COSCO SHIPPING Development Co., Ltd. — Capital/Financing Update 2017

Oct 30, 2017

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

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中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd.*

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

(Stock Code: 02866)

CONNECTED TRANSACTIONS SUPERVISION TECHNICAL SERVICE AGREEMENTS

THE SUPERVISION TECHNICAL SERVICE AGREEMENTS

The Board is pleased to announce that, on 30 October 2017, the Company, COSCO SHIPPING Lines and COSCO Mercury entered into the Supervision Technical Service Agreements, pursuant to which the Company has agreed to provide supervision technical services to COSCO SHIPPING Lines and COSCO Mercury in respect of the Vessels.

The aggregate technical service fees payable to the Company for its provision of an aggregate of 826 man-months of supervision technical services during the initial service terms under the Supervision Technical Service Agreements is RMB34,431,084 (equivalent to approximately HK$40,284,368), which is subject to adjustments with reference to the actual man-months incurred pursuant to the terms of the Supervision Technical Service Agreements.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, COSCO SHIPPING and its associates control or are entitled to exercise control over the voting rights in respect of 4,458,195,175 A Shares and 100,944,000 H Shares, representing approximately 39.02% of the total issued share capital of the Company. Accordingly, COSCO SHIPPING is an indirect controlling shareholder of the Company and therefore a connected person of the Company. As COSCO SHIPPING is the indirect controlling shareholder of COSCO SHIPPING Holdings and each of COSCO SHIPPING Lines and COSCO Mercury is a wholly-owned subsidiary of COSCO SHIPPING Holdings, each of COSCO SHIPPING Lines and COSCO Mercury is an associate of COSCO SHIPPING and therefore a connected person of the Company.

As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules exceed 0.1% but are less than 5%, the entering into of the Supervision Technical Service Agreements and the transactions contemplated thereunder constitute connected transactions of the Company which are subject to the reporting and announcement requirements but are exempt from independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

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INTRODUCTION

The Board is pleased to announce that, on 30 October 2017, the Company, COSCO SHIPPING Lines and COSCO Mercury entered into the Supervision Technical Service Agreements, pursuant to which the Company has agreed to provide supervision technical services to COSCO SHIPPING Lines and COSCO Mercury in respect of the Vessels.

THE SUPERVISION TECHNICAL SERVICE AGREEMENTS

The principal terms of each of the Supervision Technical Service Agreements are as follows:

Date: Parties:

30 October 2017

• (1) the Company; (2) COSCO SHIPPING Lines; and

• (3) COSCO Mercury.

Subject matter:

Pursuant to the Supervision Technical Service Agreement, the Company shall send supervision personnel with on-site supervision experience to complete the following on-site supervision work in respect of the relevant Vessels based on the shipbuilding contracts, technical specifications, relevant drawings and relevant professional standards:

• (1) supervising the implementation of the shipbuilder in accordance with the relevant shipbuilding contracts and drawings;

• (2) conducting quality inspection on the storage, assembly, manufacturing, testing and other aspects of the production process of the shipbuilder and its subcontractors so as to ensure that the requirements under the relevant shipbuilding contracts and standards are met; and

• (3) preparing supervision reports and daily records as required by COSCO SHIPPING Lines.

Service term:

Please refer to the sub-section headed “Specific terms of the Supervision Technical Service Agreements” below for the respective initial service term under each of the Supervision Technical Service Agreements.

During the initial service terms, the Company will provide an aggregate of 826 man-months of supervision technical services under the Supervision Technical Service Agreements.

The initial service term is subject to extension pursuant to the terms of the Supervision Technical Service Agreement.

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Technical service fees:

Pursuant to the Supervision Technical Service Agreements, the Company shall be entitled to receive from either COSCO SHIPPING Lines or COSCO Mercury a technical service fee, which shall be inclusive of all expenses associated with the supervision work of the supervision personnel including wages, personal injury insurance and travelling expenses.

The aggregate technical service fees payable to the Company for its provision of an aggregate of 826 man-months of supervision technical services during the initial service terms under the Supervision Technical Service Agreements is RMB34,431,084 (equivalent to approximately HK$40,284,368), which is subject to adjustments with reference to the actual man-months incurred pursuant to the terms of the Supervision Technical Service Agreements.

Please refer to the sub-section headed “Specific terms of the Supervision Technical Service Agreements” below for the respective technical service fee payable to the Company under each of the Supervision Technical Service Agreements.

The amount of the technical service fees was determined after arm’s length negotiation between the parties with reference to (i) the prevailing market rate for services of similar nature; (ii) the estimated costs of the Company to provide the supervision technical services; and (iii) the historical expenses incurred by the Company in respect of the supervision of the construction of the Vessels.

Payment term:

The technical service fee payable under each of the Supervision Technical Service Agreements shall be paid by either COSCO SHIPPING Lines or COSCO Mercury to the Company in the following manner:

• (1) 50% of the technical service fee shall be paid within 30 working days of the date of the relevant Supervision Technical Service Agreement; and

• (2) 50% of the technical service fee shall be paid within 30 working days of the end of the initial service term under the relevant Supervision Technical Service Agreement.

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Specific terms of the Supervision Technical Service Agreements

A summary of the specific terms of each of the Supervision Technical Service Agreements is set out below:

Supervision Technical		Number of	Technical
Service Agreements	Initial service term	man-months	service fee
21,000 TEU Supervision	Ending on 30 June 2019	318	RMB12,436,400
Technical Service Agreement
13,500 TEU Supervision	Ending on 31 December 2018	241	RMB11,801,317
Technical Service Agreement I
13,500 TEU Supervision	Ending on 31 December 2018	267	RMB10,193,367
Technical Service Agreement II

REASONS FOR AND BENEFITS OF ENTERING INTO THE SUPERVISION TECHNICAL SERVICE AGREEMENTS

The supervision work in relation to the construction of the Vessels has been undertaken by the supervision personnel of the Company prior to the assignment and novation of the relevant shipbuilding contracts for the construction of the Vessels by the Group to COSCO Mercury, further details of which are set out in the announcement of the Company dated 4 May 2017 and the circular of the Company dated 31 May 2017. As the supervision personnel of the Company are familiar with the specifications and construction progress of the Vessels, the parties consider that it would be more efficient to retain the Company to provide the supervision technical services in respect of the Vessels following completion of the aforementioned assignment and novation.

In addition, the entering into of the Supervision Technical Service Agreements allows the Company to generate additional revenue, which will facilitate the overall business development of the Company.

The terms of each of the Supervision Technical Service Agreements were agreed after arm’s length negotiations among the parties thereto. The Board (including the independent non-executive Directors) considers that the terms of each of the Supervision Technical Service Agreements and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole. As stated in the section headed “Implications under the Listing Rules”, all the executive Directors and non-executive Directors have abstained from voting on the relevant Board resolutions approving the Supervision Technical Service Agreements and the transactions contemplated thereunder.

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INFORMATION ON THE GROUP AND THE PARTIES TO SUPERVISION TECHNICAL SERVICE AGREEMENTS

Information on the Company and the Group

The Company is a joint stock limited company incorporated in the PRC with limited liability, the H Shares of which are listed on the Main Board of the Hong Kong Stock Exchange and the A Shares of which are listed on the Shanghai Stock Exchange.

The Group is principally engaged in providing integrated financial services with diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing, supply chain finance, shipping insurance, logistic infrastructure investment and other financial assets investment services.

Information on COSCO SHIPPING Lines

COSCO SHIPPING Lines is a company established under the laws of the PRC with limited liability and is a wholly-owned subsidiary of COSCO SHIPPING Holdings. It is principally engaged in container shipping.

Information on COSCO Mercury

COSCO Mercury is a company incorporated in the Cayman Islands with limited liability and is a wholly-owned subsidiary of COSCO SHIPPING Holdings. COSCO Mercury and its subsidiaries are principally engaged in the leasing of vessels.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, COSCO SHIPPING and its associates control or are entitled to exercise control over the voting rights in respect of 4,458,195,175 A Shares and 100,944,000 H Shares, representing approximately 39.02% of the total issued share capital of the Company. Accordingly, COSCO SHIPPING is an indirect controlling shareholder of the Company and therefore a connected person of the Company. As COSCO SHIPPING is the indirect controlling shareholder of COSCO SHIPPING Holdings and each of COSCO SHIPPING Lines and COSCO Mercury is a wholly-owned subsidiary of COSCO SHIPPING Holdings, each of COSCO SHIPPING Lines and COSCO Mercury is an associate of COSCO SHIPPING and therefore a connected person of the Company.

As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules exceed 0.1% but are less than 5%, the entering into of the Supervision Technical Service Agreements and the transactions contemplated thereunder constitute connected transactions of the Company which are subject to the reporting and announcement requirements but are exempt from independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

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Ms. Sun Yueying, Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, all being executive Directors, hold directorship(s) or act as senior management in China Shipping and its associates, and Mr. Feng Boming, Mr. Huang Jian and Mr. Chen Dong, all being non-executive Directors were nominated by China Shipping to the Board. Accordingly, Ms. Sun Yueying, Mr. Wang Daxiong, Mr. Liu Chong, Mr. Xu Hui, Mr. Feng Boming, Mr. Huang Jian and Mr. Chen Dong have therefore abstained from voting on the relevant Board resolutions approving the Supervision Technical Service Agreements and the transactions contemplated thereunder. Save as aforementioned, none of the other Directors has a material interest in the Supervision Technical Service Agreements and the transactions contemplated thereunder and hence no other Director has abstained from voting on such Board resolutions.

DEFINITIONS

Unless the context requires otherwise, capitalized terms used in this announcement shall have the meanings as follow:

• “13,500 TEU Supervision Technical Service Agreement I”

• the supervision technical service agreement entered into between the Company, COSCO SHIPPING Lines and COSCO Mercury on 30 October 2017 in respect of the provision of supervision technical services by the Company to COSCO SHIPPING Lines and COSCO Mercury for the three container vessels with a capacity of 13,500 TEU each (No. H3027/ H3029/ H3031), which are under construction

• “13,500 TEU Supervision Technical Service Agreement II”

• the supervision technical service agreement entered into between the Company, COSCO SHIPPING Lines and COSCO Mercury on 30 October 2017 in respect of the provision of supervision technical services by the Company to COSCO SHIPPING Lines and COSCO Mercury for the five container vessels with a capacity of 13,500 TEU each (No. H3025/ H3026/ H3028/ H3030/ H3032), which are under construction

• “21,000 TEU Supervision Technical Service Agreement”

• the supervision technical service agreement entered into between the Company, COSCO SHIPPING Lines and COSCO Mercury on 30 October 2017 in respect of the provision of supervision technical services by the Company to COSCO SHIPPING Lines and COSCO Mercury for the six container vessels with a capacity of 21,000 TEU each (No. H1416/ H1417/ H1420/ H1427/ H1428/ H1429), which are under construction

• “A Share(s)”

• the domestic share(s) in the ordinary share capital of the Company with a par value of RMB1.00 each, which are listed on the Shanghai Stock Exchange

• “associate”

• has the meaning ascribed to it under the Listing Rules

• “Board”

• the board of directors of the Company

• “China Shipping”

China Shipping (Group) Company[#] (中國海運（集團）總公司), a PRC state-owned enterprise, the controlling shareholder of the Company and a wholly-owned subsidiary of COSCO SHIPPING

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“Company”

COSCO SHIPPING Development Co., Ltd.* (中遠海運發展股份 有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed on Main Board of the Hong Kong Stock Exchange (Stock Code: 2866) and the Shanghai Stock Exchange (Stock Code: 601866), respectively

“COSCO SHIPPING” China COSCO SHIPPING Corporation Limited[#] (中國遠洋海 運集團有限公司), a PRC state-owned enterprise and an indirect controlling shareholder of the Company “COSCO SHIPPING COSCO SHIPPING Holdings Co., Ltd.[#] (中遠海運控股股份有限 Holdings” 公司), a joint stock limited company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 1919) and the Shanghai Stock Exchange (Stock Code: 601919), respectively

“COSCO SHIPPING COSCO SHIPPING Lines Co., Ltd.[#] (中遠海運集裝箱運輸 Lines” 有限公司), a company established under the laws of the PRC with limited liability and a wholly-owned subsidiary of COSCO SHIPPING Holdings

“COSCO Mercury” COSCO (Cayman) Mercury Co., Ltd., a company incorporated in the Cayman Islands with limited liability and a wholly-owned subsidiary of COSCO SHIPPING Holdings “connected person” has the meaning ascribed to it under the Listing Rules “controlling shareholder” has the meaning ascribed to it under the Listing Rules “Director(s)” director(s) of the Company “Group” the Company and its subsidiaries “H Share(s)” the overseas listed foreign shares in the ordinary share capital of the Company with a par value of RMB1.00 each, which are listed on Main Board of the Hong Kong Stock Exchange “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited “Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited “percentage ratios” has the meaning ascribed to it under the Listing Rules

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“PRC” the People’s Republic of China, and for the purpose of this announcement only, excluding Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan “RMB” Renminbi, the lawful currency of the PRC “Share(s)” A Share(s) and H Share(s) “Shareholder(s)” holder(s) of the Share(s) “Supervision Technical collectively, the 13,500 TEU Supervision Technical Service Service Agreements” Agreement I, the 13,500 TEU Supervision Technical Service Agreement II and the 21,000 TEU Supervision Technical Service Agreement “TEU” twenty-foot equivalent units, a standard unit of measurement of the volume of a container with a length of 20 feet, height of eight feet and six inches and width of eight feet “Vessels” collectively, the six container vessels with a capacity of 21,000 TEU each (No. H1416/ H1417/ H1420/ H1427/ H1428/ H1429) and the eight container vessels with a capacity of 13,500 TEU each (No. H3025/ H3026/ H3027/ H3028/ H3029/ H3030/ H3031/ H3032), which are under construction “%” per cent

By order of the Board COSCO SHIPPING Development Co., Ltd. Yu Zhen Company Secretary

Shanghai, the People’s Republic of China 30 October 2017

For the purpose of this announcement, translations of RMB into HK$ or vice versa have been calculated by using an exchange rate of RMB1.00 equal to HK$1.17. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amounts were, may have been or will be exchanged at such rate or any other rates or at all.

As at the date of this announcement, the Board comprises Ms. Sun Yueying, Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, being executive Directors, Mr. Feng Boming, Mr. Huang Jian and Mr. Chen Dong, being non-executive Directors, and Mr. Cai Hongping, Ms. Hai Chi Yuet and Mr. Graeme Jack, being independent non-executive Directors.

• The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Developments Co., Ltd.”.

For identification purposes only.

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