COSCO SHIPPING Development Co., Ltd. — Capital/Financing Update 2019

Jan 10, 2019

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 SALE AND LEASEBACK ARRANGEMENT

THE SALE AND LEASEBACK ARRANGEMENT

The Board is pleased to announce that on 10 January 2019, the Vessel Sellers (indirect wholly owned subsidiaries of the Company), the Vessel Purchasers, the Vessel Owners and COSCO SHIPPING HK (a direct wholly owned subsidiary of the Company) have entered into the Sale and Leaseback Arrangement, pursuant to which, (i) the Vessel Sellers have agreed to sell, and the Vessel Purchasers have agreed to purchase, the Vessels at the aggregate Purchase Price of US$267 million (equivalent to approximately HK$2.09 billion); and (ii) the Vessel Owners have agreed to charter, and COSCO SHIPPING HK has agreed to take on charter, the Vessels for the Charter Period.

IMPLICATIONS UNDER THE LISTING RULES

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

INTRODUCTION

The Board is pleased to announce that on 10 January 2019, the Vessel Sellers (indirect wholly owned subsidiaries of the Company), the Vessel Purchasers, the Vessel Owners and COSCO SHIPPING HK (a direct wholly owned subsidiary of the Company) have entered into the Sale and Leaseback Arrangement, pursuant to which, (i) the Vessel Sellers have agreed to sell, and the Vessel Purchasers have agreed to purchase, the Vessels at the aggregate Purchase Price of US$267 million (equivalent to approximately HK$2.09 billion); and (ii) the Vessel Owners have agreed to charter, and COSCO SHIPPING HK has agreed to take on charter, the Vessels for the Charter Period.

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THE SALE AND LEASEBACK ARRANGEMENT

The principal terms of the Sale and Leaseback Arrangement are as follows:

Date

• 10 January 2019

Parties to the Memoranda of Agreement

• (i) the Vessel Sellers (as sellers); and

• (ii) the Vessel Purchasers (as purchasers).

Parties to the Bareboat Charters

• (i) the Vessel Owners (as owners); and

• (ii) COSCO SHIPPING HK (as charterer).

Purchase Price and payment

Pursuant to the Memoranda of Agreement, the Vessel Sellers have agreed to sell, and the Vessel Purchasers have agreed to purchase, the Vessels for the aggregate Purchase Price of US$267 million (equivalent to approximately HK$2.09 billion), subject to the terms and conditions thereunder.

The Purchase Price was determined after arm’s length negotiations between the Vessel Sellers and the Vessel Purchasers with reference to the market value of vessels of comparable size and year of built and the book value of the Vessels. The book value of the Vessels as at 31 December 2018 was approximately US$325 million (equivalent to approximately HK$2.55 billion).

The obligations of the Vessel Purchasers to purchase the Vessels and to make the payment of the Purchase Price are subject to certain conditions precedent that on or prior to the date of Delivery, among other things, the Vessel Purchasers shall be satisfied that, upon Delivery, COSCO SHIPPING HK, as charterer, will accept the Vessels and charter the Vessels from the Vessel Owners, as owners, in accordance with the terms and conditions of the Bareboat Charters.

The Vessels shall be immediately sold by the Vessel Purchasers to the Vessel Owners upon the terms and conditions of the Instalment Sale Agreements for the purpose of the Bareboat Charters.

Charter Hire

Pursuant to the Bareboat Charters, the Vessel Owners have agreed to charter, and COSCO SHIPPING HK has agreed to take on charter, the Vessels for the Charter Period.

COSCO SHIPPING HK shall, during the Charter Period, pay the Charter Hire to the Vessel Owners in arrears on the respective Payment Dates in accordance with the payment schedule set out in the Bareboat Charters.

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Based on LIBOR of approximately 2.78% as at 8 January 2019, the maximum aggregate amount of the Charter Hire payable by COSCO SHIPPING HK to the Vessel Owners is estimated to be approximately US$248 million (equivalent to approximately HK$1.94 billion).

The Charter Hire was determined after arm’s length negotiations between the Vessel Owners and COSCO SHIPPING HK with reference to the Purchase Price and the prevailing market practice.

Voluntary option to purchase

Pursuant to the Bareboat Charters, COSCO SHIPPING HK has the right, exercisable by irrevocable written notice to the Vessel Owners given not earlier than 18 months nor later than 12 months prior to the relevant Early Buy-Out Date, to purchase the Vessels upon such Early Buy-Out Date.

If the abovementioned notice is given by COSCO SHIPPING HK, the Charter Period will terminate on the relevant Early Buy-Out Date and COSCO SHIPPING HK will be obliged to pay to the Vessel Owners on the Early Buy-Out Date: (i) the relevant early buy-out price; (ii) all the Charter Hire then due and payable; and (iii) all other amounts then due and payable by COSCO SHIPPING HK under the Bareboat Charters or any other documents in connection with the Sale and Leaseback Arrangement.

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 Stock Exchange and the A Shares of which are listed on the Shanghai Stock Exchange. The Group is principally engaged in shipping and industry-related leasing businesses, manufacturing of containers and provision of investment and financial services.

INFORMATION ON THE PARTIES TO THE SALE AND LEASEBACK ARRANGEMENT

The Vessel Sellers

Each of the Vessel Sellers is a company incorporated in Hong Kong with limited liability and is a vessel holding company. As at the date of this announcement, each of the Vessel Sellers is an indirect wholly owned subsidiary of the Company.

The Vessel Purchasers

Each of the Vessel Purchasers is a corporation incorporated under the laws of the Republic of Panama and is a vessel holding company. As at the date of this announcement, each of the Vessel Purchasers is a wholly owned subsidiary of Financial Products Group.

COSCO SHIPPING HK

COSCO SHIPPING HK is a company incorporated in Hong Kong with limited liability and is principally engaged in vessel chartering and container leasing. As at the date of this announcement, COSCO SHIPPING HK is a direct wholly owned subsidiary of the Company.

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The Vessel Owners

Each of the Vessel Owners is a corporation formed under the laws of Japan with limited liability and is a vessel holding company. As at the date of this announcement, each of the Vessel Owners is a wholly owned subsidiary of Financial Products Group.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, each of the Vessel Purchasers, the Vessel Owners and Financial Products Group and their respective ultimate beneficial owners are third parties independent of the Company and its connected persons.

REASONS FOR AND BENEFITS OF THE SALE AND LEASEBACK ARRANGEMENT

The Sale and Leaseback Arrangement allows the Group to obtain additional financing with the Vessels and expands the financing channels of the Group. The proceeds from the Sale and Leaseback Arrangement are expected to be used for the general working capital of the Group.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Sale and Leaseback Arrangement and the transactions contemplated thereunder are fair and reasonable and the Sale and Leaseback Arrangement is in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

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

DEFINITIONS

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

• “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

• “Bareboat Charters” collectively, the four bareboat charters dated 10 January 2019 entered into between the Vessel Owners and COSCO SHIPPING HK, pursuant to which the Vessel Owners have agreed to charter, and COSCO SHIPPING HK has agreed to take on charter, the Vessels

• “Board” the board of directors of the Company

• “Charter Commencement Date” the date on which the Delivery occurs

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“Charter Hire” the instalments of charter hire payable on the Payment Dates by COSCO SHIPPING HK to the Vessel Owners pursuant to the Bareboat Charters

• “Charter Period”

the period commencing on the Charter Commencement Date until the relevant Early Buy-Out Date or, in the event that COSCO SHIPPING HK shall not have exercised its voluntary option to purchase the Vessels, the final Payment Date (being eight years and seven months commencing from the Charter Commencement Date), or if earlier the date of termination, subject to the terms of the Bareboat Charters

• “Company”

COSCO SHIPPING Development Co., Ltd.* (中遠海運發展股 份有限公司), a joint stock company established under the laws of the PRC with limited liability, the H Shares and A Shares of which are listed on the Main Board of the 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

• “COSCO SHIPPING HK”

COSCO SHIPPING Development (Hong Kong) Co., Ltd. (中遠海 運發展（香港）有限公司), a company incorporated in Hong Kong with limited liability and a direct wholly owned subsidiary of the Company

• “Delivery”

the time when:

• (i) the relevant Vessel Purchaser obtains title to the relevant Vessel under the relevant Memorandum of Agreement; and

• (ii) the relevant Vessel Owner accepts delivery of the relevant Vessel under the relevant Instalment Sale Agreement,

all of which shall occur simultaneously

• “Director(s)”

director(s) of the Company

• “Early Buy-Out Date”

either of (i) the date falling on the fourth anniversary of the Charter Commencement Date; or (ii) the date falling three months after the seventh anniversary of the Charter Commencement Date, or if such date is not a business day, the immediately preceding business day

• “Financial Products Group”

Financial Products Group Co., Ltd., a corporation formed under the laws of Japan with limited liability and the shares of which are listed on the Tokyo Stock Exchange (Stock Code: 7148)

• “Group”

the Company and its subsidiaries

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“H Share(s)”	the overseas listed foreign share(s) 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 Stock Exchange
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Instalment Sale Agreements”	collectively, the four instalment sale agreements dated 10 January
	2019 entered into between the Vessel Purchasers as sellers and the
	Vessel Owners as buyers in respect of the instalment sale of the
	Vessels
“LIBOR”	the London Interbank Offered Rate for the offering of deposits
	in US$ for a period of three months and, if such rate is less than
	zero, LIBOR is deemed to be zero
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“Memoranda of Agreement”	collectively, the four memoranda of agreement dated 10 January
	2019 entered into between the Vessel Sellers and the Vessel
	Purchasers, pursuant to which the Vessel Sellers have agreed
	to sell, and the Vessel Purchasers have agreed to purchase, the
	Vessels
“Payment Date(s)”	the date(s) of payment of the Charter Hire as specified in the
	Bareboat Charters
“PRC”	the People’s Republic of China which, for the purpose of
	this announcement, excludes Hong Kong, the Macau Special
	Administrative Region of the People’s Republic of China and
	Taiwan
“Purchase Price”	the aggregate consideration for the sale and purchase of the
	Vessels payable by the Vessel Purchasers to the Vessel Sellers
	under the Memoranda of Agreement, being US$267 million
	(equivalent to approximately HK$2.09 billion)
“RMB”	Renminbi, the lawful currency of the PRC
“Sale and Leaseback	the arrangement in relation to the sale and leaseback of the
Arrangement”	Vessels comprising, among other things, the Memoranda of
	Agreement and the Bareboat Charters
“Share(s)”	A Share(s) and H Share(s)
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

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“TEU” twenty-foot equivalent unit, 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 “US$” United States dollar(s), the lawful currency of the United States of America “Vessels” collectively, the four container vessels with a capacity of 10,000 TEU each “Vessel Owners” collectively, Ship No. 140 Co., Ltd., Ship No. 141 Co., Ltd., Ship No. 142 Co., Ltd. and Ship No. 143 Co., Ltd., each of which is a corporation formed under the laws of Japan with limited liability “Vessel Purchasers” collectively, FPG Shipholding Panama 48 S.A., FPG Shipholding Panama 49 S.A., FPG Shipholding Panama 50 S.A. and FPG Shipholding Panama 51 S.A., each of which is a corporation incorporated under the laws of the Republic of Panama “Vessel Sellers” collectively, CSCL Spring Shipping Co., Ltd., CSCL Summer Shipping Co., Ltd., CSCL Winter Shipping Co., Ltd. and CSCL Bohai Sea Shipping Co., Ltd., each of which is a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of the Company “%” per cent

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

Shanghai, the People’s Republic of China 10 January 2019

For the purpose of this announcement, translations of US$ into HK$ or vice versa have been calculated by using an exchange rate of US$1.00 equal to HK$7.84. 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. Liang Yanfeng, being non-executive Directors, and Mr. Cai Hongping, Ms. Hai Chi Yuet, Mr. Graeme Jack, Mr. Lu Jianzhong, Mr. Gu Xu and Ms. Zhang Weihua, 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.”.

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