Dida Inc. — M&A Activity 2001

Dec 24, 2001

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

CHINA SHIPPING DEVELOPMENT COMPANY LIMITED

中海發展股份有限公司

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

CONNECTED TRANSACTION

The board (the “Board”) of directors (the “Directors”) of China Shipping Development Company Limited (the “Company”) is pleased to announce that the Company has entered into a transfer of interests agreement (the “Transfer of Interests Agreement”) on 21 December 2001 with Shanghai Shipping (Group) Company (上海海運(集團)公司) (“Shanghai Shipping”), a wholly-owned subsidiary of China Shipping (Group) Company (the “Group Company”), being the controlling shareholder of the Company as defined under The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Pursuant to the Transfer of Interests Agreement, the Company has agreed to purchase and Shanghai Shipping has agreed to sell 95% equity interests in Hainan Hai Xiang Maritime Industrial Corporation (海南海翔航運實業公司) (“Hai Xiang”) (“Sale Interests”), which is a wholly-owned subsidiary of Shanghai Shipping for a total consideration of RMB49,368,700 (approximately HK$46,139,000).

Shanghai Shipping is a connected person of the Company for the purposes of the Listing Rules. Therefore, the transfer of the Sale Interests from Shanghai Shipping to the Company pursuant to the Transfer of Interests Agreement constitutes a connected transaction of the Company for the purposes of the Listing Rules. As the total consideration for this connected transaction is less than the limit specified in Rule 14.25(1)(ii) of the Listing Rules, only certain specified details of the connected transaction are required to be disclosed in this announcement and the Company's next annual report and accounts.

The terms and conditions of the Transfer of Interests Agreement have been negotiated on an arm's length basis and are normal commercial terms. The Board (including the independent non-executive Directors) considers the above connected transaction to be fair and reasonable, and is in the interests of the Company and the shareholders of the Company, other than the Group Company and its associates (as defined in the Listing Rules) (the “Independent Shareholders”), taken as a whole.

Particulars of the Transfer of Interests Agreement are set forth below, and will also be disclosed in the Company's next annual report and accounts.

1. The Transfer of Interests Agreement dated 21 December 2001

1.1 Parties

Vendor:	Shanghai Shipping
Purchaser:	The Company

1.2 Transfer of the Sale Interests

Pursuant to the Transfer of Interests Agreement, the Company has agreed to purchase and Shanghai Shipping has agreed to sell the Sale Interests.

1.3 Purchase price and payment terms

Pursuant to the Transfer of Interests Agreement, the Company will pay to Shanghai Shipping a sum of RMB49,368,700 (approximately HK$46,139,000) as consideration for the transfer of the Sale Interests. Such consideration was determined based on an independent asset valuation of Hai Xiang as at 30 September 2001 conducted by Shanghai Zhonghua Asset Valuation Company Limited (上海眾華資產評估有限公司) (the “Independent Valuation”). The consideration will be paid by the Company to Shanghai Shipping in cash within one calendar month of the completion of the transfer of the Sale Interests pursuant to the Transfer of Interests Agreement. The registration for the transfer of the Sale Interests shall be arranged for by Shanghai Shipping within three days of the execution of the Transfer of Interests Agreement, with the assistance of the Company, where necessary.

1.4 Information on Hai Xiang

Hai Xiang is a company incorporated in Hainan Province, the People’s Republic of China (the “PRC”) on 8 November 1993, with a registered share capital of RMB51,000,000. Its legal address is Block C7, Binjing Garden Villa, Shugang Road, Haikou, Hainan Province, the PRC. Its principal business is transportation of goods and refined oil along the coast of the PRC and between ports from the mid stream section to down stream section of Yangtze River. According to the Independent Valuation, the net asset value of Hai Xiang as at 30 September 2001 was RMB51,967,045.56.

1.5 Other significant terms

Shanghai Shipping has warranted to the Company that the information disclosed by it to the Company in respect of the operations of Hai Xiang are true and complete without any concealment or omission. In addition, Shanghai Shipping has warranted to the Company that it is the legal holder of all the equity interests in Hai Xiang and there are no defects in respect of its shareholdings or its rights in Hai Xiang.

Shanghai Shipping has further warranted to the Company that, during the period from the date of execution of the Transfer of Interests Agreement until the date of the completion of the transfer of the Sale Interests, it shall not transfer or pledge any of its equity interests in Hai Xiang to any third party, and its equity interests in Hai Xiang will not be frozen, auctioned or sold off by any of the PRC state departments.

After the execution of the Transfer of Interests Agreement, if Hai Xiang is found to have any actual and/or contingent liabilities which have not been previously disclosed to the Company, the Company shall have the right to demand Shanghai Shipping to provide security (the “Security”) to the Company, which has a monetary value equivalent to the sum of such actual and contingent liabilities (the “Compensation”). If Hai Xiang becomes liable to repay any third party due to such actual and/or contingent liabilities, the Company shall have the right to demand Shanghai Shipping for payment of the Compensation which may be made by:

1. reducing the amount of consideration to be paid by the Company to Shanghai Shipping for the transfer of the Sale Interests;

2. Shanghai Shipping refunding to the Company an amount equivalent to the Compensation; or

3. the Company realising the Security provided by Shanghai Shipping.

The Company shall inject any of the Compensation received into Hai Xiang.

The transfer of the Sale Interests will not affect any employment relations between Hai Xiang and its employees.

Upon the completion of the transfer of the Sale Interests, it is agreed by both the Company and Shanghai Shipping that Hai Xiang shall be converted into a company with limited liability, as required by the PRC Company Law.

Any fees payable to any of the PRC state departments in connection with the transfer of the Sale Interests shall be paid in accordance with the stipulations of the relevant PRC laws and regulations, and if the PRC laws and regulations do not regulate such matter, the relevant fees shall be shared equally by the Company and Shanghai Shipping pursuant to the Transfer of Interests Agreement.

The Transfer of Interests Agreement may be terminated upon occurrence of any of the following events:

1. if Shanghai Shipping breaches any of the aforementioned warranties or fails to comply with its obligations in connection with the aforementioned actual and contingent liabilities;

2. if the Company fails to pay to Shanghai Shipping the consideration for the transfer of the Sale Interests after the elapse of one calender month from the last payment due date (being the last day of one calendar month from the completion of the transfer of the Sale Interests as explained in paragraph 1.3 above); or

3. if the transfer of the Sale Interests cannot be realised due to any breach of the Transfer of Interests Agreement by the Company or Shanghai Shipping.

Any dispute arising from the Transfer of Interests Agreement shall be settled through reasonable discussions between the Company and Shanghai Shipping. If the dispute remains unresolved, either party may institute action at the courts at the place of the legal address of Hai Xiang.

1. Reasons for, and benefits of, the Transfer of Interests Agreement

As disclosed in the 2000 annual report of the Company, the Company and its subsidiaries (the “Group”) are steadily developing its business on a constant basis. The Board believes that the acquisition by the Company of the Sale Interests will enhance and benefit its business as a whole.

1. General

The business of the Company mainly involves coastal, ocean and Yangtze River cargo transportation, oil transportation, international passenger transportation, chartering, cargo agency and cargo transportation agency.

The audited loss before taxation and extraordinary items of Hai Xiang, attributable to the Sale Interests which are subjected to be transferred to the Company, for the two financial years ended 31 December 2000, prepared in accordance with the relevant PRC accounting rules and regulations, were RMB35,038 and RMB161,873 respectively. The audited loss after taxation and extraordinary items of Hai Xiang, attributable to the Sale Interests which are subjected to be transferred to the Company, for the two financial years ended 31 December 2000, prepared in accordance with the relevant PRC accounting rules and regulations, were RMB33,286 and RMB153.779 respectively. The audited net asset value of Hai Xiang for the financial year ended 31 December 2000 was RMB50,411,829. Despite losses made by Hai Xiang in the past two financial years, Hai Xiang has been preforming well recently and started to produce profits according to the Independent Valuation.

The Company and Shanghai Shipping have agreed that, after the completion of the Transfer of Interests Agreement, the composition of the board of directors of Hai Xiang shall be made up in proportion to the shareholdings of the Company and Shanghai Shipping in Hai Xiang, and any profit or loss from the operations of Hai Xiang shall be divided between the Company and Shanghai Shipping in proportion to their respective shareholdings in Hai Xiang.

The consideration for the transfer of the Sale Interests shall be financed by the Company’s own funds.

The Group Company holds approximately 56.45 percent of the issued share capital of the Company, and hence is the controlling shareholder of the Company. Hai Xiang is a wholly-owned subsidiary of Shanghai Shipping which in turn is a wholly-owned subsidiary of the Group Company. Therefore, Shanghai Shipping is a connected person of the Company for the purposes of the Listing Rules.

The aggregate consideration of this connected transaction is RMB49,368,700 (approximately HK$46,739,000). As the total consideration for this transaction is less than the limit specified in Rule 14.25(1)(ii) of the Listing Rules, such transaction does not require the approval of the Independent Shareholders and only certain specified details of the connected transaction are required to be disclosed in this announcement and the Company's next annual report and accounts. The terms and conditions of the Transfer of Interests Agreement have been negotiated on an arm's length basis and are normal commercial terms. The Board (including the independent non-executive Directors) considers the above connected transaction to be fair and reasonable, and is in the interests of the Company and the Independent Shareholders, taken as a whole.

By order of the Board
China Shipping Development Company Limited
Ye YumangCompany SecretaryShanghai, the PRC
21 December 2001

Note: Unless otherwise specified, conversion of HK$ into RMB is based on the exchange rate of HK$1.00 = RMB1.07

Please also refer to the published version of this announcement in the Hong Kong iMail.