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

May 26, 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)

DISCLOSEABLE TRANSACTION

CAPITAL CONTRIBUTION TO CHINA BOHAI BANK

THE CAPITAL CONTRIBUTION

The Board is pleased to announce that on 26 May 2017, CS Investment, a wholly-owned subsidiary of the Company, entered into the Capital Contribution Letter of Intent with China Bohai Bank, pursuant to which CS Investment has agreed to make a capital contribution of approximately RMB1,759 million (equivalent to approximately HK$1,987.67 million) (subject to adjustments) for the subscription of 584,307,425 ordinary shares of China Bohai Bank at the subscription price of RMB3.01 per share (subject to adjustments), subject to the terms and conditions set out therein. In addition, China Bohai Bank proposes to increase its capital by RMB15,005,602,500 (equivalent to approximately HK$16,956,330,825).

Upon completion of the Capital Contribution and the Capital Increase of China Bohai Bank, the equity interest of CS Investment in China Bohai Bank will decrease from approximately 13.67% to approximately 13.17%.

IMPLICATIONS UNDER THE LISTING RULES

As one or more applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Capital Contribution exceed 5% but are less than 25%, the Capital Contribution constitutes a discloseable transaction of the Company which is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

INTRODUCTION

The Board is pleased to announce that on 26 May 2017, CS Investment, a wholly-owned subsidiary of the Company, entered into the Capital Contribution Letter of Intent with China Bohai Bank, pursuant to which CS Investment has agreed to make a capital contribution of approximately RMB1,759 million (equivalent to approximately HK$1,987.67 million) (subject to adjustments) for the subscription of 584,307,425 ordinary shares of China Bohai Bank at the subscription price of RMB3.01 per share (subject to adjustments), subject to the terms and conditions set out therein. In addition, China Bohai Bank proposes to increase its capital by RMB15,005,602,500 (equivalent to approximately HK$16,956,330,825).

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Upon completion of the Capital Contribution and the Capital Increase of China Bohai Bank, the equity interest of CS Investment in China Bohai Bank will decrease from approximately 13.67% to approximately 13.17%.

THE CAPITAL CONTRIBUTION LETTER OF INTENT

The principal terms of the Capital Contribution Letter of Intent are as follows:

Date

26 May 2017

Parties

• (1) CS Investment; and

• (2) China Bohai Bank.

The Capital Contribution

China Bohai Bank proposes to increase its capital by RMB15,005,602,500 (equivalent to approximately HK$16,956,330,825) by issuing and allotting 4,985.25 million ordinary shares to its existing shareholders on the basis of 3.45 shares for every 10 shares in the existing subscribed capital of RMB14.45 billion of China Bohai Bank at the subscription price of RMB3.01 per share (subject to adjustments).

In this connection, CS Investment has agreed to make a capital contribution of approximately RMB1,759 million (equivalent to approximately HK$1,987.67 million) (subject to adjustments) for the subscription of 584,307,425 ordinary shares of China Bohai Bank at the subscription price of RMB3.01 per share (subject to adjustments), subject to the terms and conditions set out in the Capital Contribution Letter of Intent.

The proposed subscription of 584,307,425 ordinary shares of China Bohai Bank by CS Investment under the Capital Contribution represents approximately 11.72% of the total number of shares to be issued and allotted by China Bohai Bank under the Capital Increase of China Bohai Bank.

CS Investment will waive its right to make capital contribution proportionately under the Capital Increase of China Bohai Bank. Upon completion of the Capital Contribution and the Capital Increase of China Bohai Bank, the equity interest of CS Investment in China Bohai Bank will decrease from approximately 13.67% to approximately 13.17%. China Bohai Bank will continue to be accounted as an investment in associates in the consolidated financial statement of the Group.

The parties have agreed that the Capital Contribution and its terms shall be subject to the approval of the CBRC, the state-owned assets supervisory institution and other regulatory authorities pursuant to the relevant PRC laws and regulations.

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Consideration

The subscription price of RMB3.01 per share and the consideration for the Capital Contribution of approximately RMB1,759 million (equivalent to approximately HK$1,987.67 million) were determined after arm’s length negotiations between CS Investment and China Bohai Bank with reference to, among other things, the appraised value of China Bohai Bank as set out in the Valuation Report.

According to the Valuation Report prepared based on the income approach and in accordance with the relevant state-owned financial assets management requirements, the appraised value of the net asset value of China Bohai Bank as at 30 September 2016 was approximately RMB41,747,157,000 (equivalent to approximately HK$47,174,287,410), which was equivalent to approximately RMB3.01 per share.

The Valuation Report shall be filed with the state-owned assets supervision institution in accordance with the relevant requirements under the PRC laws and regulations. In the event that the abovementioned appraised value of the net asset value of China Bohai Bank is being adjusted during the filing process, the parties have agreed that the subscription price of RMB3.01 per share and the consideration for the Capital Contribution of approximately RMB1,759 million (equivalent to approximately HK$1,987.67 million) shall be adjusted accordingly.

The Capital Contribution will be funded by the internal resources of CS Investment.

Payment and conditions precedent

The consideration for the Capital Contribution shall be payable to China Bohai Bank by CS Investment on or before 29 September 2017, conditional upon the fulfilment of the following conditions:

• (a) CS Investment having signed other document(s) to replace the Capital Contribution Letter of Intent in respect of the Capital Contribution;

• (b) CS Investment having obtained all necessary internal approval (including but not limited to the approval from the Board and the Shareholders at the Shareholders’ meeting of the Company) in respect of the Capital Contribution;

• (c) China Bohai Bank having obtained all necessary internal approval (including but not limited to the approval from its board of directors and its shareholders at the shareholders’ meeting) in respect of the Capital Contribution;

• (d) the Capital Contribution having been approved by the CBRC, the state-owned assets supervisory institution and other regulatory authorities;

• (e) there shall not have occurred event which has material adverse effect on the overall financial condition, operating results, assets, business or other conditions of China Bohai Bank; and

• (f) there being no action or proceeding of any government agencies which restricts, stops, prohibits, invalidates or otherwise prevents or seeks to prevent the completion of the Capital Contribution.

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Termination

The Capital Contribution Letter of Intent shall automatically terminate upon the occurrence of any of the following events:

• (a) the parties having signed other document(s) to replace the Capital Contribution Letter of Intent in respect of the Capital Contribution;

• (b) the Capital Contribution not being approved by the shareholders of China Bohai Bank at the shareholders’ meeting; and

• (c) the Capital Contribution not having been approved by the CBRC, the state-owned assets supervisory institution and other regulatory authorities on or before 29 September 2017.

INFORMATION ON THE GROUP AND PARTIES TO THE CAPITAL CONTRIBUTION LETTER OF INTENT

Information on the Group

The Company is a joint stock company established under the laws of 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 CS Investment

CS Investment is a company established under the laws of the PRC with limited liability and is a wholly-owned subsidiary of the Company. It is principally engaged in container manufacturing and financial investment in certain financial institutions, ports and shipping logistic companies.

Information on China Bohai Bank

China Bohai Bank is a joint stock company established in the PRC with limited liability, and is principally engaged in the provision of a range of banking services and related financial services.

Based on the audited financial statement of China Bohai Bank prepared in accordance with the China Accounting Standards for Business Enterprises, the financial information of China Bohai Bank for the two years ended 31 December 2015 and 2016 was approximately as follows:

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		For the year ended
		31 December
	2015	2016
	(audited)	(audited)
	(RMB)	(RMB)
Profit before taxation and extraordinary items	7,134,650,000	7,997,224,000
	(equivalent to	(equivalent to
	approximately	approximately
	HK$8,062,155,000)	HK$9,036,863,000)
Profit after taxation and extraordinary items	5,688,512,000	6,473,428,000
	(equivalent to	(equivalent to
	approximately	approximately
	HK$6,428,018,560)	HK$7,314,973,640)

The audited net asset value and the audited total asset value of China Bohai Bank as at 31 December 2016 were approximately RMB41,463,367,000 (equivalent to approximately HK$46,853,605,000) and approximately RMB856,119,678,000 (equivalent to approximately HK$967,415,236,000), respectively.

According to the Valuation Report prepared based on the income approach and in accordance with the relevant state-owned financial assets management requirements, the appraised value of the net asset value of China Bohai Bank as at 30 September 2016 was RMB41,747,157,000 (equivalent to approximately HK$47,174,287,410).

REASONS FOR AND BENEFITS OF THE CAPITAL CONTRIBUTION

The Company considers China Bohai Bank as a valuable long-term investment, which has good long term prospects and development potentials in the banking sector in the foreseeable future. The Capital Contribution will provide additional working capital and enhance the competitiveness of China Bohai Bank. It is also in line with the strategic planning and development of the Group as an integrated financial services platform with leasing businesses.

In addition, the Capital Contribution will prevent a significant dilution of the equity interest of the Group in China Bohai Bank following completion of the Capital Increase of China Bohai Bank.

Based on the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Capital Contribution Letter of Intent and the transactions contemplated thereunder are fair and reasonable and the Capital Contribution is in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As one or more applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Capital Contribution exceed 5% but are less than 25%, the Capital Contribution constitutes a discloseable transaction of the Company which is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

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A director and senior management of COSCO SHIPPING, the indirect controlling shareholder of the Company, is also a director of China Bohai Bank. Save as aforementioned, to the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, China Bohai Bank and its ultimate beneficial owners are third parties independent of the Company and its connected persons under the Listing Rules.

GENERAL

China Bohai Bank is a connected person of the Company under the relevant PRC laws and regulations. Accordingly, the Capital Contribution constitutes a connected transaction of the Company and is subject to the Shareholders’ approval requirement under the relevant PRC laws and regulations.

The Company will seek the Shareholders’ approval pursuant to the relevant PRC laws and regulations for the Capital Contribution and the transactions contemplated thereunder at the AGM.

DEFINITIONS

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

“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
“AGM”	the forthcoming annual general meeting of the Company to be
	convened at 1:30 p.m. on Tuesday, 20 June 2017 at Holiday
	Inn Shanghai Jinxiu, No.399 Jinzun Road, Pudong New Area,
	Shanghai, the People’s Republic of China (or any adjournment
	thereof) to consider and, if thought fit, approve, among other
	things, the Capital Contribution Letter of Intent and the
	transactions contemplated thereunder
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors of the Company
“Capital Contribution”	the proposed capital contribution by CS Investment of
	approximately RMB1,759 million (equivalent to approximately
	HK$1,987.67 million) (subject to adjustments) for the subscription
	of 584,307,425 ordinary shares of China Bohai Bank at the
	subscription price of RMB3.01 per share (subject to adjustments)
	pursuant to the Capital Contribution Letter of Intent
“Capital Contribution Letter	the capital contribution letter of intent entered into between CS
of Intent”	Investment and China Bohai Bank on 26 May 2017 in respect of
	the Capital Contribution

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“Capital Increase	the proposed capital increase of China Bohai Bank in the
of China Bohai Bank”	amount of RMB15,005,602,500 (equivalent to approximately
	HK$16,956,330,825) by issuing and allotting 4,985.25 million
	ordinary shares to its existing shareholders on the basis of 3.45
	shares for every 10 shares in the existing subscribed capital of
	RMB14.45 billion of China Bohai Bank at the subscription price
	of RMB3.01 per share (subject to adjustments)
“CBRC”	the China Banking Regulatory Commission (中國銀行業監督管
	理委員會)
“China Bohai Bank”	China Bohai Bank Co., Ltd.#(渤海銀行股份有限公司), a joint
	stock company incorporated in the PRC with limited liability
“Company”	COSCO SHIPPING Development Co., Ltd.* (中遠海運發展股份
	有限公司), a joint stock limited company established in the PRC,
	the H Shares and A Shares of which are listed on the Main Board
	of the Hong Kong Stock Exchange (Stock Code: 2866) and the
	Shanghai Stock Exchange (Stock Code: 601866), respectively
“connected person(s)”	has the meaning ascribed to it under the Listing Rules
“controlling shareholder”	has the meaning ascribed to it under the Listing Rules
“COSCO SHIPPING”	China COSCO SHIPPING Corporation Limited#(中國遠洋海
	運集團有限公司), a PRC state-owned enterprise and an indirect
	controlling shareholder of the Company
“CS Investment”	China Shipping Investment Co., Ltd.#(中海集團投資有限公司),
	a company established under the laws of the PRC with limited
	liability and a wholly-owned subsidiary of the Company
“Director(s)”	director(s) of the Company
“Group”	the Company and its subsidiaries
“H Share(s)”	the overseas listed foreign shares in the ordinary share capital of
	the Company with a par value of RMB1.00 each, which are listed
	on the Main Board of the Hong Kong Stock Exchange
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited

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“PRC”	the People’s Republic of China excluding, for the purpose of this
	announcement, Hong Kong, the Macau Special Administrative
	Region of the PRC and Taiwan
“RMB”	Renminbi, the lawful currency of the PRC
“Share(s)”	A Share(s) and H Share(s)
“Shareholder(s)”	holder(s) of Share(s)
“Valuation Report”	the valuation report dated 9 March 2017 prepared by an
	independent valuer in relation to China Bohai Bank
“%”	per cent

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

Shanghai, the People’s Republic of China 26 May 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$1.13. 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, Mr. Tsang Hing Lun, 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 Development Co., Ltd.”.

• For identification purpose only.

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