008)
	of services to be		1,408,977 (as of 30		3,252,000 (2009)
	provided by the		September 2006)
	Group		1,881,697 (estimated
			amount for
			2006)
(4)	Master Ground	54,000	30,359 (2004)	160,000	330,000 (2007)
	Container Transport		34,218 (2005)	(revised cap)	365,000 (2008)
	Agreement in respect		79,728 (as of 30	(See Note)	398,000 (2009)
	of services to be		September 2006)
	provided to the Group		159,950 (estimated
			amount for
			2006)

– 10 –

LETTER FROM THE BOARD

(RMB’000)

					(RMB’000)
		Historical	Historical Figures
		Caps		Proposed	Proposed
	Transactions	for 2004-		Revised Cap	Future Caps
	under the	2006	for 2004-2006	for 2006	for 2007-2009
(5)	(i) First Master	894,000	585,188 (2004)		903,000 (2007)
	Container		817,130 (2005)		993,000 (2008)
	Management		542,446 (as of 30		1,092,000 (2009)
	Agreement; and		September 2006)
	(ii) Second Master		820,530 (estimated
	Container		amount for
	Management		2006)
	Agreement in respect
	of services etc. to be
	provided to the Group
(6)	Master Time Charter	926,000	291,965 (2004)		410,000 (2007)
	Agreement in respect		288,188 (2005)		411,000 (2008)
	of vessels etc. to be		200,420 (as of 30		410,000 (2009)
	provided to the Group		September 2006)
			232,000 (estimated
			amount for
			2006)
(7)	(i) First Master	1,045,000	541,480 (2004)		1,255,000 (2007)
	Loading and		693,601 (2005)		1,505,000 (2008)
	Unloading		663,515 (as of 30		1,806,000 (2009)
	Agreement; and		September 2006)
	(ii) Second Master		1,045,000 (estimated
	Loading and		amount for
	Unloading Agreement		2006)
	in respect of services
	to be provided to the
	Group

Note: As each of the applicable percentage ratios in respect of this revised 2006 annual cap is more than 0.1% but less than 2.5% on an annual basis, the transactions under the Master Ground Container Transport Agreement for 2006, together with its revised 2006 annual cap, are exempt from Independent Shareholders’ approval under the Listing Rules. In this respect, the Board approved the said transactions and its revised 2006 annual cap on 15 December 2006. Please refer to the announcement dated 24 January 2007 for more details.

– 11 –

LETTER FROM THE BOARD

Table B – Revised Master Provision of Containers Agreement

(RMB’000)

Proposed Future Transactions under the Historical Caps Historical Figures for 2004-2006 Caps for 2007-2009

Revised Master Provision of Containers Agreement in respect of:

(1)	containers to be	680,000 (2004)	588,558	(2004)	620,000 (2007)
	leased to the Group	680,000 (2005)	488,231	(2005)	784,000 (2008)
		680,000 (2006)	408,551	(as of 30 Sep 2006)	894,000 (2009)
			590,493	(estimated amount for
				2006)
(2)	containers to be	870,960 (2006)	0	(2004)	1,131,000 (2007)
	purchased by the	1,000,400 (2007)	250,448	(2005)	285,000 (2008)
	Group	586,560 (2008)	606,210	(as of 30 Sep 2006)	182,000 (2009)
		(See Note)	868,814	(estimated amount for
				2006)

Note: These historical caps were initially stated and approved in US$ and have been converted to RMB in this Table for ease and consistency of reference.

III. RENEWAL OF NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

A. Background

As disclosed in the Prospectus, the Group entered into the Master Agreements with the relevant Connected Persons prior to the Listing. Transactions under such agreements constitute continuing connected transactions of the Company under the Listing Rules and the Company was granted a waiver by the Stock Exchange from strict compliance with the relevant requirements under the Listing Rules with respect to certain of such continuing connected transactions under the Master Agreements for a period of three years ended 31 December 2006. After such date, the Company must re-comply with the requirements under Chapter 14A of the Listing Rules in order to continue those continuing connected transactions.

B. General

1. Connected Persons

China Shipping is the controlling shareholder of the Company. Therefore, China Shipping and its associate(s) are connected persons of the Company under the Listing Rules.

– 12 –

LETTER FROM THE BOARD

Each of CS Agency (Bangkok), CS Agency (Indonesia), CSS, Dalian Terminal, Shanghai Terminal, West Basin and Zhanjiang Terminal is an associate of China Shipping and is therefore a connected person of the Company under the Listing Rules.

CS (Yangpu) Refrigeration and the Regional Subsidiaries are non-wholly owned subsidiaries of the Company where China Shipping, a connected person of the Company under the Listing Rules, is entitled to exercise 10% or more of the voting power at any general meeting of each such company. Accordingly, CS (Yangpu) Refrigeration and the Regional Subsidiaries are connected persons of the Company under the Listing Rules.

2. General Principles, Price and Terms

Each of the Master Agreements contains the binding principles, guidelines and terms and conditions in accordance with which any and all products and services contemplated therein are to be provided by the relevant provider to the relevant recipient.

Each of the Master Agreements requires in general terms that:

• (a) the quality of products and services to be provided should be satisfactory to the recipient;

• (b) the price at which such products and services are to be provided must be fair and reasonable; and

• (c) the terms and conditions on which such products and services are to be provided should be no less favourable to the Group than those offered from or to (as appropriate) the relevant Connected Persons, their subsidiaries and/or associates to or from (as appropriate) independent third parties, and offered from or to (as appropriate) independent third parties to or from (as appropriate) the Group.

3. Price Determination

Each of the Master Agreements provides that each relevant product or service must be provided in accordance with the following general pricing principles:

• (a) state-prescribed prices;

• (b) where there is no state-prescribed price, then according to relevant market prices; or

• (c) where there is no market price, then according to the contracted price.

– 13 –

LETTER FROM THE BOARD

For the purpose of each of the Master Agreements:

“state-prescribed price” means the price set by the relevant laws, regulations and other governmental regulatory documents issued by the relevant departments of the PRC government;

“market price” means the price at which the same or comparable type of products or services are provided from or to (as appropriate) independent third parties in the same area in the ordinary course of business; and

“contracted price” means the actual cost incurred in providing such products or services plus a margin ranging from 0% to 15% thereof.

4. Term and Termination

The initial term of each of the Master Agreements is three years, with effect from 10 May 2004. Upon the expiry of such initial term, each of the Master Agreements shall automatically extend for further terms of three years, unless any relevant party gives to the other party or parties written notice of termination at least three months prior to such expiry date.

During the term of each of the Master Agreements, termination of any implementation agreement described below may be effected from time to time by any one of the parties to the relevant implementation agreement providing at least 3 months’ written notice of termination to the other party or parties.

5. Implementation Agreements

It is envisaged that from time to time and as required, individual implementation agreements may be entered into between the Group and the relevant Connected Persons, and their respective subsidiaries and/or associates, as appropriate.

Each implementation agreement will set out the specific products and services requested by the relevant party and any detailed technical and other specifications which may be relevant to those products or services. The implementation agreements may only contain provisions which are in all material respects consistent with the binding principles, guidelines, terms and conditions in accordance with which such products and services are required to be provided as contained in the relevant Master Agreement.

As the implementation agreements are simply further elaborations on the provision of products and services as contemplated by each of the Master Agreements, they do not constitute new categories of connected transactions.

– 14 –

LETTER FROM THE BOARD

C. Non-exempt Continuing Connected Transactions

Set out below is a summary in respect of each of the Non-exempt Continuing Connected Transactions. Please refer to Part II, Table A of this Letter for the respective historical annual caps, historical figures and future annual caps of such continuing connected transactions.

1. Master Supply Agreement

On 10 May 2004, the Company entered into the Master Supply Agreement with China Shipping and CSS for the provision of fresh water, vessel fuel, lubricants, spare parts and other materials, generators for the containers and other related and ancillary services by: (i) China Shipping, CSS and their respective subsidiaries and associates; to (ii) the Group.

Due to the following reasons and based on an internal estimate of the transaction amount for 2006, the Directors believe that the existing 2006 annual cap will not be sufficient for the Group’s current requirements and therefore propose that the existing 2006 annual cap, i.e. RMB350,000,000, be revised to RMB484,000,000:

• (i) The trading value of fuel constitutes a major factor affecting the transaction value under this agreement. In 2006, the following factors contributed to an increase in the price and amount of fuel purchased:

• (a) Firstly, due to an increase in international oil prices, the average fuel purchase price of the Group for 2006 was approximately RMB3,680/T, representing an increase of RMB576/T or approximately 18.6% as compared with the average fuel purchase price of RMB3,104/T in the corresponding period of 2005. As such and excluding other factors affecting the transaction value under this agreement, the total amount of fuel purchased under this agreement is expected to increase by approximately RMB58,000,000, as compared with that of 2005;

• (b) Secondly, in order to expand domestic market share, the Group increased its shipping capacity, opened premium trade lanes and further engaged large vessels (each with a volume of more than 4,000TEU) in domestic trade lanes since August 2006. An additional large vessel will lead to an increase of approximately 2,000 to 2,500 tonnes in total fuel purchase each month. As such, the aggregate amount of fuel purchased under this agreement is expected to increase by approximately 36%, or RMB12,000,000 from August 2006 to December 2006, as compared with that of the corresponding period of 2005; and

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LETTER FROM THE BOARD

• (ii) The increase in the total amount of fuel purchased mentioned above is expected to account for approximately 50% of the increased total transaction amount under this agreement as of 31 December 2006. The other 50% increase in the total transaction amount under this agreement is expected to come from spare parts and other materials purchased. As more of the Group’s vessels have approached their respective inspection and maintenance cycles, the demand by the Group for spare parts and other materials have increased. In addition, following the increase in international metal prices, the prices of the said spare parts and certain other materials have increased accordingly. Furthermore, approximately 32% of the Group’s vessels are over ten years of age and are in need of regular maintenance. As a result, the costs in relation to the said spare parts and other materials increased significantly during 2005 and 2006.

The proposed annual caps for the transaction amounts under this agreement for each of the three years ending 31 December 2007, 2008 and 2009 are RMB800,000,000, RMB840,000,000 and RMB850,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) for 2004 to 2006;

• (ii) Based on the varying market conditions of international oil prices in 2006, in view of the expected general increase in the prices of international crude oil and oil for domestic trade for 2007 to 2009, and in light of the expected higher price of oil for domestic trade as compared with the price of international crude oil, the transaction value under this agreement is expected to increase accordingly;

• (iii) With the development of the domestic container shipment market and the opening up of premium trade lanes for domestic trade by the Group, the Group intends to further strengthen its investment in shipping capacity for domestic trade lanes and intends to gradually engage nine more large vessels (each with a volume of over 4,000TEU) for domestic trade lanes for 2007 to 2009. As a result, the total amount of fuel to be purchased annually during that three year period is expected to be approximately 180,000 tonnes, 200,000 tonnes and 200,000 tonnes respectively; and

• (iv) With the said nine additional new vessels put into operation and more existing vessels approaching their respective inspection and maintenance cycles, the demand by the Group in spare parts and other materials is expected to continue to increase.

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2. First Master Liner and Cargo Agency Agreement and Second Master Liner and Cargo Agency Agreement

On 10 May 2004, the Company entered into the First Master Liner and Cargo Agency Agreement with China Shipping, CS Agency (Indonesia), CS Agency (Bangkok) and Shanghai Puhai for the provision of sales and marketing services, port agency services (arrange for berthing of vessels, customs, towage, pilotage, loading and discharging of the cargo and/or containers), container services (stuffing and unstuffing of cargo, prepare documents for custom clearance, undertake leasing of containers, arrange for container repairs and maintenance), accounting and financial services and other related and ancillary services by: (i) China Shipping, CS Agency (Indonesia), CS Agency (Bangkok) and Shanghai Puhai and their respective subsidiaries and associates; to (ii) the Group.

On 10 May 2004, the Company also entered into the Second Master Liner and Cargo Agency Agreement with the Regional Subsidiaries for the provision of the same services above by: (i) the Regional Subsidiaries and their respective subsidiaries and associates; to (ii) the Group (excluding the Regional Subsidiaries and their respective subsidiaries).

Due to the following reasons and based on an internal estimate of the transaction amount for 2006, the Directors believe that the existing 2006 annual cap will not be sufficient for the Group’s current requirements and therefore propose that the existing 2006 annual cap, i.e. RMB455,000,000, be revised to RMB494,000,000:

• (i) The Group’s shipping capacity for 2006 increased by approximately 15% as compared with that of 2005, resulting in an increase of cargo volume by approximately 19% for 2006 as compared with that of 2005. Accordingly, the liner and cargo agency business volume of the Group also increased; and

• (ii) During 2006, the Group opened a number of new trade lanes, including West Africa – Europe, Atlantic II, Atlantic III, Europe VII and America Eastern IV. In order to meet the liner and cargo agency requirements of the Group for the above new trade lanes, China Shipping established 5 joint-venture agencies and holding companies in the above-mentioned regions in 2006, resulting in additional liner and cargo agency service fees of RMB156,000,000 for these new trade lanes.

The proposed annual caps for the transaction amounts under these agreements for each of the three years ending 31 December 2007, 2008 and 2009 are RMB584,000,000, RMB691,000,000 and RMB819,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) for 2004 to 2006, as well as the relationship between the increase in shipping capacity and the increase in forwarding agency service fees; and

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• (ii) As the Group is expected to continue to put large vessels into operation in the coming years, the shipping capacity of the Group is expected to grow by approximately 12% annually for 2007 to 2009, which is expected to result in an approximate 18% annual increase in cargo volume over the same period. On the premise that the current service rate will remain unchanged and taking into account the above factors, the transaction value under this agreement is expected to grow by approximately 18% annually for 2007 to 2009.

3. Master Liner Services Agreement

On 10 May 2004, the Company entered into the Master Liner Services Agreement with China Shipping for the provision of liner services, container space and other related and ancillary services by the Group to the China Shipping Group.

Due to the following reasons, the 2006 annual cap in respect of the provision of services by the Group has been exceeded and the Directors therefore propose that the existing 2006 annual cap, i.e. RMB1,281,000,000, be revised to RMB1,882,000,000:

• (i) The transactions under this agreement mainly originate from the American trade lanes. Based on historical figures, the transaction value for 2004, 2005 and the first half of 2006 each accounted for approximately 13%, 8% and 15% respectively of the total transaction volume of the American trade lanes (which were RMB8,687,942,000, RMB11,341,455,000 and RMB6,395,445,000 for 2004, 2005 and the first half of 2006 respectively). Therefore, the increase in the business volume of the American trade lanes directly influenced the volume of transactions under this agreement; and

• (ii) Due to seasonal impact on shipping operations, the increase in demand in the shipping market fell behind the increase in shipping capacity by approximately 4.4%, which further intensified market competition. The Group has been striving to strengthen cargo solicitation efforts to increase operating revenue, and the China Shipping Group has been proactively cooperating with the Group to meet operation demands by increasing the number of outlets and staff for cargo solicitation and strengthening business development in markets such as the USA. As a result, the 2006 transaction amount amounted to RMB1,882,000,000, representing an increase of approximately 99% as compared with that of the previous year. In return, the Group’s estimated operating revenue from its American trade lanes increased by more than 30% as compared with that of the previous year.

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LETTER FROM THE BOARD

The proposed annual caps for the transaction amounts under this agreement for each of the three years ending 31 December 2007, 2008 and 2009 are RMB2,259,000,000, RMB2,710,000,000 and RMB3,252,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) for 2004 to 2006, as well as the relationship between the growth in shipping capacity and the increase in the transaction value under this agreement; and

• (ii) The Group is expected to continue to put large vessels into operation in the coming years. The shipping capacity of the American trade lanes is also expected to increase by approximately 12% to 14% annually for 2007 to 2009, leading to a corresponding growth in shipping volume. As the Group’s cargo solicitation ability is improving, the increase in its shipping capacity is expected to bring a steady increase of shipping volume. Historical figures for 2003 to 2005 show that when the shipping capacity of the Company increases by approximately 10%, the shipping volume would increase by approximately 20% accordingly. On the premise that the current service rate will remain unchanged and taking into account the above factors, the transaction value under this agreement is expected to grow by approximately 20% annually for 2007 to 2009.

4. Master Ground Container Transport Agreement

On 10 May 2004, the Company entered into the Master Ground Container Transport Agreement with China Shipping for the provision of ground transportation services and other related and ancillary services by the China Shipping Group to the Group.

The proposed annual caps for the transaction amounts under this agreement for each of the three years ending 31 December 2007, 2008 and 2009 are RMB330,000,000, RMB365,000,000 and RMB398,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) and service rates for 2004 to 2006;

• (ii) Since the second half of 2006, in addition to CS (Shanghai), the other seven Regional Subsidiaries have each entered into implementation agreements under this agreement with CS Logistics in accordance with their business development requirements. The said other seven Regional Subsidiaries entered into transactions with CS Logistics during the second half of 2006 due to an adjustment of the Group’s operating strategies. With the increasingly intense competition faced by the Group

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in its trade lane operations in 2006, the Group needs to take further advantage of the brand recognition and reputation of the China Shipping Group in each port to provide its customers with better services, so as to increase the Group’s volume of cargo to be solicited, expand its market share and secure a competitive advantage. The Group entered into transactions with CS Logistics taking into account the following factors: (a) due to the chain expansion and service improvement measures adopted and completed by CS Logistics in the first half of 2006, CS Logistics is currently able to provide comprehensive ground transportation services nationwide; (b) as there are presently a very limited number of logistic companies which can provide ground transportation services, companies with similar capabilities would generally be our competitors (except for CS Logistics); and (c) the quality, timely and convenient services provided by CS Logistics, which in turn will help the Group to improve its own services. Accordingly, the Regional Subsidiaries will continue to cooperate with CS Logistics for the provision of ground container transport services from 2007 to 2009 due to an adjustment of the Group’s operating strategies. From 2007, the Regional Subsidiaries will designate CS Logistics as the provider of all their ground container transport services. However, the transaction figures for 2006 do not accurately reflect the total transaction value of the Regional Subsidiaries for all their ground container transport services. This is because only connected transactions with CS (Shanghai) were recorded during the first half of 2006, whilst the said other seven Regional Subsidiaries consecutively designated CS Logistics as the provider of their ground container transport services in the second half of 2006 (which services were used to be provided by third parties). Also, the shipping capacity of the Group is expected to grow by approximately 12% annually from 2007 to 2009, with the ground container transport business volume of each of the Regional Subsidiaries growing at a corresponding rate; and

• (iii) Based on the above reasons, the Company collated the transaction value of the ground container transport services of each of the Regional Subsidiaries during 2006 as the basis to estimate the total transaction value of the Group for 2007 to 2009 and has, together with the expected rate of increase in such transaction value over the same period, calculated the said proposed annual caps for the transaction amounts under this agreement.

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5. First Master Container Management Agreement and Second Master Container Management Agreement (in respect of services etc. to be provided to the Group)

On 10 May 2004, the Company entered into the First Master Container Management Agreement with China Shipping, CS (Yangpu) Refrigeration and Shanghai Puhai for the mutual provision of container management services, container maintenance services (including repairing and cleaning of containers), work area for conducting container maintenance work and other related and ancillary services between: (i) the Group; and (ii) China Shipping, CS (Yangpu) Refrigeration, Shanghai Puhai and their respective subsidiaries and associates.

On 10 May 2004, the Company also entered into the Second Master Container Management Agreement with the Regional Subsidiaries for the mutual provision of the same services above between: (i) the Group (excluding the Regional Subsidiaries and their respective subsidiaries); and (ii) the Regional Subsidiaries and their respective subsidiaries and associates.

The proposed annual caps for the transaction amounts for the products and services to be provided to the Group under these agreements for each of the three years ending 31 December 2007, 2008 and 2009 are RMB903,000,000, RMB993,000,000 and RMB1,092,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) for 2004 to 2006, as well as the relationship between the growth in shipping capacity and the increase in transaction volume under this agreement; and

• (ii) The Group is expected to continue to put large vessels into operation in the coming years, thereby resulting in an expected increase in the shipping capacity of the Group by approximately 12% annually for 2007 to 2009. On the premise that the current container management agency fee will remain unchanged and taking into account the above factors, the transaction value under this agreement is expected to grow by approximately 10% annually for 2007 to 2009.

6. Master Time Charter Agreement (in respect of vessels etc. to be provided to the Group)

On 10 May 2004, the Company entered into the Master Time Charter Agreement with China Shipping and Shanghai Puhai for the mutual provision of vessels on a time charter basis and other related and ancillary services between: (i) the Group; and (ii) China Shipping, Shanghai Puhai and their respective subsidiaries and associates. As mentioned in the Prospectus, the implementation agreements under this agreement were expected to be for terms exceeding three years so as to reduce operating costs and protect the Group from potential rental price increase.

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The proposed annual caps for the transaction amounts for the vessels etc. to be provided to the Group under this agreement for each of the three years ending 31 December 2007, 2008 and 2009 are RMB410,000,000, RMB411,000,000 and RMB410,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) for 2004 to 2006;

• (ii) During 2004 to 2006, the sub-time charter relationship with China Shipping, in respect of 12 out of the 18 vessels which had been originally chartered to China Shipping by independent third party vessel owners, were terminated after construction of the vessels were completed and put into operation. Instead, time charters were directly entered into between the Group and such vessel owners. The Group is still in the process of negotiating with such vessel owners in respect of the time charters for the remaining 6 vessels, of which 2 vessels are expected to be delivered in 2007. The said vessel owners have undertaken that their time charter agreements with the China Shipping would be terminated and replaced with time charter agreements directly entered into with the Group upon the delivery of the said remaining vessels; and

• (iii) Compared with time charters which have been terminated previously, those time charters which need to be renewed for 2007 to 2009 are expected to have a larger capacity. For example, the two vessels delivered in the second half of 2006 have a capacity of 9600TEU, and their time charter prices are far much higher than those of smaller vessels.

7. First Master Loading and Unloading Agreement and Second Master Loading and Unloading Agreement

On 10 May 2004, the Company entered into the First Master Loading and Unloading Agreement with China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal for the provision of container loading and unloading services and other related and ancillary services by: (i) China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal and their respective subsidiaries and associates; to (ii) the Group.

On 10 May 2004, the Company also entered into the Second Master Loading and Unloading Agreement with West Basin for the provision of the same services above by: (i) West Basin and its subsidiaries and associates; to (ii) the Group.

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LETTER FROM THE BOARD

The proposed annual caps for the transaction amounts under these agreements for each of the three years ending 31 December 2007, 2008 and 2009 are RMB1,255,000,000, RMB1,505,000,000 and RMB1,806,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table A of this Letter) for 2004 to 2006, as well as the relationship between the growth in shipping capacity and the increase in transaction volume under this agreement; and

• (ii) In order to further assist in the expansion of the Group’s business, the China Shipping Group plans to continue investing in the construction of new piers (which are intended to be injected into the Group at the appropriate time) and further provide the Group with loading and unloading services. Based on the above analysis and on factors such as the expected increase in shipping capacity and the possible investment in piers for loading and unloading services for 2007 to 2009, the transaction value under this agreement is expected to grow by approximately 20% annually for 2007 to 2009.

D. Reasons for and Benefits of Transactions

The Company was established in 1997 as the container shipping arm of China Shipping. Due to the long established and close business relationship between the members of the Group and the China Shipping Group, a number of transactions have been entered into and are to be entered into between the Group and the relevant Connected Persons and their respective subsidiaries and associates, which are individually, significant and collectively essential to the core business and operation of container marine transportation of the Group.

In addition, as China Shipping is one of the key state-owned enterprises and is a large shipping conglomerate that operates across different regions, sectors and countries, and the relevant Connected Persons, most of which are associates of China Shipping, are well-known marine transportation corporations with outstanding competency in shipping industry and have developed good experience and service systems in respect of the products and services under the continuing connected transactions set out above. The cooperation with China Shipping and other Connected Persons enables the Group to fully leverage on their advantages to achieve better operating performance. The Regional Subsidiaries were established by the Group for the purpose of acting as its local agents in major port cities in the PRC and soliciting international and domestic container shipping business from a wide range of customers on behalf of the Group.

Finally, the terms and conditions provided by the Connected Persons in relation to the continuing connected transactions set out above are generally more favourable to the Group than those provided by independent third parties to the Group, or those provided by the Connected Persons to independent third parties.

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In light of the above factors, the Directors (including the independent non-executive Directors) consider that the terms of the above continuing connected transactions are fair and reasonable on normal commercial terms, and that it is in the best interest of the Company and its Shareholders as a whole to continue these continuing connected transactions with the relevant Connected Persons.

E. Implications under the Listing Rules

Pursuant to the terms of the waiver granted by the Stock Exchange, certain of the continuing connected transactions under the Master Agreements are subject to relevant annual caps disclosed in the Prospectus.

The 2006 annual cap for the transactions under the Master Liner Services Agreement has been exceeded as of 30 September 2006. It had also come to the Directors’ attention that the respective 2006 annual caps for the following Non-exempt Continuing Connected Transactions would not be sufficient for the Group’s current requirements and shall be revised accordingly: (i) the Master Supply Agreement; and (ii) the First Master Liner and Cargo Agency Agreement and the Second Master Liner and Cargo Agency Agreement. Since the applicable percentage ratios in respect of the proposed revised 2006 annual caps for the transactions under the said agreements will be more than 2.5% on an annual basis, such transactions, together with their respective proposed revised 2006 annual caps, are therefore subject to Independent Shareholders’ ratification in accordance with the Listing Rules.

In respect of the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for the Non-exempt Continuing Connected Transactions, the applicable percentage ratios are expected to be more than 2.5% on an annual basis. Therefore, such transactions, together with their respective proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009, are subject to Independent Shareholders’ approval as required under Rule 14A.48 of the Listing Rules.

F. Reasons for Delay in Timely Compliance and Measures Implemented

The Company has been monitoring the continuing connected transactions under the Master Agreements. However, the Company was not able to predict with sufficient accuracy whether the 2006 annual caps for the above continuing connected transactions were going to be exceeded due to the following reasons: (i) the rapid growth of the Group’s business in 2006; (ii) the large scale of the Group’s business operations; (iii) the number of subsidiaries and branches of the Group involved in relation to such transactions; (iv) the size and complexity of such transactions; and (v) relevant adjustments made by the Group to its operation strategies within 2006 in response to fluctuating market conditions. Also, the Company needed time to collect, consolidate and confirm the transaction amounts internally, and seek relevant legal and/or accounting advice, before preparing and confirming the draft announcement and other documents in fulfilment of its relevant re-compliance obligations. This process was lengthened due to the reasons set out above. Accordingly, in spite of the Company’s endeavours to expedite the completion of this process, some delay was inevitably experienced.

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In light of the above reasons, the Company had not revised the 2006 annual cap for the continuing connected transactions under the Master Liner Services Agreement promptly prior to such cap being exceeded.

In order to prevent similar problems arising in the future, the Group: (i) has commenced the review and updating of its existing internal guidelines to improve the identification and monitoring of its connected transactions, details of which will be disseminated to relevant personnel of the Group upon the confirmation and adoption of the said guidelines; (ii) has set up certain trainings for such personnel in order to deepen their understanding of connected transactions under the Listing Rules; and (iii) in view of the burdensome data collection process with respect to its continuing connected transactions, has invested particularly in the research and development of its computerbased information management system so as to expedite the statistics reporting and updating process and better monitor the volume of its continuing connected transactions in a timely and efficient manner.

IV. REVISED MASTER PROVISION OF CONTAINERS AGREEMENT

A. Background

As disclosed in the Prospectus, prior to the Listing, the Company had entered into the Container Leases, all of which were for terms exceeding three years so as to bargain for a cheaper rental price, minimise associated administrative costs, reduce operating costs and protect the Company from potential rental price increase. The applicable terms of the Container Leases vary and range from five to eleven years and the majority of the Container Leases will terminate between 2009 and 2012. The Company was granted a waiver by the Stock Exchange from strict compliance with the relevant requirements under the Listing Rules with respect to the transactions under the Container Leases for a period of three years ended 31 December 2006. The annual cap under the Container Leases for each of the three years ended 31 December 2004, 2005 and 2006 is RMB680,000,000. After 31 December 2006 or when any of the Container Leases is renewed, the Company must re-comply with the requirements under Chapter 14A of the Listing Rules in order to continue the transactions under the Container Leases.

All of the Container Leases are still in existence. One Container Lease initially expired in 2005 and five Container Leases initially expired in 2006. As the Group expects a continuing expansion of its shipping capacities in the next few years, which will result in a significant increase in demand by the Group for containers, the Company entered into the Renewed Container Leases. Please refer to Section B, paragraph 5 of this Part for more information regarding the entry of the Renewed Container Leases.

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On 1 April 2006, the Company entered into the Original Master Provision of Containers Agreement with China Shipping whereby China Shipping agreed to supply and agreed to procure that its subsidiaries and associates manufacture and supply containers to the Group. Transactions under this agreement and the annual caps were approved by the Independent Shareholders on 31 March 2006. Since then, several implementation agreements have been entered into between members of the Group and the China Shipping Group in accordance with the Original Master Provision of Containers Agreement, all of which have since expired.

The Group expects a continuing expansion of its shipping capacities in the next few years, which will result in a significant increase in demand by the Group for containers. Under such circumstances, and in light of: (i) the fact that the purchase and lease of containers are related in that an increase in leased containers would lead to the decrease in purchased containers and vice versa; and (ii) the Company’s desire to consolidate and streamline the administrative schedule of all the Company’s continuing connected transactions, the Company intends to terminate the Original Master Provision of Containers Agreement and enter into the Revised Master Provision of Containers Agreement with China Shipping pursuant to which China Shipping shall supply (including sell and/or lease), and shall procure that its subsidiaries and associates manufacture and supply (including sell and/or lease), containers to the Group.

B. General

1. Connected Persons

China Shipping is the controlling shareholder of the Company. Therefore, China Shipping and its associate(s) are connected persons of the Company under the Listing Rules. DFI is a wholly-owned subsidiary of China Shipping and is therefore a connected person of the Company under the Listing Rules.

2. General Principles, Price and Terms, Price Determination and Implementation Agreements

The general principles, price and terms, price determination and implementation agreements set out in the Revised Master Provision of Containers Agreement are exactly the same as those contained in the Master Agreements. Please refer to Part III, Section B of this Letter for more details.

3. Term and Termination

The Revised Master Provision of Containers Agreement will come into effect from the date of signature with an initial term of three years. Upon the expiry of such initial term, the Revised Master Provision of Containers Agreement shall automatically extend for further terms of three years, subject to the review of the annual caps by the Shareholders if required under the Listing Rules and the

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fulfillment of the relevant requirements of the Listing Rules, unless at any time either party gives to the other party or parties at least 3 months’ written notice of termination prior to such expiry date. The Company shall comply with the relevant disclosure and shareholders’ approval requirements under the Listing Rules, if the Revised Master Provision of Containers Agreement is renewed.

During the term of the Revised Master Provision of Containers Agreement, termination of any implementation agreement under the Revised Master Provision of Containers Agreement may be effected from time to time by any one of the parties to the relevant implementation agreement providing at least 3 months’ written notice of termination to the other party or parties.

4. Incorporation of Container Leases

Upon the Revised Master Provision of Containers Agreement becoming effective, the Original Master Provision of Containers Agreement shall cease to be in force and each of the existing Container Leases, including the Renewed Container Leases, will be incorporated into the Revised Master Provision of Containers Agreement. The provisions contained in the Container Leases, including the Renewed Container Leases, shall be in all material respects consistent with the binding principles, guidelines, terms and conditions in accordance with which such containers are required to be provided as contained in the Revised Master Provision of Containers Agreement.

As the Container Leases, including the Renewed Container Leases, are simply further elaborations on the provision of containers as contemplated by the Revised Master Provision of Containers Agreement, they do not constitute new categories of connected transactions.

5. Renewed Container Leases

The Company has entered into six Renewed Container Leases with DFI for containers of various types and sizes to be leased by DFI to the Company. The Renewed Container Leases individually may cover as few as 20 containers or as many as 20,417 containers. The respective daily rental rates payable for each type of containers were adjusted such that the maximum aggregate annual amount of the lease payments payable by the Company under the Renewed Container Leases is approximately US$10,496,045 (equivalent to approximately RMB83,968,000), all of which shall be paid monthly in arrears and in US$. Such lease payments will be aggregated on an annual basis with the total annual transaction amount to be paid by the Group under the Revised Master Provision of Containers Agreement for the purpose of aggregation of transactions under the Listing Rules.

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The terms of each of the Renewed Container Leases are set out below:

	Date of
Addendum	Addendum	Commencement
Agreement	Agreement	Date	Expiry Date	Lease Period
Container	1 July 2006	1 July 2006	30 June 2007	1 year
Lease	(as amended on
DFL9701	11 January 2007)
Container	1 July 2006	1 July 2006	30 June 2008	2 years
Lease
DFL9702
Container	1 March 2006	1 March 2006	28 February 2007	1 year
Lease	(as amended on
DFL9801	11 January 2007)
Container	1 March 2006	1 March 2006	28 February 2008	2 years
Lease
DFL9802
Container	1 March 2006	1 March 2006	28 February 2007	1 year
Lease	(as amended on
DFL9803	11 January 2007)
Container	1 September 2005	1 September 2005	31 August 2007	1 year
Lease DFL-	(as amended on
TRTN-01	11 January 2007)

The Group has continued, and intends to continue, leasing containers from DFI as the terms and conditions provided by DFI are generally more competitive, flexible and favourable to the Group as compared to those provided by third parties. Also, the rental prices under the Renewed Container Leases were significantly lower than those offered by third parties for containers of comparable type, age and quality.

C. Historical Figures, Annual Caps and Basis for Annual Caps

1. Historical Figures and Future Annual Caps

Please refer to Part II, Table B of this Letter for: (i) the respective historical figures for the Container Leases and the Original Master Provision of Containers Agreement; and (ii) the respective proposed annual caps for: (a) the containers to be leased; and (b) the containers to be purchased, under the Revised Master Provision of Containers Agreement for each of the three years ending 31 December 2007, 2008 and 2009.

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2. Basis for Future Annual Caps

The proposed annual caps for the purchase of containers by the Group under this agreement for each of the three years ending 31 December 2007, 2008 and 2009 are RMB1,131,000,000, RMB285,000,000 and RMB182,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table B of this Letter) for 2004 to 2006;

• (ii) As the shipping capacity of the Group is expected to grow by approximately 12% annually for 2007 to 2009, additional container volume of approximately 135,148TEU, 130,892TEU and 84,360TEU are expected to be required for 2007, 2008 and 2009 respectively. Based on capital requirements and the approved container purchase plan for 2007, the ratio of the number of containers to be purchased in relation to the total number of containers to be acquired is expected to be approximately 65%, 20% and 20% for 2007, 2008 and 2009 respectively; and

• (iii) The premise that the purchase price for containers will remain unchanged for 2007 to 2009.

The proposed annual caps for the lease of containers by the Group under this agreement for each of the three years ending 31 December 2007, 2008 and 2009 are RMB620,000,000, RMB784,000,000 and RMB894,000,000 respectively. In arriving at such annual caps, the Directors have considered the following factors:

• (i) The historical figures (as set out in Part II, Table B of this Letter) for 2004 to 2006;

• (ii) The purchase and lease of containers are related in that an increase in leased containers would lead to the decrease in purchased containers and vice versa. Accordingly, as the total number of containers required and to be purchased under this agreement for each of 2007, 2008 and 2009 have been determined, the total number of containers to be leased under this agreement for each of 2007, 2008 and 2009 have also been respectively set; and

• (iii) The premise that the rental price for containers will remain unchanged for 2007 to 2009.

D. Reasons for and Benefits of Transactions

Please refer to: (i) Part III, Section D of this Letter for the reasons and benefits of transactions between the Group and the China Shipping Group; and (ii) Part IV, Section A of this Letter for the background of the entry into the Revised Master Provision of Containers Agreement.

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In light of the above factors, the Directors (including the independent non-executive Directors) consider that the terms of the above transactions are fair and reasonable, on normal commercial terms, and that it is in the best interest of the Company and its Shareholders as a whole to enter into the Revised Master Provision of Containers Agreement with China Shipping.

E. Implications under the Listing Rules

In respect of the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for the transactions under the Revised Master Provision of Containers Agreement (as set out in Part II, Table B of this Letter), the applicable percentage ratios are expected to be more than 5% but less than 25% on an annual basis. Therefore, such transactions will constitute continuing connected transactions of the Company under Chapter 14A (transactions under this agreement in respect of the purchase of containers further constitute discloseable transactions of the Company under Chapter 14 of the Listing Rules) and shall be, together with the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009, subject to Independent Shareholders’ approval as required under Rule 14A.48 of the Listing Rules.

V. FINANCE TERMS

The Company expects to use internal resources and/or bank borrowings to satisfy the consideration payable under the Non-exempt Continuing Connected Transactions and the Revised Master Provision of Containers Agreement.

With regards to the provision of products under the Non-exempt Continuing Connected Transactions (where applicable) and the Revised Master Provision of Containers Agreement, the conduct of the transactions thereunder will increase the Group’s assets. With regards to the provision of services under the Non-exempt Continuing Connected Transactions (where applicable), the conduct of the transactions thereunder will not affect the Group’s assets. The Group’s current assets will decrease or long-term liabilities will increase depending on whether the consideration for such transactions will be funded from internal resources or external finance, as the case may be. The effect of such transactions on the earnings of the Group cannot be ascertained at present, which will depend on the conditions of the shipping market at the time such transactions are conducted.

VI. GENERAL

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

China Shipping is a large shipping conglomerate that operates across different regions, sectors and countries. The China Shipping Group (including the Group) has five specialised shipping fleets (including oil tankers, tramps, passenger vessels, container vessels and special vessels). CS (Yangpu) Refrigeration is principally engaged in transportation, placement and

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LETTER FROM THE BOARD

storage of containers, refrigeration, warehousing and storage business, and mainly carries out container management and repair services for the Group. The Regional Subsidiaries acting as the Group’s local agents in major port cities in the PRC and solicit international and domestic container shipping business from a wide range of customers on behalf of the Group.

China Shipping is the controlling shareholder of the Company, therefore China Shipping and its associate(s) are connected persons (as defined under the Listing Rules) of the Company. Pursuant to Rule 14A.59(5) of the Listing Rules, where independent shareholders’ approval is required with regard to a connected transaction, any connected person with a material interest in such transaction and any shareholder with a material interest in such transaction and its associates, will not vote on such transaction. Accordingly, China Shipping and its associate(s) shall at the SGM abstain from voting on the Proposed Transactions, which will be taken on a poll as required under the Listing Rules. As at the Latest Practicable Date, China Shipping and its associates controlled or were entitled to exercise control over the voting rights in respect of 3,610,000,000 domestic shares in the Company, representing 59.87% of the entire issued share capital of the Company. To the extent that the Company is aware having made all reasonable enquiries, as at the Latest Practicable Date:

• (i) there was no voting trust or other agreement, arrangement or understanding entered into by or binding upon China Shipping;

• (ii) China Shipping was not subject to any obligation or entitlement whereby it had or might have temporarily or permanently passed control over the exercise of the voting right in respect of its shares in the Company to a third party, whether generally or on a case-by-case basis; and

• (iii) it was not expected that there would be any discrepancy between China Shipping’s beneficial shareholding interest in the Company, as disclosed in the Appendix to this Circular, and the number of shares in the Company in respect of which it would control or would be entitled to exercise control over the voting right at the SGM.

As far as the Directors are aware, other than China Shipping and its associate(s), no other Shareholder has a material interest in the Proposed Transactions and has to abstain from voting at the SGM on such Proposed Transactions.

The Independent Board Committee has been established to advise the Independent Shareholders on the Proposed Transactions. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Proposed Transactions. The letter from the Independent Board Committee and its recommendations to the Independent Shareholders is set out on pages 34 to 36 of this Circular, and the opinion letter from the Independent Financial Adviser is set out on pages 37 to 75 of this Circular.

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LETTER FROM THE BOARD

VII. RECOMMENDATION

As mentioned above, the Independent Financial Adviser has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Proposed Transactions.

Having taken into account the advice of the Independent Financial Adviser, the Independent Board Committee considers that the Non-exempt Continuing Connected Transactions and the transactions under the Revised Master Provision of Containers Agreement are conducted on normal commercial terms or on terms no less favourable than those available to or from independent third parties, and shall be entered into on a continuing and regular basis in the ordinary and usual course of business of the Company, and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Independent Board Committee further considers that: (i) the proposed revised 2006 annual caps for the relevant Non-exempt Continuing Connected Transactions (namely, the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement and the Master Liner Services Agreement) and the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for the Non-exempt Continuing Connected Transactions are fair and reasonable; and (ii) the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for transactions under the Revised Master Provision of Containers Agreement are fair and reasonable.

Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM in respect of the Proposed Transactions.

VIII. SGM

The Notice convening the SGM to be held at 2:30 p.m. on 10 April 2007 at Conference Room 1, 3rd Floor, 450 Fu Shan Road, Pudong New District, Shanghai, the PRC is being dispatched to the Shareholders together with this Circular.

There is enclosed in this Circular a proxy form for use at the SGM. Whether or not you are able to attend the SGM, you are requested to complete, sign and return the enclosed proxy form for the SGM in accordance with the instructions printed thereon.

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, at Room 1806-1807, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 24 hours before the time for holding the SGM or any adjournment thereof in order for such documents to be valid.

For the holder of domestic shares of the Company, the form of proxy together with any documents of authority must be delivered to the Directorate Secretary Office of the Company at 3rd Floor, 450 Fu Shan Road, Pudong New District, Shanghai, the PRC, not less than 24 hours before the time for holding the SGM or any adjournment thereof in order for such documents to be valid.

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LETTER FROM THE BOARD

Holders of domestic shares or H shares, who intend to attend the SGM, must complete the reply slip enclosed with this Circular and return them to the Directorate Secretary Office of the Company not later than 20 days before the date of the SGM, i.e. no later than 21 March 2007.

Pursuant to Articles 8.18 to 8.20 of the Articles of Association of the Company, at the SGM, 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; or

• (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.

Pursuant to the Articles of Association of the Company, for the purpose of holding the SGM, the Register of Members of the Company will be closed from 12 March 2007 to 10 April 2007 (both days inclusive), during which period no transfer of shares of the Company will be registered. Shareholders whose names appear on the Register of Members of the Company at the close of business on 12 March 2007 are entitled to attend and vote at the SGM.

In order to attend the SGM, 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, at Room 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on 9 March 2007.

By Order of the Board

China Shipping Container Lines Company Limited Li Shaode Chairman

– 33 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [307 x 88] intentionally omitted <==

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

16 February 2007

To the Independent Shareholders

Dear Sir or Madam,

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 16 February 2007 (the “ Circular ”) to the shareholders of China Shipping Container Lines Company Limited (the “ Company ”) of which this letter forms part. Unless otherwise specified, terms defined in the Circular shall have the same meanings when used in this letter.

We have been appointed as members of the Independent Board Committee, which has been established to advise the Independent Shareholders in respect of:

• (i) the proposed revised 2006 annual caps for the following Non-exempt Continuing Connected Transactions: the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement and the Master Liner Services Agreement;

• (ii) the Non-exempt Continuing Connected Transactions and their respective proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009; and

• (iii) transactions under the Revised Master Provision of Containers Agreement and their proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009,

((i), (ii) and (iii) collectively, the “ Proposed Transactions ”), details of which are set out in the letter from the Board contained in the Circular. None of us has a material interest in the Proposed Transactions.

* 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”.

– 34 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

China Shipping is the controlling shareholder of the Company. Therefore, China Shipping and its associate(s) are connected persons of the Company under the Listing Rules. Each of CS Agency (Bangkok), CS Agency (Indonesia), CSS, Dalian Terminal, Shanghai Terminal, West Basin and Zhanjiang Terminal is an associate of China Shipping and is therefore a connected person of the Company under the Listing Rules. CS (Yangpu) Refrigeration and the Regional Subsidiaries are non-wholly owned subsidiaries of the Company where China Shipping, a connected person of the Company under the Listing Rules, is entitled to exercise 10% or more of the voting power at any general meeting of each such company. Accordingly, CS (Yangpu) Refrigeration and the Regional Subsidiaries are connected persons of the Company under the Listing Rules.

In respect of each of the Proposed Transactions, the relevant “percentage ratio” applicable for the purpose of Chapter 14A of the Listing Rules is expected or likely to exceed 2.5% on an annual basis, the aggregate annual consideration payable is expected or likely to exceed HK$10,000,000 and such transactions are not expected to fall under any of the categories set out in Rules 14A.16(1) to (4) of the Listing Rules. Accordingly, the Proposed Transactions are expected to be, or continue being, non-exempt continuing connected transactions of the Company under the Listing Rules, and will be subject to approval or ratification (as the case may be) by the Independent Shareholders at the SGM.

Guotai Junan Capital Limited has been appointed as the independent financial adviser to advise us and the Independent Shareholders in respect of the Proposed Transactions. We wish to draw your attention to the opinion letter from Guotai Junan Capital Limited set out on pages 37 to 75 of the Circular.

As members of your Independent Board Committee, we have discussed with the management of the Company in relation to the Proposed Transactions, and the basis upon which the terms of such transactions have been determined and the said revised caps and annual caps have been calculated. We have also taken into account the principal factors and reasons considered by Guotai Junan Capital Limited in forming its opinion in relation to the Proposed Transactions, and have discussed with Guotai Junan Capital Limited its opinion letter and its advice.

On the basis of the above, we consider, and agree with the view of Guotai Junan Capital Limited, that the Non-exempt Continuing Connected Transactions and the transactions under the Revised Master Provision of Containers Agreement are conducted on normal commercial terms or on terms no less favourable than those available to or from independent third parties, and shall be entered into on a continuing and regular basis in the ordinary and usual course of business of the Company, and are fair and reasonable and in the interests of the Company and the shareholders of the Company as a whole. We further consider, and agree with the view of Guotai Junan Capital Limited, that: (i) the proposed revised 2006 annual caps for the relevant Non-exempt Continuing Connected Transactions (namely, the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement and the Master Liner Services Agreement) and the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for the Non-exempt Continuing

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Connected Transactions are fair and reasonable; and (ii) the proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009 for transactions under the Revised Master Provision of Containers Agreement are fair and reasonable.

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM in respect of the Proposed Transactions.

Yours faithfully,

Mr. Hu Hanxiang, Mr. Gu Nianzu, Mr. Wang Zongxi and Mr. Lam Siu Wai, Steven Independent Board Committee

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice dated 16 February 2007 from Guotai Junan Capital Limited to the Independent Board Committee and the Independent Shareholders in respect of, the Proposed Transactions prepared for incorporation into this Circular:

Guotai Junan Capital Limited

27th Floor, Lower Block Grand Millennium Plaza 181 Queen’s Road Central Hong Kong 16 February 2007

To the Independent Board Committee and

the Independent Shareholders of China Shipping Container Lines Company Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement, the Master Liner Services Agreement, the Master Ground Container Transport Agreement, the First Master Container Management Agreement, the Second Master Container Management Agreement, the Master Time Charter Agreement, the First Master Loading and Unloading Agreement, the Second Master Loading and Unloading Agreement and the Revised Master Provision of Containers Agreement (collectively, the “Agreements”), the Non-exempt Continuing Connected Transactions and the Annual Caps as well as the Revised Caps (as defined below), particulars of which are set out in a circular to the Shareholders dated 16 February 2007 (the “Circular”) and in which this letter is reproduced. Unless the context requires otherwise, terms used in this letter shall have the same meanings as given to them under the definitions section of the Circular.

As set out in the letter from the Board contained in the Circular (the “Board’s Letter”), since China Shipping is the controlling shareholder of the Company, each member of the China Shipping Group is therefore a connected person of the Company. As such, the proposed transactions to be entered into between the Company and the China Shipping Group under the Agreements would constitute continuing connected transactions for the Company. As the applicable percentage ratios in respect of the proposed annual caps of those transactions for each of the three years ending 31 December 2007, 2008 and 2009 are expected to be more than 2.5% on an annual basis, such transactions (or the Non-exempt Continuing Connected Transactions) are subject to the reporting, announcement as well as independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. Besides, as set out in the Board’s Letter, the 2006 annual caps for the transactions under the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement and the Master Liner Services Agreement (the “Past Transactions”) have

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

been exceeded, the Company is required to re-comply with the requirements under Chapter 14A of the Listing Rules. It is proposed that the 2006 annual caps for the Past Transactions are revised (the “Revised Caps”) which will be subject to the ratification by the Independent Shareholders. Accordingly, the Company will convene the SGM on 10 April 2007 to approve the Agreements, the Non-exempt Continuing Connected Transactions and the Annual Caps as well as the Revised Caps by the Independent Shareholders. In this connection, the Circular containing, inter-alia, the information relating to the Agreements, the Non-exempt Continuing Connected Transactions and the recommendation from the Independent Board Committee and this letter, is dispatched to the Shareholders. In particular, this letter will set out our recommendations to the Independent Board Committee as to whether the terms of the Agreements (together with the Non-exempt Continuing Connected Transactions and the Annual Caps as well as the Revised Caps) are fair and reasonable and whether the Agreements, the Non-exempt Continuing Connected Transactions and the Annual Caps as well as the Revised Caps are in the interests of the Company and its shareholders.

In formulating our opinion, we have relied on the accuracy of the information and representations contained in the Circular and have assumed that all information and representations made or referred to in the Circular were true at the time they were made and continue to be true as at the date of the Circular. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view, to justify relying on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have no reason to suspect that any material facts have been omitted or withheld from the information contained or opinions expressed in the Circular nor to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have not, however, conducted an independent in-depth investigation into the affairs of the Company.

PRINCIPAL FACTORS CONSIDERED

In arriving at our recommendation in respect of the Non-exempt Continuing Connected Transactions, we have considered the following principal factors:

Background

As mentioned in the Board’s Letter, the Company was established in 1997 as the container shipping arm of China Shipping. The Group is principally engaged in the operation and management of international and domestic container marine transportation. China Shipping is a large shipping conglomerate that operates across different regions, sectors and countries. Most of its associates are well-known marine transportation corporations with outstanding competency in shipping industry and have developed good experience and service systems in respect of the products and services under the Non-exempt Continuing Connected Transactions. The China Shipping Group has a long established and close business relationship with the Group. The transactions which have been entered into and are to be entered into between them are significant and essential to the core business and operation of container marine transportation of the Group. The cooperation with China Shipping and other Connected Persons enables the Group to fully leverage on their advantages to achieve better operating performance.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Prospects of container shipping industry

As advised by the Directors, the shipping industry has boomed during the past few years. According to the reports from Drewry Shipping Consultants, being an independent international shipping consultant, the increase in demand in the shipping volume for the worldwide shipping market for the year 2006 would be approximately 11.5% while the increase in the shipping capacity would be approximately 15.9% for the year 2006. Market competitions in the shipping industry intensified. The Company anticipates that the shipping industry will not be optimized until the year 2009. To avoid the effect brought from the intensified competitions in the shipping industry, the Company decided to increase its business through two options: (i) enlarging the cooperation with China Shipping; and (ii) adopting more competitive price strategy to get more cargos from the market through its lower cost strategy when comparing with its competitors.

Set out below is the historical data for the years between 2002 and 2005, the estimated data for the year 2006, and the forecast data for the years between 2007 and 2009 for the shipping capacity and shipping volume of the Company as estimated based on the current conditions and provided by the Company:

				Year	Year
	2002	2003	2004	2005	2006	2007	2008	2009
	(Actual)	(Actual)	(Actual)	(Actual)	(Estimated)	(Forecast)	(Forecast)	(Forecast)
Total shipping	168,330	198,490	254,207	347,851	399,424	448,074	501,020	529,700
capacity of the
Company (TEU)
note 1
Annual increase rate		18%	28%	37%	15%	12%	12%	6%
Total annual shipping	2,261,445	2,834,207	3,654,767	4,597,395	5,160,000	6,090,000	7,190,000	8,050,000
volume of the
Company (TEU)
note 2
Annual increase rate		25%	29%	26%	12%	18%	18%	12%

Notes:

1. Total shipping capacity means the total design capacity of container vessels in terms of TEU to carry containers.

2. Total shipping volume means the total volume of containers in terms of TEU shipped.

Source: The Company

As shown above, the Company’s total shipping capacity increased by approximately 18%, 28% and 37% respectively for the three years ended 31 December 2005. For the three years ended 31 December 2005, the total annual shipping volume increased by approximately 25%, 29%, and 26% respectively. For the year ended 31 December 2006, the shipping capacity and shipping volume are expected to increase by approximately 15% and 12% respectively.

For each of the next two years ending 31 December 2008, the annual growth rate of shipping capacity of the Company will be approximately 12%, whereas the growth rate for the year 2009 will be approximately 6%, which is a little bit lower than that of the previous two years. The annual shipping volume of the Company will increase by approximately 18%, 18%, and 12% for the three years ending 31 December 2009 respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With the expected growth in shipping volume through the strengthening of its marketing expansion, the Company will continue to enlarge its vessel fleets through building new vessels and leasing more vessels from other independent third parties as well as China Shipping. Together with the strengthening of its cooperation with the China Shipping Group from 2007, the total amount of the Non-exempt Continuing Connected Transactions is anticipated to increase.

General price and quality terms

As mentioned in the Board’s Letter, the terms and conditions provided by the Connected Persons in relation to the Non-exempt Continuing Connected Transactions are generally more favourable to the Group than those provided by independent third parties to the Group, or those provided by the Connected Persons to independent third parties. In particular, the quality of products and services to be provided should be satisfactory to the recipient; and the price at which such products and services are to be provided must be fair and reasonable. The Directors consider that the terms of the Non-exempt Continuing Connected Transactions are fair and reasonable and on normal commercial terms, and that it is in the best interest of the Company and its shareholders as a whole to continue these continuing connected transactions with the relevant Connected Persons pursuant to the Agreements. Given the enormous number of past connected transactions, we were unable to go through all of them and only selected some representative (or random) cases for our evaluation. In particular, we have examined the general terms provided by the relevant Connected Persons in relation to the selected cases under each of the Non-exempt Continuing Connected Transactions and compared them with those provided by the independent third parties. Despite such limitation, we conclude that the terms for the past connected transactions are basically on normal commercial terms and, in some cases, some terms may be more favourable to the Group. We would like to present our findings in the following sections for your information.

Detailed analysis on each of the Agreements

I. Master Supply Agreement

On 10 May 2004, the Company entered into the Master Supply Agreement with China Shipping and CSS for the provision of fresh water, vessel fuel, lubricants, spare parts and other materials, generators for the containers and other related and ancillary services (the “Material Supplies”) by (i) China Shipping, CSS and their respective subsidiaries and associates; to (ii) the Group. CSS, a 50% owned associated company of China Shipping, is a professional vessel fuel supplier.

1. Reasons for the sourcing of supplies

The Company sourced the Material Supplies from China Shipping since its establishment in 1997. Amongst all the Material Supplies, the vessel fuel was the major item of purchases by the Company and accounted for approximately 63% to 80% of the total purchases each year. As advised by the Company’s management, any shortage of supply of vessel fuel will seriously affect the business operation of the Company. By entering into the Master Supply Agreement, the Company can be guaranteed its vessel fuel supply from China Shipping and CSS.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Apart from vessel fuel, China Shipping which is professional shipping material provider can provide other Material Supplies to the Company. The quality, delivery and settlement of those Material Supplies supplied by China Shipping are comparable to that from independent third parties. Given the importance of these Material Supplies to meet the Company’s logistic supply chain, the long history of sourcing from China Shipping and the quality standard met by the Material Supplies, we consider that it is justifiable for the Company to enter into the Master Supply Agreement.

2. Terms of the Master Supply Agreement

Price terms

As advised by the Directors, the price terms under the Master Supply Agreement are agreed between the Company and China Shipping based on arm’s length negotiations and market prices.

For the year 2006, the total purchase volume of vessel fuel was 103,168 tonnes. Amongst all types of vessel fuels, the total purchase volume of the model FO180 fuel was approximately 77,715 tonnes which is the most common type of vessel fuel used by the Group’s container vessel fleet (represented approximately 75% of total vessel fuels used). Save for the model FO180 fuel, the Group’s container vessels also consume other type of fuels of which diesel fuel #0, vessel fuel #4, and model FO120 represented approximately 5.5%, 12.8% and 6.4% of the total fuel purchased respectively. However, as advised by the management of the Company, the remaining types of vessel fuels which are the mixture of other types of fuels. As there is no suitable price comparison for all types of vessel fuel, we can only compare the purchase price of model FO180’s vessel fuel under the Master Supply Agreement with market price.

Set out below is vessel fuel price for FO180 in different geographic regions:

		Average
		fuel price
		for FO180	Average	Average
		under the	fuel price	fuel price
		Master	for FO180	for FO180	Average
		Supply	in	in	WTI crude
Year		Agreement	Rotterdam	Singapore	oil price
		_(RMB/tonne) _	_(RMB/tonne) _	(RMB/tonne)	US$/barrel
2005		2,800	1,960	2,192	56.7
2006		3,413	2,424	2,584	66.2
Increase	rate	21.9%	23.7%	17.9%	16.8%

Note: US$1=RMB8; WTI means West Texas Intermediate

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

From the above table, it is found that the PRC domestic fuel price was much higher than that in some foreign markets. We also noticed that the average West Texas Intermediate (“WTI”) crude oil price increased around 16.8% since 2005, and the average fuel price for FO180 in Rotterdam and Singapore increased approximately 23.7% and 17.9% respectively when comparing with the years 2005 and 2006.

For the PRC domestic fuel market, it was not only affected by any changes of the world oil price, but also by the PRC Government on the policy of oil and fuel. The domestic fuel price for vessel usage in the PRC is generally higher than the world market price.

According to the PRC Government on the policy of oil and fuel, all the vessels operated in the domestic trade routes have to use domestic vessel fuel, which is supplied by the domestic fuel providers. As a result, the average price of vessel fuel provided under the Master Supply Agreement for the year ended 31 December 2006 was approximately RMB3,413/tonne, compared to the average vessel fuel price for model FO180 of RMB2,800/tonne over the year 2005 under the Master Supply Agreement. It represented an increase of approximately 21.9% over the year 2005.

Set out below is the model FO180’s vessel fuel price comparisons (almost the lowest price and the highest price during the year) with market price as quoted by local port fuel supplier(s) and prices under the Master Supply Agreement at different ports in daily average price and monthly average price.

The lowest fuel oil price period occurred in the month of December 2006:

										Average
									Average	price for
15 December 2006	Tianjin	Dalian	**Qingdao **	Shanghai	**Ningbo **	**Huangpu **	Zhanjiang	Haikou	price	December
Market price (RMB/tonne)	3,200	3,190	3,020	3,020	2,960	2,920	N/A	N/A	3,052	3,043
Price provided by the	2,975	2,980	3,050	3,005	2,960	2,985	2,970	2,970	2,986	3,010
Master Supply Agreement
(RMB/tonne)

The highest fuel oil price period occurred in the month of July 2006:

										Average
									Average	price for
21 July 2006	Tianjin	Dalian	**Qingdao **	Shanghai	**Ningbo **	**Huangpu **	Zhanjiang	Haikou	price	July
Market price (RMB/tonne)	3,780	3,820	3,800	3,770	3,640	3,700	N/A	N/A	3,752	3,764
Price provided by the	3,725	3,750	3,830	3,770	3,700	3,705	N/A	3,850	3,771	3,745
Master Supply Agreement
(RMB/tonne)

– 42 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is model FO180’s vessel fuel prices comparison between the market price as quoted by local port fuel supplier(s) and prices under the Master Supply Agreement for the year 2006:

FO180 Price under the Master Supply FO180 For the year 2006 Agreement Market price Yearly average fuel purchase price RMB3,413/tonne RMB3,541/tonne

According to the market information provided by the Company, the yearly lowest and highest of vessel fuel prices in 2006 were December and July respectively. We selected and compared the vessel fuel price quoted on 15 December 2006 which was the lowest vessel fuel price in the year 2006, and on 21 July 2006 which was the highest vessel fuel price in the year 2006. At these two days, the average vessel fuel price for eight domestic ports, supplied by CSS was similar to the market prices as quoted by local port fuel suppliers. From the above table, at some ports, the market vessel fuel prices were a little bit lower than the price provided under the Master Supply Agreement.

As advised by the Company’s management, the Company, after taking into consideration other commercial terms such as settlement methods and credit period provided by the vessel fuel providers, might purchase the vessel fuel under the Master Supply Agreement from the relevant Connected Persons even though the price was a bit higher than the current market price for some cases. Nevertheless, the monthly and the yearly average purchase price under the Master Supply Agreement were lower than the average market prices.

For spare parts supplied by China Shipping, we randomly selected some cases to review the price of spare parts. We noted that the pricing for spare parts supplied by China Shipping is based on the purchasing prices from the spare parts supplier(s) plus a margin of around 4% (i.e., the contracted price agreed between the Group and China Shipping). We were advised by the Company’s management that the Company may source the spare parts from China Shipping instead of directly from third party supplier(s) because of its effective lower prices and extensive sourcing network. In particular, China Shipping can obtain a good discount in its bulk purchases from those suppliers for the entire group.

For the category of lubricants and water, majority of the purchase amount is lubricants and water only accounts for small portion. We also reviewed the purchasing price of lubricants from China Shipping; it was generally noted that the price of lubricants under the Master Supply Agreement is approximately 3% to 5% discount to the market price.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Payment terms

As advised by the Company’s management, the amount of vessel fuel purchases under the Master Supply Agreement is usually settled within 10 days. Given that the Company can choose to obtain fuel from those designated ports with lower price, it seldom sources fuel from the market and has not developed stable business relationship with these independent third party fuel suppliers. As such, if the Company purchases fuel from them, it may have to make deposit and/or settlement by cash, cheques or bills with short credit period. In other words, the settlement terms for the vessel fuel purchases under the Master Supply Agreement are generally better than those from independent third parties.

Based on the above, we consider that the price terms and the payment terms for the vessel fuel purchases under the Master Supply Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

3. Historical caps and figures

Set out below is the annual aggregate amount paid for the Material Supplies by the Company to China Shipping, CSS and their respective subsidiaries and associates for each of the three years ended 31 December 2006:

				**For the year ended 31 **	**For the year ended 31 **	December
				2004	2005	2006
				(Actual)	(Actual)	(Estimated)
				RMB’000	RMB’000	RMB’000
Amount				297,685	346,144	483,320
Cap				350,000	350,000	350,000
Amount	over	the	cap	–	–	133,320

From the above table, we found that the annual cap in the previous waiver was RMB350,000,000 and the annual amount paid for the Material Supplies under the Master Supply Agreement by the Company to China Shipping, CSS and their respective subsidiaries and associates for the three years ended 31 December 2006 are approximately RMB297,685,000, RMB346,144,000 and RMB483,320,000 respectively. For the three years ended 31 December 2006, the percentage of the Material Supplies accounted for approximately 1.33%, 1.22% and 1.64% respectively of the Group’s total annual turnover. It was noticed that the total purchase amount for the Material Supplies increased rapidly from the year 2004 to 2006.

According to the explanation by the Company’s management, such dramatic increase in the use of the Material Supplies for the year 2006 was mainly due to the substantial increase in vessel fuel price. In 2006, the increased amount of purchase for the Material Supplies was due to two significant parts namely: (i) vessel fuel and (ii) spare parts. In addition, amongst all the Material Supplies, the vessel fuel was the major item of purchases by the Group and accounted for approximately 63% to 80% for each year under the Master Supply Agreement between 2004 and 2006.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noticed that the estimated total purchase amount of vessel fuel increased by approximately 50% for the year 2006. It was mainly caused by the sharp rise in total purchase amount of vessel fuel.

Set out below are the reasons for the rapid increase of purchase amount under the Master Supply Agreement:

Between January and October of 2006, the international fuel price increased rapidly. The average WTI crude oil price was US$66.2 per barrel in 2006 when comparing to the correspondent period for the year 2005 of US$56.7 per barrel, which increased approximately 16.9%. With such increase of international crude oil prices, it directly linked to the increase of the average vessel fuel price purchased under the Master Supply Agreement. For the whole year 2006, the estimated average purchased price of vessel fuel is expected to be approximately RMB3,680 per tonne, which represented approximately 18.6% higher than that of the year 2005 (which recorded the yearly average price of approximately RMB3,104 per tonne).

In order to expand the domestic market share of container shipping business in the PRC, the Group has increased its shipping capacity, opened premium trade routes and further engaged large vessels (each with a volume of more than 4,000TEU) in domestic trade routes since August 2006. An additional large-sized vessel will lead to increase in approximately 2,000 to 2,500 tonnes of fuel consumption each month if a large-sized container vessel becomes in full operations. Although these new vessels have operated, the utilisation rates are depending on the demand for the trade routes. Hence, the total amount of fuel purchased under the Master Supply Agreement led to an increase of approximately 36% from August 2006 to December 2006, as compared to that of the corresponding period of 2005. If the full year fuel consumption of these vessels was taken into account, the total amount of fuel purchase under the Master Supply Agreement would be much higher than actual amount. As advised by the Company’s management, the updated vessel fuel consumption for the month of December 2006 has already been 16,000 tonnes which was in line with higher demand for container shipping services.

Thus, based on both the increase in the vessel fuel price and the total vessel fuel consumption, the anticipated total vessel fuel consumption amount for 2006 is expected to be approximately 103,168 tonnes for 2006 with an average price of US$460 per tonne (equivalent to RMB3,680 per tonne). Then the estimated total fuel cost will be approximately RMB380 million which is increased by approximately RMB70 million when compared to the amount of last year.

Set out below is the purchase breakdown under the Master Supply Agreement for the three years ended 31 December 2006:

	**For the year ended 31 **	**For the year ended 31 **	December
	2004	2005	2006
	(Actual)	(Actual)	(Estimated)
	RMB’000	RMB’000	RMB’000
Vessel fuel	244,900	310,159	379,878
Lubricants and water	21,010	23,120	26,122
Spare parts	31,775	12,865	78,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

From the above table, we noted that the purchase amount for lubricants and fresh water gradually increased and was in line with the Group’s expansion of vessel fleet for the three years ended 31 December 2006.

According to the above table, the amount of purchase of spare parts also increased substantially for the year ended 31 December 2006. The Company’s management explained that the Company received 78 new vessels between 2000 and 2006 (in which 23 new vessels entered into 3-year or 5-year repair and maintenance services period) that require spare parts for maintenance. The increase in world metal price in recent years led to an increase in the price of spare parts. Currently, the Company has 49 vessels with age of over 10-year old (representing approximately 32% of total vessels) which require more spare parts then. Thus, the total payment for spare parts increased sharply when compared with the years 2004 and 2005.

Based on the increases in the vessel fuel price, the total vessel fuel consumption, the use of lubricants and water and the need of spare parts as explained by the Company’s management, we consider that the reason for exceeding the cap amount under the Master Supply Agreement in 2006 is acceptable.

4. Proposed annual caps

As advised by the Company’s management, the Company intends to launch four premium domestic trade routes in the PRC, including nine 4,000TEU new container vessels in total. The old domestic trade routes involved 18 small container vessels. The total amount of vessel fuel consumption for these 18 small container vessels can be treated as four 4,000TEU large container vessels. Thus, for the next three years ending 31 December 2009, it is assumed that there are a total of 13 large container vessels with 4,000TEU in operation. The annual total vessel fuel consumption for these 13 large vessels is estimated to be from approximately 312,000 tonnes to 390,000 tonnes, taking the consideration that all of the 13 vessels are in full operation.

However, these four new routes which involved nine new vessels will be launched gradually. The usage for these container shipping services will soon catch up with the market demand. Furthermore, the Company may consider reducing the usage of smaller and aged container vessels gradually in next few years in order to improve the operational efficiency.

We noted from the Company’s management that the estimated number of vessels in services in the domestic routes in the PRC will be approximately 50% of the total number of container vessels (13 vessels). In other words, it will be approximately six to seven vessels in operation at the beginning of 2007 and they will gradually increase the vessel utilisation rate. Based on the Company’s actual monthly average vessel fuel consumption of 15,000 tonnes with large vessels being entered into operation for the second half year of 2006, the total amount of vessel fuel consumption for the year 2007 will be approximately 180,000 tonnes.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With the maturity of these four newly opened premium trade routes, the Company will launch further new and larger container vessels in 2008 and thereafter will maintain at this shipping capacity level for the year 2009. As a result, we accept that the annual total amount of vessel fuel oil consumption will be approximately 180,000 tonnes, 200,000 tonnes, and 200,000 tonnes respectively for the three years ending 31 December 2009 as estimated by the Company. With the total amount of vessel fuel oil consumption increases, the proposed annual payment for the vessel fuel to be purchased for each of the three years ending 31 December 2009 will be RMB684,000,000, RMB760,000,000 and RMB760,000,000 respectively (assuming the vessel fuel price is stable at an average price of RMB3,800 per tonne).

To derive the proposed annual caps, the Company’s management considered several factors:

• (i) the rapid development of the domestic container shipping market in the PRC and; the opening up of premium trade routes for domestic trade routes in the PRC by the Company;

• (ii) the Company’s intention to further strengthen its investment in shipping capacity for domestic trade routes and continue to use more larger vessels (each with a volume of over 4,000TEU) for domestic trade routes from 2007 onward; and

• (iii) consumption of vessel fuel, lubricants and water, and spare parts for next three years ending 31 December 2009.

Hence, the total proposed annual caps under the Master Supply Agreement for the three years ending 31 December 2009 are set out below:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		800,000	840,000	850,000
Yearly	change		5.0%	1.2%

Taking into account the anticipated shipping capacity, the vessel fuel price and consumption and the requirement of other Material Supplies, we consider that the proposed caps for the Material Supplies for the three years ending 31 December 2009 determined are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

II. First Master Liner and Cargo Agency Agreement & Second Master Liner and Cargo Agency Agreement (Collectively, the “Master Liner and Cargo Agency Agreements”)

On 10 May 2004, the Company entered into the First Master Liner and Cargo Agreement with China Shipping, CS Agency (Indonesia), CS Agency (Bangkok) and Shanghai Puhai for the provision of sales and marketing services, port agency services, container services, accounting and financial services and other related and ancillary services by (i) China Shipping, CS Agency (Indonesia), CS Agency (Bangkok) and Shanghai Puhai and their representative and associates; to (ii) the Group.

On 10 May 2004, the Company also entered into the Second Master Liner and Cargo Agency Agreement with the Regional Subsidiaries for the provision of the same services above (together the “Liner and Cargo Agency Services”) by: (i) the Regional Subsidiaries and their respective subsidiaries and associates; to (ii) the Group (excluding the Regional Subsidiaries and their respective subsidiaries).

1. Reasons for the sourcing of liner and cargo agency services

The Company sourced the Liner and Cargo Agency Services from the China Shipping Group since its establishment in 1997. China Shipping provides a full range of shipping services from marketing, port agency to land delivery services both in the PRC and some major overseas countries. It has also been acting as settlement agencies for the Group’s operations in overseas countries.

As the Company would like to devote majority of the resources to strengthen its container vessel fleet for domestic and overseas operations, it is not intended to develop its own port agency services in foreign countries and other regions in the PRC. By entering into the Master Liner and Cargo Agency Agreements, the Company can secure the Liner and Cargo Agency Services in port foreign countries and regions in the PRC. Given the provision of full range of shipping services both in the PRC and some major overseas countries and the long history of sourcing the Liner and Cargo Agency Services from the China Shipping Group, we consider that it is justifiable for the Company to enter into the Master Liner and Cargo Agency Agreements.

2. Terms of the Master Liner and Cargo Agency Agreements

Price terms

As advised by the Directors, the price terms under the Master Liner and Cargo Agency Agreement are agreed between the Company and the China Shipping Group based on arm’s length negotiations and market prices. Based on the advice by the Directors and information provided by the Company, the commission rate charged by the China Shipping Group to the Company is similar to the commission rate charged by independent third parties. We randomly reviewed several connected transactions under the Master Liner and Cargo Agency Agreements, and the outcomes of these cases are affirmative.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For illustration purpose, set out below is one of those randomly selected cases for the Liner and Cargo Agency Services charged by different parties:

	**Price **	under the Master	**Price **	charged by an
	**Liner **	and Cargo Agency	independent third
	Agreements		party
Husbandry fees	US$600/time		US$900/time
Cargo fees:
Canvassing and	2%	* shipping fees for	3%	* shipping fees for
booking		each container		each container
Service outward	1.5%	* shipping fees for	2%	* shipping fees for
		each container		each container
Service inward	1.15%	* shipping fees for	2.25%	* shipping fees for
		each container		each container

Under the Master Liner and Cargo Agency Agreements, the price was based on the agreement between the Company and China Shipping Agency (UK) Co., Ltd, which is a subsidiary of China Shipping. In addition, the commission rate was made reference to the independent third party’s commission rate based on the agency agreement between the Company and the independent parties such as Societe Maritime Tuniship S.A.R.L and other agency companies.

Payment terms

According to those randomly selected cases, we noted that the commissions of connected transactions under the Master Liner and Cargo Agency Agreements are settled within approximately 30 days after invoices are issued to the Company. Such settlement terms are basically same as those from independent third parties.

Based on the above, we consider that the commission rate and the payment term under the Master Liner and Cargo Agency Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the Company to China Shipping and its subsidiaries and associates, for the three years ended 31 December 2006:

				For the year ended	For the year ended
					31 December
				2004	2005	2006
				(Actual)	(Actual)	(Estimated)
				RMB’000	RMB’000	RMB’000
Amount				338,548	268,526	493,806
Cap				455,000	455,000	455,000
Amount	over	the	cap	–	–	38,806

The annual cap for the three years ended 31 December 2006 as set out in the Prospectus was RMB455 million. The annual aggregate amount paid by the Company to China Shipping and its subsidiaries and associates for the three years ended 31 December 2006 were RMB338,548,000, RMB268,526,000 and RMB493,806,000 respectively. For the three years ended 31 December 2006, the total payment by the Company to China Shipping under the Master Liner and Cargo Agency Agreements accounted for approximately 1.51%, 0.95% and 1.67% respectively of the total turnover of the Group.

The estimated amount paid to China Shipping would exceed the annual cap for the year 2006 of RMB455 million. The Company’s management explained to us that the reasons for exceeding the cap were due to (i) a significant increase in number of shipping transactions in 2006 as a result of the rapid expansion of the Group’s fleet number; and (ii) an increase in the number of trade routes being launched and operated by certain joint venture entities established by China Shipping.

During 2006, the Company rapidly expanded the number of its container vessel fleets. Meanwhile the Company has developed and launched several new trade routes (which include (a) the new trade routes are between West Africa and Europe route; (b) the Second Atlantic route; (c) the Third Atlantic route; (d) the Seventh Europe route; (e) the Fourth East America route; and (f) the (Asia-Middle Sea-America) AMA route). In order to meet such requirements, it has opened 5 new joint agent companies in the area of above new trade lines. The expected total turnover for all these new routes would be up to approximately US$650,000,000 (equivalent to approximately RMB5,200,000,000) for the year ended 31 December 2006, especially the Seventh Europe route which was launched in August 2006. Until November 2006, this new trade route resulted in gross profit of approximately US$27,070,000 (equivalent to approximately RMB216,560,000). The total expected commissions for these connected transactions caused by these new trade routes in 2006 is expected to be approximately RMB156 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the amount paid to China Shipping in 2005, the commission and fees paid to China Shipping for the year 2006 was expected to be approximately RMB337,806,000 which did not take into account the launching of new trade routes. The increase rate for the connected transactions (not including the new trade routes) is expected to be 26%, which is still within the previous annual cap amount of RMB455,000,000 in 2006. However, after taking into consideration the newly launched trade routes, the total amount of fees and commission paid for the connected transactions (i.e. the new trade routes and the original amount) under the Master Liner and Cargo Agency Agreements would exceed annual cap in 2006.

Based on the launch of several new trade routes as explained by the Company’s management, we consider that the reason for exceeding the cap amount under the Master Liner and Cargo Agency Agreements in 2006 is acceptable.

4. Proposed annual caps

As advised by the Company’s management and information provided by the Company, the proposed caps for the three years ending 31 December 2009 have been taken into considerations of the following factors:

• (i) the fast and strong economy growth rate in the PRC will demand for more container shipping services in the PRC domestic and overseas markets;

• (ii) based on the expected amount paid for the connected transactions under the Master Liner and Cargo Agency Agreements by the Company to China Shipping in 2006;

• (iii) the amount from new trade routes was only partially reflected in 2006. The full year amount of commission between 2007 and 2009 have been anticipated; and

• (iv) based on the Company’s business plan in the coming three years ending 31 December 2009, some new trade routes will be launched and new container vessels will simultaneously commence in services.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After considering the above factors, the proposed caps under the Master Liner and Cargo Agency Agreements will be set out below:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		584,000	691,000	819,000
Yearly	change		18.3%	18.5%

Taking into account the anticipated increase in container shipping services and the new trade routes as set out above, we consider that the proposed annual caps for the Liner and Cargo Services for the three years ending 31 December 2009 determined are fair and reasonable.

III. Master Liner Services Agreement

On 10 May 2004, the Company entered into the Master Liner Services Agreement with China Shipping for the provision of liner services, container space and other related and ancillary services (the “Liner Services”) by the Company to the China Shipping Group.

1. Reasons for the provision of the Liner Services

The Company provided the Liner Services to the China Shipping Group since its establishment in 1997. It is a domestic and international container shipping operator to provide the container shipping services. The Company has devoted majority of the resources to strengthen its container vessel fleet for domestic and overseas operations after listing on the Stock Exchange. The Directors consider that the entering into the Master Liner Services Agreement can help secure more business for the Group since the Company does not have sufficient resources to set up many offices at different locations around the world to serve new customers. Given the principal activity of the Company, the long history of providing the Liner Services and the additional shipping business, we consider that it is justifiable for the Company to enter into the Master Liner Services Agreement.

2. Terms of the Master Liner Services Agreement

Price terms

As advised by the Directors, the price terms under the Master Liner Services Agreement are agreed between the Company and the China Shipping Group based on arm’s length negotiations and market prices.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the Company’s management and information provided by the Company, the charges under the Master Liner Services Agreement were made reference to the Company and independent third parties such as Transcon Shipping Co., Inc. DBA Transworld Shipping, DBA American Patroit Lines, which provide similar the Liner Services to the Company. We randomly reviewed some comparable cases of connected transactions under the Master Liner Services Agreement. The outcomes were affirmative in which the charges of the Liner Services charged to China Shipping are similar to those from independent third parties.

Set out below illustrated one of the randomly selected cases for liner charge fees charged by different parties:

Charges under the Master	Charges by an
Liner Services Agreement	independent third party
size	size
20’ 40’	20’ 40’

Origin: Dalian Destination: West American US$1,280 each US$1,705 each US$1,280 each US$1,705 each coast

Payment terms

According to those randomly selected cases, we noted that the amount of connected transactions under the Master Liner Services Agreement is settled within approximately 30 days after invoices are issued to the China Shipping Group. Such settlement terms are basically same as those from independent third parties.

Based on the above, we consider that the charges of the Liner Services and the payment terms under the Master Liner Services Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the China Shipping Group to the Company in relation to the Liner Services for the three years ended 31 December 2006:

				For the year ended	For the year ended
					31 December
				2004	2005	2006
				(Actual)	(Actual)	(Estimated)
				RMB’000	RMB’000	RMB’000
Amount				1,137,246	941,774	1,881,697
Cap				1,281,000	1,281,000	1,281,000
Amount	over	the	cap	–	–	600,697

The annual aggregate amount paid by the China Shipping Group to the Company for the two years ended 31 December 2005 were approximately RMB1,137,246,000 and RMB941,774,000 respectively. The estimated annual aggregate amount paid by the China Shipping Group to the Company is expected to be approximately RMB1,881,697,000 for the year ended 31 December 2006.

From the above table, we noted that the aggregated amount paid for the year 2005 by the China Shipping Group to the Company decreased to RMB941,774,000 which was approximately RMB200,000,000 less than the year 2004. As the estimated amount paid to the Company will exceed the annual limit of RMB1,281,000,000 for 2006. The Company explained to us for the following reasons:

• (i) further strengthening the marketing efforts and cooperation with China Shipping and its subsidiaries as, the total shipping volume of the Group increased by about 36.3% as compared to the last year in 2005; and

• (ii) further enlargement of China Shipping’s customer network and business (especially the strong growth of North America).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the amount of transactions under the Master Liner Services Agreement, the Company’s total American trade line:

	For the year ended	For the year ended
		31 December
	2004	2005	2006
	(Actual)	(Actual)	(Estimated)
	RMB’000	RMB’000	RMB’000
Transactions under the Master	1,137,246	941,774	1,881,697
Liner Services Agreement
The Company’s total American	8,687,942	11,341,455	14,223,169
trade line
The percentage of transactions	13.09%	8.30%	13.23%
under the Master Liner Services
Agreement to the Company’s
total American trade line
operations

From the above table, the total amount in relation to the Liner Services received from the China Shipping Group under the Master Liner Services Agreement for the three years ended 31 December 2006 was relatively stable at approximately 10% of the Company’s total turnover generated from the American trade line operations. The amount of connected transactions under the Master Liner Services Agreement was in line with the total amount of the Company’s total American trade line.

Based on the strengthening of marketing efforts and cooperation with China Shipping and the enlargement of its customer network and business as explained by the Company’s management, we consider that the reason for exceeding the cap amount under the Master Liner Services Agreement in 2006 is acceptable.

4. Proposed annual caps

In arriving at the proposed annual caps, the Directors have considered:

• (i) the historical figures, i.e., the actual amount of the connected transactions under the Master Liner Services Agreement;

• (ii) the outlook of container shipping industry and the business development of the Company (which includes the increase in shipping capacity and volume (see the paragraph headed “Prospects of container shipping industry” of this letter)); and

• (iii) the expected increase in the Liner Services, particularly more shipping volume to be provided by China Shipping regarding the North American trade routes.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The proposed caps for the Liner Services are set out below:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		2,259,000	2,710,000	3,252,000
Yearly	change		20.0%	20.0%

Taking into account the anticipated shipping volume (especially the North American trade routes) through the strengthening of marketing efforts and cooperation with China Shipping, we consider that the proposed annual caps for the Liner Services for the three years ending 31 December 2009 determined are fair and reasonable.

IV. Master Ground Container Transport Agreement

On 10 May 2004, the Company entered into the Master Ground Container Transport Agreement with China Shipping for the provision of ground transportation services and other related and ancillary services (the “Ground Transportation Services”) by the China Shipping Group to the Group.

In July 2006, in order to expand the Group’s business in the PRC, the seven Regional Subsidiaries each entered into an implementation agreement under this agreement with CS Logistics, a wholly owned subsidiary of China Shipping, in accordance with the business development requirements of the Group. As such, CS Logistics commenced to provide the Ground Transportation Services to seven Regional Subsidiaries in order to match the Group’s business expansion strategy.

1. Reasons for the sourcing of ground transportation services

As advised by the Directors, the ground delivery service is a necessary and complementary service for container shipping companies. However, the Company itself has not had such facilities and resources to provide the ground transportation services. The Company sourced the Ground Transportation Services from the China Shipping Group. CS Logistics is one of the biggest logistic companies in the PRC and has nationwide delivery capability. Other companies which have similar capabilities are competitors of the China Shipping Group (including the Group). The rest of the companies in the ground transportation industry in the PRC are relative small companies which just provide short distance delivery service and may not provide a nationwide coverage of delivery services. Thus, CS Logistics is the most suitable choice for the Group to use the nationwide delivery services. Its services are comparable to those from independent third parties. In fact, the China Shipping Group could guarantee its Ground Transportation Services in terms of the reliability, quality, timing and convenience. The

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Directors consider that the Ground Transportation Services provided by the China Shipping Group are the most satisfied services to its customers. Given the importance of nationwide delivery, the long relationship of sourcing the Ground Transportation Services and the reliability of such services from the China Shipping Group, we consider that it is justifiable to enter into the Master Ground Container Transport Agreement.

2. Terms of the Master Ground Container Transport Agreement

Price terms

As advised by the Directors, the price terms under the Master Ground Container Transportation Agreement are agreed between the Group and the China Shipping Group based on an arm’s length negotiations and market prices.

The Company’s containers were delivered by the China Shipping Group as well as the independent third parties which have relative smaller operation capacities than CS Logistics. According to the information provided by the Company, we reviewed the price of delivery services paid to the China Shipping Group. We noted that such price is comparable to that from the independent third parties. In fact, the service charges for container sizes of 20’s and 40’s by the China Shipping Group and the independent third parties are similar.

Payment terms

According to the sample cases, we noted that the amount of connected transactions under the Master Ground Container Transport Agreement is settled within approximately 60 days after invoices are issued to the Company. We, however, noted that some independent third parties issued monthly invoices to the Company on the 15th of each month. After the Company verified those invoiced transactions with the independent third party service providers, the Company had to settle the amount before the last day of the next month. Nevertheless, the settlement terms under the Master Ground Container Transport Agreement are also comparable to those from the independent third parties.

Based on the above, we consider that the charges for the Ground Transportation Services and the payment terms under the Master Ground Container Transport Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the Company to the China Shipping Group for the three years ended 31 December 2006:

				For the year ended	For the year ended
					31 December
				2004	2005	2006
				(Actual)	(Actual)	(Estimated)
				RMB’000	RMB’000	RMB’000
Amount				30,359	34,218	159,950
Cap				54,000	54,000	54,000
Amount	over	the	cap	–	–	105,950

The annual aggregate amount paid by the Company to the China Shipping Group for the two years ended 31 December 2005 were approximately RMB30,359,000 and RMB34,218,000 respectively. The estimated annual aggregate amount paid by the Company to the China Shipping Group is expected to be RMB159,950,000 for the year ended 31 December 2006. The estimated amount paid to the China Shipping Group exceeds the annual cap limit of RMB54,000,000 in 2006.

Since the applicable percentage ratios in respect of revised 2006 annual caps for the sourcing of grand transportation services under the Master Ground Container Transportation Agreement are more than 0.1% but less than 2.5% on an annual basis, such transaction and the revised 2006 annual cap shall only be subject to the reporting and announcement requirement under Rules 14A.45 to 14A.47 of the Listing Rules. In this respect, on 15 December 2006 and on 24 January 2007, the Board ratified and approved such revised 2006 annual cap in accordance with the Listing Rules.

4. Proposed annual caps

In arriving at the proposed annual caps, the Directors have compared to the estimated amount for the year ended 31 December 2006 and the expected potential business growth of the Company between 2006 and 2007. Set out below are the factors taken into account for deriving the proposed annual caps for the three years ending 31 December 2009:

1. the increase amount of connected transactions due to the agreements with seven Regional Subsidiaries. For the full year 2006, if the seven Regional Subsidiaries are counted from the beginning of the year instead of only 6 months, the expected connected transaction amount will be approximately RMB159,950,000. On such basis, the expected increase rate for 2007 will be approximately 106.3%;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. the expected annual increase rate of 10% in trade volume per annual for the truck towing business; and

2. the expected increase in container shipping volume provided by the agent of each port of the Group.

After considering the above factors, the proposed caps under the Master Ground Container Transport Agreement are set out below:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		330,000	365,000	398,000
Yearly	change		10.6%	9.0%

In view of the container shipping volume relating to each port and the relevant service charges, the expected amounts to be paid by the Group (i.e. CS (Shanghai) and seven Regional Subsidiaries) to the China Shipping Group in the three years ending 31 December 2009 as compared to amount paid by the Group to the China Shipping Group in the year 2006 are set out below. We noted from the Company’s management that the amount paid by CS (Shanghai) reflected the full year amount whereas the amount paid by seven Regional Subsidiaries only reflected the amount in the second half of 2006. As such, the expected amounts to be paid by the Group to the China Shipping Group will increase substantially taken into account the full year projection from 2007 to 2009.

For the

year ended 31 December Area 2006 (Estimated) RMB’000 Shanghai 25,490 Dalian 37,100 Tianjin 24,000 Qingdao 25,000 Xiamen 15,000 Shenzhen 6,440 Guangzhou 18,540 Hainan 8,380* Total 159,950	For the year ending 31 December 2007 (Forecast) 2008 (Forecast) 2009 (Forecast) RMB’000 RMB’000 RMB’000 25,500 25,500 25,500 74,110 74,850 75,600 65,000 78,000 94,000 55,000 60,000 66,000 45,000 56,000 60,000 13,200 13,860 14,560 33,860 37,250 40,980 17,600 19,360 21,300 329,270 364,820 397,940	For the year ending 31 December 2007 (Forecast) 2008 (Forecast) 2009 (Forecast) RMB’000 RMB’000 RMB’000 25,500 25,500 25,500 74,110 74,850 75,600 65,000 78,000 94,000 55,000 60,000 66,000 45,000 56,000 60,000 13,200 13,860 14,560 33,860 37,250 40,980 17,600 19,360 21,300 329,270 364,820 397,940
		397,940

• For Regional Subsidiaries (which included Dalian, Tianjin, Qingdao, Xiamen, Shenzhen, Guangzhou and Hainan), they only reflected the amount of connnected transactions in the second half of 2006.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Taking into account the anticipated shipping and ground transportation volume, we consider that the proposed annual cap for the Ground Transportation Services for the three years ending 31 December 2009 determined are fair and reasonable.

V. First Master Container Management Agreement & Second Master Container Management Agreement (Collectively, the “Master Container Management Agreements”)

On 10 May 2004, the Company entered into the First Master Container Management Agreement with China Shipping, CS (Yangpu) Refrigeration and Shanghai Puhai for the mutual provision of container management services, container maintenance services (including repairing and cleaning of containers), work area for conducting container maintenance work and other related and ancillary services between: (i) the Group; and (ii) China Shipping, CS (Yangpu) Refrigeration and Shanghai Puhai and their respective subsidiaries and associates.

On 10 May 2004, the Company also entered into the Second Master Container Management Agreement with the Regional Subsidiaries for the mutual provision of the same services above (together, the “Container Management Services”) between: (i) the Group (excluding the Regional Subsidiaries and their respective subsidiaries); and (ii) the Regional Subsidiaries and their respective subsidiaries and associates.

1. Reasons for the sourcing of container management services

As mentioned above, the principal business of the Group is to engage in container shipping business in the PRC and foreign countries. It requires container management services to support its operations in different port locations in the PRC. Currently, the Group only has some facilities to provide part of those services. As such, the Company sourced the Container Management Services from the China Shipping Group through its representative offices. The Company considers that the Container Management Services provided by the China Shipping Group were satisfactory and reliable during the past few years. In addition, it is not cost effective for the Group to set up offices and service centres at different locations all over the world and to source those services from different service providers. Given that the China Shipping Group has a wide geographical coverage of operation centres in the PRC as well as in some overseas countries, it will be more convenient and cost effective for the Group to use the Container Management Services from the China Shipping Group. Given the need of the Container Management Services in different port locations worldwide and the reliability of such services provided by the China Shipping Group, we consider that it is justifiable for the Company to enter into the Master Container Management Agreements relating to the services to be provided to the Group.

2. Terms of the Master Container Management Agreements

Price terms

As advised by the Directors, the price terms under the Master Container Management Agreements are agreed between the Company and the China Shipping Group based on arm’s length negotiation and market prices.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The charges under the Master Container Management Agreements are made reference to the agreement between the Group and independent third party which provides similar container management services to the Group. The fees charged under the Master Container Management Agreements for empty container storages is based on the agreement between the Company and China Shipping (Lian Yungang) Co., Ltd., a subsidiary of China Shipping. In addition, the fees were made reference to the fees charged to the Group by an independent third party. We randomly reviewed several comparable cases; the results of these cases are affirmative in which the fees charged for the Container Management Services by the China Shipping Group are similar to those from independent third parties.

Set out table below is one of the randomly selected cases for container management service fees charged by the China Shipping Group and independent third parties:

	Charges under	Charges by	Charges by
	the Master Container	**an **	independent
	Management Agreements	third party
	Size		Size
	20’ 40’	20’	40’
Empty container	RMB2/day RMB4/day	RMB2/day RMB4/day
storage fees	10 days free storage	5	days free storage
Container repair
fees	Unique price based on the Company’s		offer price.

From the above table, we noticed that the charges for empty container storage fee by the China Shipping Group and an independent third party were the same. However, under the Master Container Management Agreements, the China Shipping Group can supply 10-day free storage for containers whereas the independent third party only offers a 5-day free storage for containers.

The container repair fees charged under the Master Container Management Agreements and the independent third parties are unique and subject to the Company’s offered for the price to be charged.

Payment terms

According to those randomly selected cases, we noted that the amount of connected transactions under the Master Container Management Agreements will be settled by the Company after invoices are issued to the Company subject to those invoices are approved by the Company. We noted that such settlement terms are similar to or in line with the market practice.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the above, we consider that the charges for the Container Management Services by the China Shipping Group and the payment terms under the Master Container Management Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the Company to the China Shipping Group for the three years ended 31 December 2006:

	For the year ended	For the year ended
		31 December
	2004	2005	2006
	(Actual)	(Actual)	(Estimated)
	RMB’000	RMB’000	RMB’000
Amount	585,188	817,130	820,530
Cap	894,000	894,000	894,000

The annual aggregate amount paid by the Company to (i) China Shipping, CS (Yangpu) Refrigeration and Shanghai Puhai and their respective subsidiaries and associates; and (ii) the Regional Subsidiaries and their respective subsidiaries and associates for the two years ended 31 December 2005 were approximately RMB585,188,000 and RMB817,130,000 respectively. The annual aggregate amount paid by the Company to (i) China Shipping, CS (Yangpu) Refrigeration and their respective subsidiaries and associates; and (ii) the Regional Subsidiaries and their respective subsidiaries and associates for the year ended 31 December 2006 were expected to be approximately RMB820,530,000.

We noted from the above table that the historical transaction amount under the Master Container Management Agreements for the three years ended 31 December 2006 did not exceed their respective cap amounts as stated in the previous waiver.

4. Proposed annual caps

In arriving at the proposed annual caps, the Directors have considered the historical figures and the expected increase of approximately 12% in total shipping capacity and approximately 18% increase in total shipping volume of the Group for the next three years ending 31 December 2009. Thus the estimated amount for the connected transactions under the Master Container Management Agreements to be paid by the Group to the China Shipping Group is expected to increase by approximately 10% per annum for the next three years ending 31 December 2009.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the proposed caps under the Master Container Management Agreements for the three years ending 31 December 2009:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		903,000	993,000	1,092,000
Yearly	change		10.0%	10.0%

Taking into account the anticipated shipping volume, we consider that the proposed annual cap for the Container Management Services to be provided to the Group for the three years ending 31 December 2009 determined are fair and reasonable.

VI. Master Time Charter Agreement

On 10 May, 2004, the Company entered into the Master Time Charter Agreement with China Shipping and Shanghai Puhai for the mutual provision of vessels on a time charter basis and other related and ancillary services (the “Time Charter Services”) between (i) the Group; and (ii) China Shipping, Shanghai Puhai and their respective subsidiaries and associates.

1. Reasons for the sub-leasing

As advised by the Directors, in general, a shipping company is not likely to own all of the vessels because it involves a large amount of capital investment. Hence, most shipping operators lease some vessels for their operations. Before the Company’s listing on the Stock Exchange, the China Shipping Group has better reputation than the Company and most vessel lessors would like to lease vessels to the China Shipping Group rather than the Company. The Company then sub-leased all the leased vessels from the China Shipping Group. Following listing, the Group started to sign the lease with the vessel lessors directly. As a result, the Company has already decreased the number of leased vessels from the China Shipping Group from 18 to 5, and the 13 vessels signed the leases with the Group directly. Hence, for the remaining 5 vessels, the lessors prefer to continue the remaining leasing terms of these vessels with the China Shipping Group until the leases become expiry. Given the importance of the sub-leasing for the operation and the time of expiry of the original leases between the vessel lessors and the China Shipping Group, we consider that it is justifiable for the Company to enter into the Master Time Charter Agreement relating to the vessels to be provided to the Group.

2. Terms of the Master Time Charter Agreement

Price terms

As advised by the Directors, the price terms under the Master Time Charter Agreement are agreed between the Company and the China Shipping Group based on arm’s length negotiations and market prices.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The lease amount under the Master Time Charter Agreement is made reference to the agreements between the Company and independent third parties, which is similar to the Time Charter Services to the Company. Hence, the leasing amount charged by the China Shipping Group is similar to that from independent third parties. According to the information provided by the Company, the charges for the vessel leases paid to the China Shipping Group are comparable to the independent third parties. The charges for all the vessels under sub-leases from the China Shipping Group are the same as the charges from other lessors. We randomly reviewed several comparable cases and the results were affirmative.

Set out below illustrated one of the randomly selected cases for vessel lease fees charged by different parties:

	Ship name	Standard	Daily fees	Category
		(cars)	(US$)
China Shipping	Zhonghai Gaosu	3,294	14,000	Car ship
Independent third	Dongfang Gaosu	3,294	16,000	Car ship
party

Payment terms

According to the sample cases, we noted that the amount of connected transactions under the Master Time Charter Agreement is settled every semi-month in advance by the Company. We also noted that such settlement terms are similar to those from the independent third parties.

Based on the above, we consider that the leasing fee paid to China Shipping and the payment terms under the Master Time Charter Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the Group to China Shipping, for the three years ended 31 December 2006:

	For the year ended	For the year ended
		31 December
	2004	2005	2006
	(Actual)	(Actual)	(Estimated)
	RMB’000	RMB’000	RMB’000
Amount	291,965	288,188	232,000
Cap	926,000	926,000	926,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The annual aggregate amount paid by the Group to China Shipping, Shanghai Puhai and their respective subsidiaries and associates for the two years ended 31 December 2005 were approximately RMB291,965,000 and RMB288,188,000 respectively. The estimated annual aggregate amount paid by the Group to China Shipping, Shanghai Puhai and their subsidiaries and associates for the year ended 31 December 2006 was expected to be approximately RMB232,000,000.

Following listing on the Stock Exchange, the Group started to sign the lease of vessels with the vessel owners directly. From above table, the total amount decreased gradually between 2003 and 2006. In the second half of 2006, the Group received 2 vessels from China Shipping, which caused the total amount for the year 2006 increased to RMB232,000,000. As a result, the number of vessels leased from the China Shipping Group decreased from 18 to 5 by the end of 2006. Otherwise, the leasing amount under the agreement will be much smaller. Moreover, some lessors have already agreed to lease their vessels to the Group directly. Hence, some vessel leases will no longer constitute connected transactions. Thus, the total number leased vessels from the China Shipping Group would be maintained at 5 vessels as at 31 December 2006.

We noted from the above table that the historical transaction amount under the Master Time Charter Agreement for the three years ended 31 December 2006 did not exceed their respective cap amounts as stated in the previous waiver.

4. Proposed annual caps

In arriving at the proposed annual caps, the Directors have considered the historical figures and the number of vessels (including two additional new vessels received from China Shipping in the second half of 2006) which resulting in the increase in lease payment from 2007 onwards.

Set out below is the proposed cap amount under the Master Time Charter Agreement for the three years ending 31 December 2009:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		410,000	411,000	410,000
Yearly	change		0.2%	-0.2%

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The total charges (or rental fees) in the three years ending 31 December 2009 are set out as follows:

Vessels’ name CSCL EUROPE (US$) CSCL AMERICA (US$) CSCL PUSAN (US$) CSCL Le HARVE (US$) CSCL Gaosu (US$) Total in US$ Total in RMB	Total rental fees for the year 2007 10,658,000 10,658,000 12,410,000 12,410,000 5,110,000 51,246,000 409,968,000	Total rental fees for the year 2008 10,658,000 10,658,000 12,410,000 12,410,000 5,124,000 51,260,000 410,080,000	Total rental fees for the year 2009 10,658,000 10,658,000 12,410,000 12,410,000 5,110,000
			51,246,000
			409,968,000

Taking into account the number of vessels to be sub-leased and the rental fee, we consider that the proposed annual cap for the Time Charter Services to be provided to the Group for the three years ending 31 December 2009 determined are fair and reasonable.

VII. First Master Loading and Unloading Agreement & Second Master Loading and Unloading Agreement (Collectively, the “Master Loading and Unloading Agreements”)

On 10 May 2004, the Company entered into the First Master Loading and Unloading Agreement with China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal for the provision of container loading and unloading services and other related and ancillary services by: (i) China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal and their respective subsidiaries and associates; to (ii) the Group.

On 10 May 2004, the Company also entered into the Second Master Loading and Unloading Agreement with West Basin for the provision of the same services above (together, the “Container Loading and Unloading Services”) by (i) West Basin and its subsidiaries and associates; to (ii) the Group.

1. Reasons for using the container loading and unloading services

As advised by the Directors, since the Company is a domestic and international container shipping operator, an efficient operation for loading and unloading of containers at container terminals is one of the important factors to affect the Company’s overall operation efficiency. The Company considers that the priority right to use the loading and unloading services at some ports is extremely important for the Group to achieve high operation efficiency when its container vessels embank at the container terminals especially during the rush hours. In view that some independent third parties container

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

terminal operators cannot offer such similar priority right to the Company, the Company would like to enter into the Master Loading and Unloading Agreements to source its priority right. Given the importance of having efficiency in container loading and unloading and the priority right granted from China Shipping, we consider that it is justifiable for the Company to enter into the Master Container Loading and Unloading Agreements.

2. Terms of the Master Loading and Unloading Agreements

Price terms

As advised by the Directors, the price terms under the Master Loading and Unloading Agreements are agreed between the Company and the China Shipping Group based on arm’s length negotiations and market prices.

We randomly reviewed several comparable cases; the outcomes of these cases are affirmative in which the container handling charges charged by the China Shipping Group are similar and comparable to those from the independent third parties who provide the container handling services.

Set out below is one of the randomly selected cases for loading and unloading handling fees charged by different parties:

	Size	Size
	20’	40’
Price under the Master	RMB190/container	RMB287.5/container
Loading and Unloading
Agreements
Price charged by an	RMB200/container	RMB300/container
independent third party

The handling charges in the PRC domestic operations charged under the Master Loading and Unloading Agreements set out above are based on the agreement between the Company and CS (Dalian). In addition, the container handling charge was made reference to independent third party’s charges based on the agency agreement between the Company and the independent parties such as Tianjin Port (Group) Co. Ltd and other similar independent third party container terminal operators.

Furthermore, we also reviewed that the container handling charges in the overseas operations under the Master Loading and Unloading Agreement are based on the agreements between Los Angeles WBCT, which is a subsidiary of the China Shipping Group. In addition, the charges were made reference to independent third party’s prices based on the agency agreements between the Company and the independent third parties such as SSAT OAKLAND Co. Ltd and other similar independent third party container terminal operators.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Payment terms

According to the sample cases, we noted that the amount of connected transactions under the Master Loading and Unloading Agreements will be settled within approximately 30 days after invoices are issued to the Company. We also noted that such settlement terms appeared to be similar to the market practice. Based on the above, we consider that the loading and unloading handling fees charged by China Shipping and the payment terms under the Master Loading and Unloading Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the Company to China Shipping, for the three years ended 31 December 2006:

	For the year ended	For the year ended
		31 December
	2004	2005	2006
	(Actual)	(Actual)	(Estimated)
	RMB’000	RMB’000	RMB’000
Amount	541,480	693,601	1,045,000
Cap	1,045,000	1,045,000	1,045,000

The annual aggregate amount paid by the Company to (i) China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal and their respective subsidiaries and associates; and (ii) West Basin and its subsidiaries and associates for the two years ended 31 December 2005 were approximately RMB541,480,000 and RMB693,601,000 respectively. The estimated annual aggregate amount for the year ended 31 December 2006 is expected to be RMB1,045,000,000.

The total payment for the year ended 31 December 2006 increased by approximately 50% when comparing the same corresponding period in 2005. For the year ended 31 December 2005, only Zhanjiang, Jinzhou, Lian Yungang, Shanghai and WBCT were accounted. However, for the year ended 31 December 2006, the newly joined ports Nansha, Dalian were also taking into account and lead to an increase in the amount of the connected transactions under the Master Loading and Unloading Agreements substantially. Particularly, the monthly transaction amount at Nansha Port increased by approximately 65.74% in the month of October 2006, and the monthly transaction amount at WBCT increased approximately 27.08% in October 2006 compared to the same corresponding period in 2005.

We noted from the above table that the historical transaction amount under the Master Loading and Unloading Agreements for the three years ended 31 December 2006 did not exceed their respective cap amounts as stated in the previous waiver.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Proposed annual caps

In arriving at the proposed annual caps, the Directors have considered the historical figures set out in the above table and the estimated 20% increase in shipping capacity and volume annually in the three years ending 31 December 2009. Furthermore, the Group is planning to expand its new trade routes in the coming years. Thus the increase in connected transactions under this agreement is inevitable. The continuing increase in shipping volume will lead to an increase in the total container loading and unloading transactions. As advised by the Company’s management the total amount to be paid by the Company to the China Shipping Group and its subsidiaries and associates is expected to increase by approximately 20% annually based on the above factors.

Set out below is the proposed cap amount under the Master Loading and Unloading Agreements for the three years ending 31 December 2009:

		**For **	the year ending
		31 December
		2007	2008	2009
		(Proposed)	(Proposed)	(Proposed)
		RMB’000	RMB’000	RMB’000
Cap		1,255,000	1,505,000	1,806,000
Yearly	change	20.1%	19.9%	20%

Taking into account the anticipated shipping volume and the fees charged for container loading and unloading, we consider that the proposed annual caps for the Container Loading and Unloading Services to be provided to the Group for the three years ending 31 December 2009 determined are fair and reasonable.

VIII. Revised Master Provision of Containers Agreement

As disclosed in the Prospectus, prior to its listing, the Company had entered into the Container Leases and was granted a waiver by the Stock Exchange from strict compliance with the relevant requirements under the Listing Rules with respect to the transactions under such leases for a period of three years ended 31 December 2006.

On 1 April 2006, the Company entered into the Original Master Provision of Containers Agreement with China Shipping whereby China Shipping agreed to supply and procure that its subsidiaries and associates manufacture and supply containers to the Group. Transactions under this agreement and the annual caps for a period of three years ending 31 December 2008 were approved by the Independent Shareholders on 31 March 2006. Since then, several implementation agreements have been entered into between members of the Group and the China Shipping Group in accordance with the Original Master Provision of Containers Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group expects that the continuing expansion of its shipping capacities in the next few years will result in a significant increase in demand by the Group for containers. Under such circumstances, and in light of: (i) the fact that the purchase and lease of containers are related in that an increase in leased containers would lead to the decrease in purchased containers and vice versa; (ii) the Company’s desire to consolidate and streamline the administrative schedule of all the Company’s continuing connected transactions, the Company intends to terminate the Original Master Provision of Containers Agreement and enter into the Revised Master Provision of Containers Agreement with China Shipping pursuant to which China Shipping shall supply (including sell and/or lease), and shall procure that its subsidiaries and associates manufacture and supply (including sell and/or lease), containers to the Group.

Upon the Revised Master Provision of Containers Agreement becoming effective, the Original Master Provision of Containers Agreement shall cease to be in force and each of the existing Container Leases, including the Renewed Container Leases, will be incorporated into the Revised Master Provision of Containers Agreement. The provisions contained in the Container Leases, including the Renewed Container Leases, shall be in all material respects consistent with the binding principles, guidelines, terms and conditions in accordance with which such containers are required to be provided as contained in the Revised Master Provision of Containers Agreement.

1. Reasons for sourcing containers from the China Shipping Group

• (a) Purchasing

As advised by the Company’s management, the sale terms of containers provided by the China Shipping Group are generally more favorable to the Group than those provided by independent third party suppliers. We noted that the China Shipping Group has provided containers to the Group since October 2005. During the past fifteen months, the Board considers that those containers provided by the China Shipping Group were satisfactory and met the quality requirement of the Group. Besides, those containers production facilities of the China Shipping Group are relatively new. And, the facilities are capable of producing containers at a faster speed with prompt delivery comparing with other containers manufacturers. Given the quality standard and the prompt delivery, we consider that purchasing containers from the China Shipping Group is justifiable.

• (b) Leasing

As advised by the Company’s management, the lease terms provided by the DFI are generally more favorable to the Group than those provided by independent third party lessors. The Company has noted that the container lease contracts provided by the independent third parties are less flexible than DFI and the Company is very difficult to negotiate for any amendments. The containers provided by DFI are based on the Company’s standards with the Company’s corporate color as well as the Company’s logo. Unlike the containers from independent third parties,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

they were based on the lessors’ standards with the lessor’s logo. They must be picked up and returned monthly at a particular place as determined by the lessors. However, DFI is more flexible on container return and container repair services. We noted that DFI has been providing the container leasing service for the Company prior to its listing on the Stock Exchange. During the past few years, the Board considers that the containers leased from DFI were satisfactory and met the quality requirement of the Company. Given the characterised standard of containers, the flexibility in picking up and returning containers and the quality standard, we consider that leasing containers from DFI is justifiable.

2. Terms of the Revised Master Provision of Containers Agreement

Price terms

As advised by the Directors, the price terms under the Revised Master Provision of Containers Agreements are agreed between the Company and the China Shipping Group based on arm’s length negotiations and market price.

We randomly reviewed several other comparable cases; the outcomes of these cases are affirmative.

Set out below is one of the randomly selected cases for container leasing fees and container purchasing prices charged by different parties:

		Charges under
	the Original Master Provision of
	Containers Agreement			**Independent third **		parties
Leasing of		US$1.02/day			US$1.05/day
container
(each TEU)
Purchasing of	20’GP	40’GP	40’HC	20’GP	40’GP	40’HC
container
	US$1,770	US$2,832	US$3,009	US$1,880	US$2,880	US$3,060

The price under the Original Master Provision of Container Agreement is based on the agreement between the Company and DFI. In addition, the price was made reference to independent third party’s prices based on the agency agreement between the Company and the independent parties such as Triton Shipping Co. Ltd and Shanghai Pacific International Container Co. Ltd and other companies. Hence, the fees charged by the DFI to the Company are similar or favorable to independent third parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Payment terms

According to the sample cases, we noted that (i) the lease payment for containers under the Original Master Provision of Containers Agreement is settled one month in advance by the Company and (ii) the amount for the purchase of container under the Original Master Provision of Containers Agreement is generally settled within 60 days by the Company. We noted that the above payment terms are in line with the market practice.

Based on the above, we consider that the charges for the leasing and purchasing of containers from the China Shipping Group and the payment terms under the Revised Master Provision of Containers Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

3. Historical caps and figures

Set out below is the annual aggregate amount paid by the Company to the China Shipping Group for the three years ended 31 December 2006:

	**For **	the year ended
	2004	2005	2006
	(Actual)	(Actual)	(Estimated)
	RMB’000	RMB’000	RMB’000
Leasing of containers
Amount	588,558	488,231	590,493
Cap	680,000	680,000	680,000
Purchasing of containers
Amount	0	250,448*	868,814
Cap	N/A	N/A	870,960

* US$31,306,000 as announced by the Company on 27 January 2006

From the above table, it was found that the annual cap in the existing waiver for the lease of containers is RMB680,000,000 and the annual amount paid for container leases by the Company to DFI for the three years ended 31 December 2006 are RMB588,558,000, RMB488,231,000 and RMB590,493,000 respectively; and the annual cap for the purchase of containers is RMB870,960,000 for the year ended 31 December 2006 and the annual purchase amount paid for container purchase by the Company for the year ended 31 December 2006 is estimated to be approximately RMB868,814,000. For the three years ended 31 December 2006, the percentage of container lease accounted for approximately 1.33%, 1.22% and 1.64% respectively of its total annual turnover.

We noted from the above table that (i) the historical lease amount of containers for the three years ended 31 December 2006 and (ii) the historical purchase amount of containers for the year ended 31 December 2006 did not exceed their respective cap amounts.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Proposed annual caps

	For the year ending	For the year ending
		31 December
	2007	2008	2009
	(Proposed)	(Proposed)	(Proposed)
	RMB’000	RMB’000	RMB’000
Containers to be leased	620,000	784,000	894,000
Yearly change	5.0%	26.5%	14.0%
Containers to be purchased	1,131,000	285,000	182,000
Yearly change		-74.8%	-36.1%

From the above table, the estimated total payment for leasing containers under the Revised Master Provision of Containers Agreement for the three years ending 31 December 2009 are approximately RMB619,993,000, RMB783,809,000 and RMB893,994,000 respectively; which accounts for approximately 1.87%, 2.05% and 2.03% of the annual turnover respectively. The estimated total payment for purchasing containers under the Revised Master Provision of Containers Agreement for the three years ending 31 December 2009 are approximately RMB1,131,000,000, RMB284,832,000 and RMB181,280,000 respectively.

The Company considers to lease more containers instead of purchasing them from China Shipping and independent third parties in order to save more resource to build more vessels. Thus, in the next three years ending 31 December 2009, the total leasing fees will increase sharply and the total amount paid for containers decrease dramatically holding the total number of containers required at a stable level. Under this situation, the Company’s total shipping capacity is expected to grow by approximately 12%, 12%, and 6% annually for the three years ending 2009 respectively. With the increase in shipping capacity, the total demand for containers will also increase (which means that 1 TEU spare space needs 2 TEU containers), the additional required container volume will be approximately 135,148TEU, 130,892TEU and 84,360TEU for the three years ending 2009 respectively. Then the ratio for the number of containers to be purchased in relation to the total number of containers to be leased is expected to be approximately 65%, 20%, and 20% for the three years ending 2009 respectively.

Taking into account the anticipated shipping capacity, the container capacity requirements and the revised ratio for the number of containers to be purchased/leased, we consider that the proposed annual caps for the purchase/lease of containers for the three years ending 31 December 2009 determined are fair and reasonable.

– 73 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for exceeding the 2006 annual caps for the Past Transactions and new measures taken

As advised by the Company’s management, the Company has been monitoring the continuing connected transactions under the Agreements. However, the Company was not able to predict with sufficient accuracy whether the 2006 annual caps for the Past Transactions were going to be exceeded due to the following reasons: (i) the rapid growth of the Group’s business in 2006; (ii) the large scale of the Group’s business operations; (iii) the number of subsidiaries and branches of the Group involved in relation to such transactions; (iv) the size and complexity of such transactions; and (v) relevant adjustments made by the Group to its operation strategies within 2006 in response to fluctuating market conditions. Also, the Company needed time to collect, consolidate and confirm the transaction amounts internally, and seek relevant legal and/or accounting advice, before preparing and confirming the draft announcement and other documents in fulfillment of its relevant re-compliance obligations.

As stated in the Board’s Letter, in order to prevent similar problems arising in the future, the Group: (i) has adopted, and will keep improving, a set of internal guidelines for identifying and monitoring its connected transactions, details of which have been disseminated to relevant personnel of the Group; (ii) has set up certain trainings for such personnel in order to deepen their understanding of connected transactions under the Listing Rules; and (iii) in view of the burdensome data collection process with respect to its continuing connected transactions, has invested particularly in the research and development of its computer-based information management system so as to expedite the statistics reporting and updating process and better monitor the volume of its continuing connected transactions in a timely and efficient manner. As advised by the Company’s management, those relevant personnel understood the importance of monitoring the information of its continuing connected transactions following the provision of internal guidelines and trainings. We believe that the new measures taken, if also properly maintained by the Company, can help reduce its possibility of the delay in reporting to the Shareholders as well as the Stock Exchange should any caps be exceeded.

RECOMMENDATION

Taking into consideration the above factors, in particular, the background, the general price and quality terms and the detailed analysis on each of the Agreements (including the respective reasons for these transactions, the pricing basis and the determination of the annual caps), we consider that the Agreements are in the interests of the Company and its shareholders and the terms of which (together with the Non-exempt Continuing Connected Transactions and the Annual Caps), being entered into on normal commercial terms, are fair and reasonable so far as the Shareholders are concerned. Besides, taking into consideration the reasons for exceeding the 2006 annual caps for the Past Transactions, the determination of the Revised Caps and the new measures taken by the Company to monitor the information of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

its continuing connected transactions, we consider that the interests of the Independent Shareholders have not been prejudiced as a consequence of exceeding the 2006 annual caps under the Past Transactions and the Revised Caps are fair and reasonable so far as the Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolutions for approving the Agreements, the Non-exempt Continuing Connected Transactions and the Annual Caps as well as the Revised Caps at the SGM.

Yours faithfully, For and on behalf of Guotai Junan Capital Limited Henry Yeung Director

– 75 –

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

9 Directors and 3 supervisors were granted Rights under the Rights scheme adopted by the Shareholders on 12 October 2005. Details of the Rights scheme are set out in the Company’s circular to Shareholders dated 26 August 2005. The interests of such Directors and supervisors in the underlying H shares of the Company as at the Latest Practicable Date were as follows:

	Number of	Capacity in which	Percentage
	underlying	underlying H shares	figure in the
Name	H shares involved	were held	H shares
Directors
Li Shaode	680,000	Beneficial owner	0.03%
			(Long position)
Jia Hongxiang	880,000	Beneficial owner	0.04%
			(Long position)
Huang Xiaowen	820,000	Beneficial owner	0.03%
			(Long position)
Zhao Hongzhou	720,000	Beneficial owner	0.03%
			(Long position)
Wang Daxiong	300,000	Beneficial owner	0.01%
			(Long position)
Zhang Guofa	300,000	Beneficial owner	0.01%
			(Long position)
Zhang Jianhua	300,000	Beneficial owner	0.01%
			(Long position)

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GENERAL INFORMATION

APPENDIX

	Number of	Capacity in which	Percentage
	underlying	underlying H shares	figure in the
Name	H shares involved	were held	H shares
Xu Hui	200,000	Beneficial owner	0.01%
			(Long position)
Yao Zuozhi	200,000	Beneficial owner	0.01%
			(Long position)
Supervisors
Huang Xinming	720,000	Beneficial owner	0.03%
			(Long position)
Wang Xiuping	450,000	Beneficial owner	0.02%
			(Long position)
Tu Shiming	60,000	Beneficial owner	0.002%
			(Long position)

Each of Li Shaode, Zhang Jianhua, Wang Daxiong and Zhang Guofa was as at the Latest Practicable Date the President, a Vice-President, a Vice-President and a Vice-President respectively of China Shipping, which was a company having, as at the Latest Practicable Date, an interest or short position in the Company’s shares and underlying shares 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.

Save as disclosed above, 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 Directors).

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GENERAL INFORMATION

APPENDIX

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 expiring or determinable by the Company within one year without any payment of compensation, other than statutory compensation.

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, 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.

5. INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors, supervisors, proposed Directors or proposed supervisors of the Company had any direct or indirect interest in any assets which have been, since 31 December 2005 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement, subsisting at the date of this Circular, which is significant in relation to the business of the Group.

6. NO MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2005 (being the date to which the latest published audited accounts of the Company were made up).

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GENERAL INFORMATION

APPENDIX

7. SHAREHOLDINGS OF SUBSTANTIAL SHAREHOLDERS WITH NOTIFIABLE INTERESTS

As at the Latest Practicable Date, so far as the Directors, supervisors or chief executive(s) of the Company are aware, 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
Name of	Class of	shares/underlying		class of share	in total
shareholder	shares	shares held	Capacity	capital	share capital
China Shipping	Domestic	3,610,000,000	Beneficial owner	100%	59.87%
(Group) Company	shares	(Long position)
Li Ka-Shing	H shares	365,637,000	Interest of	15.11%	6.06%
		(Long position)	controlled
			corporation and
			founder of a
			discretionary trust
Li Ka-Shing Unity	H shares	365,637,000	Trustee and	15.11%	6.06%
Trustcorp Limited		(Long position)	beneficiary of a
			trust
Li Ka-Shing Unity	H shares	365,637,000	Trustee	15.11%	6.06%
Trustee		(Long position)
Corporation
Limited
Cheung Kong	H shares	362,637,000	Interest of	14.99%	6.01%
(Holdings)		(Long position)	controlled
Limited			corporation
Li Ka-Shing Unity	H shares	362,637,000	Trustee and	14.99%	6.01%
Trustee Company		(Long position)	beneficiary of a
Limited			trust
Hutchison	H shares	241,758,000	Beneficial owner	9.99%	4.01%
International		(Long position)
Limited
Hutchison Whampoa	H shares	241,758,000	Interest of	9.99%	4.01%
Limited		(Long position)	controlled
			corporation

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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% 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: (i) a Director, supervisor or chief executive of the Company; or (ii) 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:

==> picture [402 x 452] intentionally omitted <==

----- Start of picture text -----

||||||||||
|---|---|---|---|---|---|---|---|---|
|Percentage|of|
|Name|of|subsidiary|Name|of|shareholder|shareholding|
|(See|Note)|(See|Note)|
|China|Shipping|Container|Lines|China|Shipping|Group|10%|
|Dailian|Co.,|Ltd.|Investment|Co.|Ltd.|
|(|)|(|)|
|China|Shipping|Container|Lines|China|Shipping|Group|10%|
|Guangzhou|Co.,|Ltd.|Investment|Co.|Ltd.|
|(|)|(|)|
|China|Shipping|Container|Lines|(i)|China|Shipping|Group|10%|
|Hainan|Company|Limited|Investment|Co.|Ltd.|
|(|)|(|)|
|(ii)|China|Shipping|Agency|20%|
|Co.,|Ltd.|
|(|)|
|(iii)|China|Shipping|Hainan|30%|
|Logistics|Co.,|Ltd.|
|(|)|
|China|Shipping|Container|Lines|China|Shipping|Group|10%|
|Qingdao|Company|Limited|Investment|Co.|Ltd.|
|(|)|(|)|
|China|Shipping|Container|Lines|China|Shipping|Group|10%|
|Shanghai|Co.,|Ltd.|Investment|Co.|Ltd.|
|(|)|(|)|

----- End of picture text -----

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GENERAL INFORMATION

APPENDIX

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----- Start of picture text -----

Percentage of
Name of subsidiary Name of shareholder shareholding
(See Note) (See Note)
China Shipping Container Lines China Shipping Group 10%
Shenzhen Co., Ltd. Investment Co. Ltd.
( ) ( )
China Shipping Container Lines China Shipping Group 10%
Tianjin Company Limited Investment Co. Ltd.
( ) ( )
China Shipping Container Lines China Shipping Group 10%
Xiamen Co., Ltd. Investment Co. Ltd.
( ) ( )
China Shipping (Yangpu) (i) China Shipping Logistics 30%
Refrigeration Storage & Co., Ltd.
Transportation Co., Ltd. ( )
( ) (ii) Suzhou China Shipping 30%
Containers Lines Storage
and Transportation
Co., Ltd.
( )
China Shipping Container Lines China Shipping Agency Co., Ltd. 10%
(Haikou) Co., Ltd. ( )
( )
Shanghai HaiXin YuanCang (i) Bermuda YuanCang 40%
International Logistics Co., Ltd. International Co., Ltd.
( ) ( )
(ii) Shanghai YiHua 20%
Enterprises Company
( )
----- End of picture text -----

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) of the Company are aware, as at the Latest Practicable Date, no other person, not being: (i) a Director, supervisor or chief executive of the Company; or (ii) 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.

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GENERAL INFORMATION

APPENDIX

8. 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.

9. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Ye Yu Mang. Mr. Ye graduated from Shanghai Maritime University in 1989 with a Masters degree in mechanical engineering and was the company secretary of China Shipping Development Company Limited from April 2001 to March 2003.

• (b) The qualified accountant of the Company pursuant to Rule 3.24 of the Listing Rules is Mr. Zhao Xiaoming, who is able to meet all the requirements set out in Rule 3.24 of the Listing Rules (except that he is not a fellow or an associate member of the HKICPA or a similar body of accountants recognized by the HKICPA for the purpose of granting exemptions from the examination requirement for membership of the HKICPA). Pursuant to the conditions of the waiver from the Stock Exchange from strict compliance with Rule 3.24 of the Listing Rules, the Company has engaged Mr. Mak Po Lung, a fellow member of the HKICPA, to assist Mr. Zhao Xiaoming during the period of the waiver, commencing from 1 October 2006 and expiring on (i) 30 September 2009, being the expiry date of three years commencing from 1 October 2006; or (ii) when the Company fails to fulfill any of the conditions for the said waiver, whichever is earlier.

• (c) The legal address and principal place of business in the PRC of the Company is Rooms A, B, C and D, 27th Floor, 450 Fu Shan Lu, Pudong New District, Shanghai, the PRC. The Hong Kong H Share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Room 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.

10. CONSENT OF EXPERT

• (a) The Independent Financial Adviser, which is a licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the SFO, has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its letter and reference to its name in the form and context in which they respectively appear.

• (b) As at the Latest Practicable Date, the Independent Financial Adviser was not interested in any Right or share in any member of the Group nor did it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Right or share in any member of the Group.

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GENERAL INFORMATION

APPENDIX

• (c) As at the Latest Practicable Date, the Independent Financial Adviser did not have any direct or indirect interest in any assets which have been, since 31 December 2005 (being the date to which the latest published audited financial statements of the Company were made up) acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

11. DOCUMENTS FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s principal place of business in Hong Kong at Level 69, 99 Queen’s Road Central, the Center, Hong Kong for a period of 14 days (excluding Saturdays) from the date of this Circular:

• (i) the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement, the Master Liner Services Agreement, the Master Ground Container Transport Agreement, the First Master Container Management Agreement, the Second Master Container Management Agreement, the Master Time Charter Agreement, the First Master Loading and Unloading Agreement, the Second Master Loading and Unloading Agreement, the Revised Master Provision of Containers Agreement, the Original Master Provision of Containers Agreement and each of the existing Container Leases, including the Renewed Container Leases;

• (ii) the letter dated 16 February 2007 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 34 to 36 of this Circular;

• (iii) the opinion letter dated 16 February 2007 from the Independent Financial Adviser, the text of which is set out on pages 37 to 75 of this Circular; and

• (iv) the written consent issued by the Independent Financial Adviser as referred to in the paragraph headed “Consent of Expert” in this Appendix.

– 83 –

NOTICE OF SGM

==> picture [307 x 88] intentionally omitted <==

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

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of China Shipping Container Lines Company Limited (the “ Company ”) will be held at 2:30 p.m. on 10 April 2007 at Conference Room 1, 3rd Floor, 450 Fu Shan Road, Pudong New District, Shanghai, the People’s Republic of China (the “ PRC ”) to consider and, if thought fit, pass the following resolutions as ordinary resolutions, and unless otherwise defined herein, the terms herein shall have the same meanings as defined in the circular to the shareholders of the Company dated 16 February 2007:

1. “ THAT the proposed revised 2006 annual caps for the continuing connected transactions entered into under the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement and the Master Liner Services Agreement respectively, details of which are set out in the circular to the shareholders of the Company dated 16 February 2007, be and are hereby ratified”;

2. “ THAT the Non-exempt Continuing Connected Transactions entered into under the Master Supply Agreement, the First Master Liner and Cargo Agency Agreement, the Second Master Liner and Cargo Agency Agreement, the Master Liner Services Agreement, the Master Ground Container Transport Agreement, the First Master Container Management Agreement, the Second Master Container Management Agreement, the Master Time Charter Agreement, the First Master Loading and Unloading Agreement and the Second Master Loading and Unloading Agreement, together with their respective proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009, details of which are set out in the circular to the shareholders of the Company dated 16 February 2007, be and are hereby approved”;

3. “ THAT the Revised Master Provision of Containers Agreement (the “ Agreement ”) to be entered into between the Company and China Shipping (Group) Company (a copy of the draft Agreement has been produced to this Meeting marked “A” and initialed by the Chairman for the purposes of identification), all transactions

* 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”.

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NOTICE OF SGM

(including all continuing connected transactions) contemplated thereunder and its proposed annual caps for each of the three years ending 31 December 2007, 2008 and 2009, details of which are set out in the circular to the shareholders of the Company dated 16 February 2007, be and are hereby approved and any one director of the Company be and is hereby authorized to sign the Agreement for and on behalf of the Company”; and

1. “ THAT any one director of the Company be and is hereby authorized to do all such further acts and things and execute all such further documents and take all such steps which in his discretion may be necessary, desirable or expedient to implement and/or give effect to the terms of and the matters contemplated under the abovementioned resolutions.”

By order of the board of Directors of China Shipping Container Lines Company Limited Li Shaode Chairman

Shanghai, the People’s Republic of China 16 February 2007

Notes:

• (a) The address of Computershare Hong Kong Investor Services Limited is as follows:

46th Floor, Hopewell Centre 183 Queen’s Road East Hong Kong

• (b) Holders of domestic shares or H shares, who intend to attend the SGM, 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 SGM.

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 SGM is entitled to appoint in writing one or more proxies, whether a Shareholder or not, to attend and vote on his behalf at the SGM. 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 appointer or his attorney duly authorized in writing. If that instrument is signed by an attorney of the appointer, the power of attorney authorizing that attorney to sign, or other documents of authorization, must be notarially certified.

– 85 –

NOTICE OF SGM

• (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 appointer, 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 SGM or any adjournment thereof in order for such documents to be valid.

• (f) The 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 SGM. Notes (c) to (d) also apply to the holder 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 is set out in Note (b) above, not less than 24 hours before the time for holding the SGM or any adjournment thereof in order for such documents to be valid.

• (g) If a proxy attends the SGM 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 SGM, such representative should produce his/her identity card and the notarized copy of the resolution passed by the board of directors or other authorities or other notarized copy of the license 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 SGM, 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) Notice is hereby given that pursuant to the Articles of Association of the Company, for the purpose of holding the SGM, the Register of Members will be closed from 12 March 2007 to 10 April 2007 (both days inclusive), during which period no transfer of shares of the Company will be registered. Shareholders whose names appear on the Register of Members at the close of business on 12 March 2007 are entitled to attend and vote at the SGM.

In order to attend the SGM, 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, at Room 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on 9 March 2007.

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

The Board as at the date of this Circular comprises of Mr. Li Shaode, Mr. Jia Hongxiang, Mr. Huang Xiaowen and Mr. Zhao Hongzhou, being executive directors, Mr. Zhang Jianhua, Mr. Wang Daxiong, Mr. Zhang Guofa, Mr. Yao Zuozhi 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.

– 86 –