MAJOR TRANSACTION FINANCIAL ASSISTANCE ...sinotranship.sinotrans-csc.com/module/download/downfile...“Hai Kuo Companies” Hai Kuo Shipping 1601 Limited, Hai Kuo Shipping 1602 Limited,

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should

consult your stockbroker or other registered dealer in securities, bank manager, solicitor,

professional accountant or other professional adviser.

If you have sold or transferred all your shares in Sinotrans Shipping Limited, you should at once

hand this circular, together with the enclosed form of proxy, to the purchasers or transferees or to

the bank, stockbroker or other agent through whom the sale was effected for transmission to the

purchasers or transferees.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take

no responsibility for the contents of this circular, 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 circular.

(Incorporated in Hong Kong with limited liability)

(Stock Code: 368)

MAJOR TRANSACTIONFINANCIAL ASSISTANCE

PROVISION OF GUARANTEES TO JOINT VENTURE COMPANIES

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

15 February 2017

Page

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . I-1

APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . II-1

CONTENTS

In this circular, the following expressions have the following meanings unless the context

requires otherwise:

“Assignment Agreements” the five assignment agreements and assignment payment

letters all dated 12 December 2016 entered into between

each of the JV Companies and each of the Hai Kuo

Companies in relation to, amongst other things, the

assignment of each JV Company’s rights and interests

under the Shipbuilding Contracts to each Hai Kuo

Company

“Bareboat Charters” the five bareboat charter agreements all dated 12 December

2016 in respect of the Vessels made between each Hai Kuo

Company as owner and each JV Company as a bareboat

charterer

“Board” the board of Directors

“Charter Period” the period commencing from the delivery of each Vessel

and continues for a period of 144 months thereafter

pursuant to the Bareboat Charters

“CLNG” China LNG Shipping (Holdings) Limited, a company

incorporated in Hong Kong with limited liability

“Company” Sinotrans Shipping Limited (中外運航運有限公司), a

company incorporated in Hong Kong with limited liability

and the Shares of which are listed on the Stock Exchange

“Daewoo” Daewoo Shipbuilding & Marine Engineering Co., Ltd., a

company incorporated in the Republic of Korea with

limited liability

“Directors” directors of the Company

“Dynagas” Dynagas Holding Ltd, a company incorporated in the

Republic of the Marshall Islands with limited liability

“Group” the Company and its subsidiaries

“Guarantees” the five guarantees all dated 12 December 2016 entered

into by the Company in favour of each Hai Kuo Company

for the provision of guarantee in respect of each JV

Company’s obligations under each of the Bareboat

Charters and other ancillary security documents

DEFINITIONS

– 1 –

“Hai Kuo Companies” Hai Kuo Shipping 1601 Limited, Hai Kuo Shipping 1602

Limited, Hai Kuo Shipping 1603 Limited, Hai Kuo

Shipping 1605 Limited and Hai Kuo Shipping 1606

Limited, each of which is a special purpose vehicle

incorporated in Republic of Cyprus with limited liability,

and wholly-owned by a state-owned financial

conglomerate

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“Hong Kong” the Hong Kong Special Administrative Region of the

People’s Republic of China

“JV Agreements” the five joint venture agreements dated 21 December 2015

entered into between (1) the Company; (2) Sinotrans LNG;

(3) Dynagas; (4) CLNG; and (5) each of the JV Companies,

in relation to, amongst other things, the operation of each

of the five JV Companies

“JV Companies” Arctic LNG 1 Ltd., Arctic LNG 2 Ltd., Arctic LNG 3 Ltd.,

Arctic LNG 4 Ltd. and Arctic LNG 5 Ltd., each of which is

incorporated in the Republic of the Marshall Islands and

re-domiciled in Cyprus with limited liability, and owned as

to 49% by Dynagas, 25.5% by CLNG and 25.5% by the

Group

“Latest Practicable Date” 10 February 2017, being the last practicable date before the

printing of this circular for the purpose of ascertaining

information for inclusion in this circular

“Listing Rules” the Rules Governing the Listing of Securities on the Stock

Exchange

“LNG” liquefied natural gas

“Majority Shareholder” Sinotrans Shipping (Holdings) Limited, a company

incorporated in the British Virgin Islands with limited

liability, holding approximately 65.13% of the total issued

share capital of the Company as at the Latest Practicable

Date

“Negative Pledges” the five negative pledges over shares executed by Sinotrans

LNG in favour of each Hai Kuo Company

DEFINITIONS

– 2 –

“Novation Agreements” the five novation agreements all dated 30 July 2015 made

between Yamal, the Shipbuilders, DY Shipping Limited

and each of the JV Companies in respect of the

Shipbuilding Contracts

“Novation Payment Letters” the five novation letters all dated 21 December 2015 and

entered into between Sinotrans LNG, CLNG, Dynagas,

Yamal and each of the JV Companies, in relation to,

amongst other things, the payment by the JV Companies to

Yamal in connection with the Novation Agreements and the

guarantee of the payment thereof by each of the JV

Companies, further details of which are set out in the

Company’s announcement dated 21 December 2015

“PRC” the People’s Republic of China, which for the purpose of

this circular, excludes Hong Kong, the Macau Special

Administrative Region and Taiwan

“Purchase Price” equivalent to the shipbuilding price payable under the

Shipbuilding Contracts

“SBC Guarantees” the five deeds of corporate guarantee all dated 21

December 2015 and executed by Sinotrans LNG in favour

of Daewoo in connection with the obligations of each of the

JV Companies under each of the Shipbuilding Contracts

“Share(s)” ordinary share(s) of the Company

“Shareholder(s)” the registered holder(s) of the Shares

“Shareholder Loan Novation

Agreements”

the five shareholder debt novation agreements all dated 21

December 2015 entered into between Dynagas, Sinotrans

LNG, CLNG and each of the JV Companies in respect of

the assignment of the shareholder’s loan previously

advanced to the JV Companies by Dynagas in accordance

with the shareholders’ interest in the JV Companies

“Shipbuilders” Daewoo and DY Destiny Limited, a company incorporated

in the Republic of the Marshall Islands with limited

liability

DEFINITIONS

– 3 –

“Shipbuilding Contracts” the five shipbuilding contracts all dated 29 December 2014

entered into between the Yamal (as purchaser), Daewoo and

DY Shipping Limited (as shipbuilders), as novated to each

of the JV Companies (as purchaser) by Yamal and to DY

Destiny Limited (as a shipbuilder) by DY Shipping Limited

pursuant to the Novation Agreements

“Sinotrans LNG” Sinotrans Shipping LNG Limited, a company incorporated

in Hong Kong with limited liability, a wholly-owned

subsidiary of the Company

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“TC Guarantees” the five deeds of owner’s guarantee all dated 21 December

2015 and executed by Sinotrans LNG in favour of Yamal

respectively in connection with the obligations of each of

the JV Companies, inter alia, under each of the Time

Charters

“Time Charters” the five time charter agreements all dated 12 August 2015

in respect of the Vessels made between each of the JV

Companies as owner and Yamal as a time charterer

“US$” the lawful currency of the United States of America

“Vessel 1” an Arc 7 172,410m3 ice breaking LNG vessel to be

constructed and was assigned by Arctic LNG 1 Ltd. to Hai

Kuo Shipping 1601 Limited













DEFINITIONS

– 4 –

“Vessels” Vessel 1, Vessel 2, Vessel 3, Vessel 4 and Vessel 5

“Yamal” YAMAL Trade Pte. Ltd., a company incorporated in the

Republic of Singapore with limited liability, who was the

original party to the Shipbuilding Contracts, and is the

charterer pursuant to the Time Charters

“%” per cent

Unless otherwise specified and for illustration purpose only, the conversion of US$ into

HK$ is based on the exchange rate of US$1.00 = HK$7.8. Such conversion should not be construed

as a representation that the currency could actually be converted into HK$ at that rate or at all.

DEFINITIONS

– 5 –

(Incorporated in Hong Kong with limited liability)(Stock Code: 368)

Executive Directors:

Mr. Li Hua

Ms. Feng Guoying

Non-executive Directors:

Mr. Li Zhen (Chairman)

Mr. Tian Zhongshan

Independent Non-executive Directors:

Mr. Tsang Hing Lun

Mr. Lee Peter Yip Wah

Mr. Zhou Qifang

Mr. Xu Zhengjun

Registered Office:

21st Floor,

Great Eagle Centre,

23 Harbour Road, Wanchai,

Hong Kong

15 February 2017

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTIONFINANCIAL ASSISTANCE

PROVISION OF GUARANTEES TO JOINT VENTURE COMPANIES

INTRODUCTION

Reference is made to the Company’s announcement dated 13 December 2016 in respect ofthe provision of Guarantees to the JV Companies.

The purpose of this circular is to give you further details of the Guarantees and otherinformation prescribed by the Listing Rules.

BACKGROUND

The Company announced on 13 December 2016 that it has entered into the Guarantees withthe relevant JV Companies. The entering into the Guarantees is one of the conditions to the leasingof the Vessels to the JV Companies under the Bareboat Charters.

LETTER FROM THE BOARD

– 6 –

On 12 December 2016, each of the JV Companies (being the original owners of the Vessels)assigned their respective rights and interests under the Shipbuilding Contracts to the relevant HaiKuo Companies pursuant to the Assignment Agreements at the Purchase Price. Upon the deliveryof the Vessels to the relevant Hai Kuo Companies, each Hai Kuo Company will become the ownerof the relevant Vessel. On the same day, each of the Hai Kuo Companies entered into the BareboatCharters with each of the JV Companies to lease the five Vessels on bareboat charter terms to theJV Companies for a Charter Period of 144 months. At the end of the Charter Period, each of the JVCompanies will be obliged to purchase the Vessels from the Hai Kuo Companies pursuant to theterms of the Bareboat Charters. During the Charter Period, the JV Companies will lease the Vesselsto Yamal pursuant to the terms of the Time Charters.

Pursuant to the Bareboat Charters, each Hai Kuo Company has agreed to charter the relevantVessel to the JV Companies on bareboat charter terms for 144 months. The payment obligations ofeach of the JV Companies under the Bareboat Charters are summarized as follows.

(i) charterhire: a deposit of US$47,629,774.20 (equivalent to approximatelyHK$371,513,000) for each vessel and a charterhire of approximatelyUS$328,500,000 (equivalent to approximately HK$2,562,300,000) based on anindicative daily rate (being US$75,000 (equivalent to approximately HK$585,000)per day) pursuant to the Bareboat Charters for each Vessel. The charterhire is,approximately US$1,642,500,000 (equivalent to approximately HK$12,811,500,000)for all five Vessels, subject to the following adjustments:

(a) if the actual delivery date of the Vessels falls after the expected delivery date ofthe Vessels pursuant to the Bareboat Charters, the first instalment of thecharterhire shall be increased by an amount calculated by using the formulaunder the Bareboat Charters; and/or

(b) if the portion of the actual Purchase Price paid by the Hai Kuo Companiespursuant to the relevant Assignment Agreement (1) exceeds US$272,000,000(equivalent to approximately HK$2,121,600,000) (being an amount equivalentto 85% of the estimated purchase price under the Assignment Agreements,which is US$320,000,000 (equivalent to approximately HK$2,496,000,000)),the charterhire shall be increased by US$160 (equivalent to approximatelyHK$1,250) per day for each multiple of US$500,000 and a pro rata amount forany increase which is not equal to a multiple of US$500,000; or (2) falls belowUS$272,000,000 (equivalent to approximately HK$2,121,600,000), thecharterhire shall be reduced by US$117 (equivalent to approximately HK$920)per day for each multiple of US$500,000 and a pro rata amount for anydecrease which is not equal to a multiple of US$500,000;

(ii) fees and expenses: each of the JV Companies shall pay the Hai Kuo Companies (a) anarrangement fee in the amount of US$2,770,000 (equivalent to approximatelyHK$21,606,000) for each Vessel , that is , US$13,850,000 (equivalent toapproximately HK$108,030,000) for all five Vessels; (b) an agency fee in the amountof US$831,000 ((equivalent to approximately HK$6,482,000) for each Vessel, that isUS$4,155,000 (equivalent to approximately HK$32,409,000) for all five Vessels; and(c) a commitment fee in the amount of US$4,407,000 (equivalent to approximatelyHK$34,375,000) for all five Vessels, and other fees (if any) as set out in the relevantfee letters in consideration of the Hai Kuo Companies entering into the BareboatCharters;


– 7 –

(iii) call option: from the seventh year of the Charter Period, the JV Companies shall have

a call option, exercisable at their respective discretion, to purchase the relevant Vessel

at a net call option price and a call option fee (which is equivalent to 2% of the net call

option price) at the end of each charter year, ranging from US$194,004,000

(equivalent to approximately HK$1,513,232,000) to US$97,920,000 (equivalent to

approximately HK$763,776,000) for each Vessel, that is, US$970,020,000

(equivalent to approximately HK$7,566,156,000) to US$489,600,000 (equivalent to

approximately HK$3,818,880,000) for all five Vessels, depending on when such call

option is exercised. Such call option price was determined by the Hai Kuo Companies

after taking into commercial considerations, primarily including the value of the

Vessels and the charterhire; and

(iv) purchase obligation: at the end of the Charter Period, the JV Companies shall be

obliged to buy back the Vessels at US$144,000,000 (equivalent to approximately

HK$1,123,200,000) for each Vessel, that is, US$720,000,000 (equivalent to

approximately HK$5,616,000,000) for all five Vessels. Such purchase obligation

price was determined by the Hai Kuo Companies after taking into commercial

considerations, primarily including the value of the Vessels and the charterhire.

GUARANTEES

As one of the conditions to the leasing of the Vessels to the JV Companies under the

Bareboat Charters, the Company entered into the Guarantees, particulars of which are set forth as

follows:

Date 12 December 2016

Parties (1) the Company as guarantor

in favour of

(2) each Hai Kuo Company

Subject Matter The Company will provide guarantees for each JV Company,

in proportion to its indirect 25.5% equity interest in each JV

Company, in favour of each Hai Kuo Company for obligations

of each JV Company under each of the Bareboat Charters and

other ancil lary security documents. Pursuant to the

Guarantees, the Company:

(a) guarantees the due payment of all amounts due and

payable by each JV Company under the Bareboat

Charters and other ancillary security documents;


– 8 –

(b) undertakes to pay to each Hai Kuo Company, on each

Hai Kuo Company’s demand, any such amount which is

not paid by each JV Company when due and payable

under the Bareboat Charters and other ancillary security

documents; and

(c) undertakes to fully indemnify each Hai Kuo Company

on its demand in respect of all claims, expenses,

liabilities, costs and losses which are made or brought

against or incurred by each Hai Kuo Company as a

result of or in connection with any obligation or

liability of each JV Company under the Bareboat

Charters or any ancillary security documents and/ or

any obligation or liability guaranteed by the Company

being or becoming unenforceable, invalid, void or

il legal; and the amount recoverable under this

indemnity shall be equal to the amount which each Hai

Kuo Company would otherwise have been entitled to

recover under the Bareboat Charters or any ancillary

security documents.

The liability of the Company under the Guarantees is prorate

to its indirect 25.5% shareholding in the JV Companies and

the total aggregate liability of the Company under the

Guarantees is expected to be no more than US$668,884,000

(equivalent to approximately HK$5,217,296,000), being

25.5% of the estimated aggregate of (i) the deposit and the

charterhire payable by the JV Companies to the Hai Kuo

Companies throughout the Charter Period in respect of the five

Vessels in the amount of approximately US$479,570,000

(equivalent to approximately HK$3,740,646,000); (ii) the fees

and expenses in respect of the five Vessels in the amount of

approximately US$5,714,000 (equivalent to approximately

HK$44,569,000) pursuant to the relevant fee letters in

consideration of the Hai Kuo Companies entering into the

Bareboat Charters; and (iii) the purchase obligation price in

the amount of US$183,600,000 (equivalent to approximately

HK$1,432,080,000) payable on the buy back of the five

Vessels by the JV Companies.

The other two shareholders of the JV Companies, being

Dynagas and CLNG, also provided similar guarantees

(including the other undertakings of the guarantor as

described below) as to 49% and 25.5% respectively for

obligations of each JV Company under the Bareboat Charters

and other ancillary security documents.


– 9 –

Term of the Guarantee The Guarantees shall take effect upon execution and remain in

force as a continuing security up to the last day of the Charter

Period.

Other undertakings ofthe guarantor

Under the Guarantees, the Company undertakes to each Hai

Kuo Company that during the term of the Guarantees, it

should, amongst other things,

(a) provide each Hai Kuo Company with (i) audited annual

financial reports of the Company; and (ii) unaudited

interim financial statements accounts of the Company

as soon as possible within prescribed timeframe;

(b) notify each Hai Kuo Company details of material

litigation and claim involving the Company;

(c) remain as the legal holder and beneficial owner of

25.5% (whether directly or indirectly) of the issued

share capital of each JV Company;

(d) procure each JV Company not to utilize the Vessels or to

use or otherwise make available any proceeds of the

transaction to fund any activities for the benefits of any

person that is subject to sanctions or resulting in the JV

Company in breach of any sanctions or becoming a

party that is subject to sanctions;

(e) not create any security interest over any assets which

are the subject of the ancillary security documents;

(f) not transfer, lease or otherwise dispose of all or a

substantial part of its assets or make any substantial

change to the nature of its business or its corporate

structure; and

(g) not and should procure each JV Company not to enter

into any form of merger, sub-division, amalgamation or

other reorganization, except with the prior written

consent of the relevant Hai Kuo Company.

In additional to the Guarantees, the Negative Pledges were executed by Sinotrans LNG

together with the other two shareholders of the JV Companies in favour of each Hai Kuo Company,

pursuant to which Sinotrans LNG and the other two shareholders of the JV Companies undertake

not to create any security interest over, and not to sell or otherwise dispose of, their respective

shares in each JV Company.


– 10 –

REASONS FOR AND BENEFITS OF ENTERING INTO THE GUARANTEES

The principal purpose of the JV Companies entering into the sale-and-leaseback

arrangement as contemplated under the Assignment Agreements and the Bareboat Charters is to

ensure their obtaining of the essential funding to complete the construction of the Vessels and

enable each JV Company to perform its obligations under each of the Time Charters. As at the date

of this circular, the construction of two Vessels is under progress and is expected to complete in the

first half of 2018. The construction of the other Vessels will start according to the schedule under

the relevant agreement and is expected to complete in the first half of 2019. Further funding is

required for settling the supervision fees in the amount of approximately US$15,000,000

(equivalent to approximately HK$117,000,000) incurred from the construction of the Vessels. As

the execution of the Guarantees is one of the conditions to the Hai Kuo Companies entering into the

Bareboat Charters, such execution would facilitate the entry into of the sale-and-leaseback

arrangement.

Accordingly, the Board considers that entering into the Guarantees is in the interests of the

Company and the Group. The Directors consider that the terms of the Guarantees are fair and

reasonable and in the interests of the Shareholders as a whole.

GENERAL INFORMATION

The Company is principally engaged in dry bulk shipping, container shipping, LNG

shipping, vessel time chartering and cargo voyage chartering businesses. Sinotrans LNG is

principally engaged in investment holding.

Each of the Hai Kuo Companies is principally engaged in investment holding.

Each of the Hai Kuo Companies is a special purpose vehicle ultimately owned by the PRC

State through a listed company which, together with its subsidiaries is a financial conglomerate,

and whose principle business is banking. Each of the Hai Kuo Companies is incorporated for the

purpose of acquiring the Vessels from each JV Company pursuant to the Assignment Agreement

and chartering the Vessels to each JV Company pursuant to the Bareboat Charters.

To the best of the Directors’ knowledge, information and belief having made all reasonable

enquiries, each of the Hai Kuo Companies and their respective ultimate beneficial owner(s) are

third parties independent of the Company and its connected persons.

LISTING RULES IMPLICATIONS

The applicable percentage ratios of the Guarantees (based on the maximum commitments of

the Company under the Guarantees) are more than 25% but less than 100%. The provision of the

Guarantees, being financial assistance to each JV Company, will at most constitute major

transactions of the Company. Accordingly, the transactions contemplated under the Guarantees are

subject to reporting, announcement, circular and shareholders’ approval requirements.


– 11 –

Pursuant to Rule 14.44 of the Listing Rules, Shareholders’ approval of the Guarantees may

be given by way of written Shareholders’ approval in lieu of holding a general meeting if (1) no

Shareholder is required to abstain from voting if the Company were to convene a general meeting

for the approval of the Guarantees and the transactions contemplated thereunder; and (2) the

written Shareholders’ approval has been obtained from a Shareholder or a closely allied group of

Shareholders who together hold more than 50% of the issued share capital of the Company giving

the right to attend and vote at that general meeting to approve the Guarantees and the transactions

contemplated thereunder.

To the best knowledge, information and belief of the Directors, having made all reasonable

enquiries, no Shareholder is required to abstain from voting if the Company were to convene a

general meeting for the approval of the Guarantees and the transactions contemplated thereunder.

Written approval of the Guarantees has been obtained from the Majority Shareholder who holds

2,600,000,000 Shares, representing approximately 65.13% of the total issued share capital of the

Company as at the Latest Practicable Date. Pursuant to Rule 14.44 of the Listing Rules, the written

approval of the Majority Shareholder is accepted in lieu of holding a general meeting for the

approval of the Guarantees and the transactions contemplated thereunder.

As at the Latest Practicable Date and to the best of the Directors’ knowledge, information

and belief, the Board is not aware that any Shareholder has a material interest in the Guarantees

other than being a Shareholder. As such, no Shareholder would be required to abstain from voting

under the Listing Rules if the Company were to convene a general meeting for the approval of the

Guarantees.

RECOMMENDATIONS

The Directors (including all the independent non-executive Directors) consider that the

terms and conditions of the Guarantees are fair and reasonable and in the interests of the

Shareholders as a whole. The Board would recommend the Shareholders to vote in favour of the

Guarantees if the Company were to convene a general meeting to consider and approve the

Guarantees.

GENERAL

Your attention is drawn to the additional information set out in appendices to this circular.

By Order of the Board

Sinotrans Shipping LimitedLi Hua

Executive Director


– 12 –

1. WORKING CAPITAL

Taking into account the completion of the Agreements and the financial resources available

to the Group, including the internally generated funds and available banking facilities, the

Directors are of the opinion that the Group has sufficient working capital for its present

requirements, that is for at least the next 12 months from the date of this circular.

2. STATEMENT OF INDEBTEDNESS

(i) Borrowings and debts

As at the close of business on 31 December 2016, being the latest practicable date for

the purpose of this statement of indebtedness prior to the printing of this circular, the Group

had outstanding borrowings of approximately US$70,888,000, comprising secured bank

loans of US$29,623,000 and secured finance lease obligations of US$41,265,000.

The following table illustrates the Group’s bank and other borrowings as at 31

December 2016:

UnauditedUS$’000

Current portionCurrent portion of bank loans – secured 6,346Current portion of finance lease obligations – secured 1,663

8,009- - - - - - - - - - - -

Non-current portionBank loans – secured 23,277Finance lease obligations – secured 39,602

62,879- - - - - - - - - - - -

70,888

As at 31 December 2016, the Group’s bank loans and finance lease obligations of

US$70,888,000 were secured by its vessels with aggregate carrying amounts of

approximately US$106,565,000.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-1 –

(ii) Contingent liabilities

The Group was involved in a number of claims and lawsuits currently under way.

These claims and lawsuits are incidental to the Group’s business operation, including but

not limited to, the claims and lawsuits arising from damage to vessels during transportation,

damage to goods, delay in delivery, collision of vessels and early termination of vessel

chartering contracts.

As at 31 December 2016, the Group is unable to ascertain the likelihood and amounts

of the above respective claims, other than those provided for. However, based on the

information available to the Group, the Directors are of the opinion that these cases will not

have significant financial or operational impact to the Group.

(iii) General

Save as otherwise disclosed herein and apart from intra-group liabilities, as at 31

December 2016, the Group did not have any debt securities issued and outstanding, and

authorised or otherwise created but unissued, bank overdrafts, charges or debentures,

mortgages, loans or other similar indebtedness or any finance lease commitments, hire

purchase commitments, liabilities under acceptances (other than normal trade bills),

acceptance credits, any guarantees or other material contingent liabilities.

3. MATERIAL ADVERSE CHANGE

Save as disclosed in this circular and the Company’s interim report for the six months ended

30 June 2016, the Company is not aware of any material adverse change in the financial or trading

position of the Group since 31 December 2015, being the date to which the latest published audited

financial statements of the Company were made up.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Save as disclosed in the announcement of the Company dated 27 January 2017 regarding

profit warning, there has been no significant change in the trend of the business and financial and

trading prospects of the Group since the date of its last published interim report. The Board

believes that the entering of the Guarantees will not have any material financial effect on the

consolidated statement of comprehensive income of the Group. Although the global economy is

expected to remain sluggish and instable resulting from the investment slowdown in China and the

ongoing world-wide political and policy uncertainties, the Group continues to target on providing

the best return to its Shareholders by adopting the low-cost fleet measures as well as enhancing the

management capability. In addition, the Group will continue to actively explore new businesses

highlighted by LNG carriers, diversify its business structures, search for projects with long-term

and stable revenue and strive to enhance the Group’s comprehensive competiveness.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-2 –

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full

responsibility, includes particulars given in compliance with the Listing Rules for the purpose of

giving information with regard to the Group. The Directors, having made all reasonable enquiries,

confirm that to the best of their knowledge and belief the information contained in this circular is

accurate and complete in all material respects and not misleading or deceptive, and there are no

other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES

As at the Latest Practicable Date, none of the Directors or the chief executives of the

Company or their respective associates had or was deemed to have any interests and short positions

in the Shares, underlying Shares and debentures of the Company and its associated corporations

(within the meaning of Part XV of the SFO) which were 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 the Directors or the chief executives of the Company or their respective

associates were deemed or taken to have under provisions of the SFO), or which were required,

pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were

required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies

contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, none of the Directors is a director or employee of a

company which has, or is deemed to have, an interest or a short position 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.

Save as disclosed above, the Company has not been notified of any other relevant interests or

short positions in the issued share capital of the Company as at the Latest Practicable Date.

3. DIRECTORS’ COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor his close associates is and was

interested in any business which competes or may compete, either directly or indirectly, with the

business of the Group.

4. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors had

any interest, either directly or indirectly, in any assets which has since 31 December 2015 (being

the date to which the latest published audited consolidated financial statements of the Group were

made up), up to the Latest Practicable Date, been 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.

APPENDIX II GENERAL INFORMATION

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5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service

contract with any member of the Group which does not expire or is not terminable by such member

of the Group within one year without payment of compensation (other than statutory

compensation).

6. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors was materially interested, directly or

indirectly, in any contact or arrangement entered into by any member of the Group subsisting at the

Latest Practicable Date and which is significant in relation to the business of the Group.

7. MATERIAL ADVERSE CHANGE

Save as disclosed in the announcement of the Company dated 27 January 2017 regarding

profit warning, the Company is not aware of any material adverse change in the financial or trading

position of the Group since 31 December 2015, being the date to which the latest published audited

financial statements of the Company were made up.

8. MATERIAL LITIGATION

Sinochart Group was involved in the following pending lawsuits:

(a) Sinochart Group as defendant

Sinochart Group was involved in eight pending lawsuits amounted to approximately

US$2,697,700 in aggregate as at 31 December 2016. Taking into account the current status

of the legal proceedings and the progress of settlement negotiations, Sinochart Group has

made provisions for those cases in the sum of US$610,000 as at 31 December 2016.

(b) Back-to-back cases (Sinochart as defendant and plaintiff)

(i) In 2007, a chartered-in vessel of Sinochart grounded off and sank in Japan. The

chartered-in ship owner subsequently brought a claim against Sinochart,

alleging the port was unsafe and thus holding Sinochart liable for all the losses

and costs incurred in the sum of US$190,000,000. Sinochart thus brought a

claim against the sub-charterer in a back-to-back position. To protect the

interest of Sinochart, Sinochart obtained an irrevocable stand-by letter from

Sumitomo Mitsui Banking Corporation in the amount of US$190,000,000.

In July 2013, the High Court in London ruled that Sinochart was liable for the

incident and should compensate the shipowner for an amount of approximately

US$166,627,000. At the same time, Sinochart obtained judgment against the

sub-charterer in the same sum.


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In October 2013, the sub-charterer appealed against the judgment and

Sinochart therefore also lodged an appeal for the judgment against it.

In January 2015, the Court of Appeal in the United Kingdom reversed the

judgment of the first instance and judged that Sinochart was not liable to

undertake the compensation liability against the shipowner while the

sub-charterer was not liable to undertake any responsibility against Sinochart.

In May 2015, the case continued to appeal to the High Court in the United

Kingdom.

In September 2015, the charterer, DAIICHI, filed a bankruptcy petition.

In October 2016, the case was heard at the High Court in the United Kingdom,

a final judgement is yet to be obtained.

Sinochart has made provision for the case in the sum of US$8,700,000 as at 31

December 2016.

(ii) In 2012, a chartered-in vessel of Sinochart collided with a berth and the vessel

was held by the party concerned for 9 months.

In March 2015, the shipowner brought a claim of approximately US$110

million against Sinochart on the grounds of the port was being unsafe while

Sinochart at the same time brought a claim against the sub-charterer.

As Sinochart expects to recover compensation from the sub-charterer on

back-to-back position, no provision has been made for the case as at 31

December 2016.

The Directors consider these cases will not have significant financial or operational

impact on the Group. Save as disclosed above, as at the Latest Practicable Date, no member

of the Group was engaged in any litigation or arbitration of material importance and no

litigation or claim of material importance was known to the Directors to be pending or

threatened by or against any member of the Group.

9. MATERIAL CONTRACTS

The following material contracts (not being contracts in the ordinary course of business)

have been entered into by members of the Group within the two years preceding the date of this

circular and up to the Latest Practicable Date and are or may be material:

(a) the Guarantees;

(b) JV Agreements;

(c) Novation Payment Letters;


– II-3 –

(d) Shareholder Loan Novation Agreements;

(e) SBC Guarantees; and

(f) TC Guarantees.

10. MISCELLANEOUS

(a) The company secretary of the Company is Ms. Koo Ching Fan, who is an associate

member of both the Hong Kong Institute of Chartered Secretaries and the Institute of

Chartered Secretaries and Administrators in England and a fellow member of the

Association of Chartered Certified Accountants.

(b) The registered office, head office and the principal place of business of the Company

is at 21st Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong.

(c) The share registrar of the Company is Computershare Hong Kong Investor Services

Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East,

Wanchai, Hong Kong.

(d) The English text of this circular shall prevail over its respective Chinese text for the

purpose of interpretation.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s

principal place of business in Hong Kong at 21st Floor, Great Eagle Centre, 23 Harbour Road,

Wanchai, Hong Kong during normal business hours on any weekdays, except public holidays, for a

period of 14 days from the date of this circular:

(a) the memorandum and articles of association of the Company;

(b) the annual reports of the Company for the two years ended 31 December 2015,

respectively;

(c) the material contracts referred to in the paragraph headed “Material Contracts” in this

Appendix;

(d) the circular of the Company dated 11 March 2016;

(e) the circular of the Company dated 13 June 2016; and

(f) this circular.


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Documents

MAJOR TRANSACTION FINANCIAL ASSISTANCE ...sinotranship.sinotrans-csc.com/module/download/downfile...“Hai Kuo Companies” Hai Kuo Shipping 1601 Limited, Hai Kuo Shipping 1602 Limited,