Chu Kong Shipping Enterprises : Announcements and Notices - Connected Transaction-shipbuilding Agreement

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(Incorporated in Hong Kong with limited liability)

The Board is pleased to announce that on 18 February 2017, Sun Kong Petroleum, a wholly-owned subsidiary of the Company, entered into the Shipbuilding Agreement with GSI, pursuant to which GSI agrees to construct and sell an oil tanker to Sun Kong Petroleum at a consideration of RMB9,680,000.

As GNG, through its shareholding in CKSE, indirectly holds 702,000,000 ordinary shares in the Company, representing approximately 65.0% of the total number of issued shares of the Company as at the date of this announcement, GNG is a connected person of the Company under the Listing Rules. GSI is a wholly-owned subsidiary of GNG. Accordingly, GSI is regarded as a connected person of the Company under the Listing Rules and the transaction contemplated under the Shipbuilding Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable Percentage Ratios of the transaction under the Shipbuilding Agreement exceeds 0.1% but is lower than 5%, the Shipbuilding Agreement is subject to the reporting and announcement requirements, but is exempt from the circular, independent financial advice and shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Board is pleased to announce that on 18 February 2017, Sun Kong Petroleum, a wholly-owned subsidiary of the Company, entered into the Shipbuilding Agreement with GSI, pursuant to which GSI agrees to construct and sell an oil tanker to Sun Kong Petroleum at a consideration of RMB9,680,000.

1. THE SHIPBUILDING AGREEMENT

   Date:	18 February 2017
   Parties:	(i) Sun Kong Petroleum, a wholly-owned subsidiary of the Company, as purchaser; and
   (ii) GSI, a wholly-owned subsidiary of GNG, as vendor.
   Subject matter:	Pursuant to the Shipbuilding Agreement, GSI agrees to construct, launch, equip, as well as sell and deliver to Sun Kong Petroleum a 33-meter long steel oil tanker.
   Consideration:	RMB9,680,000, inclusive of all relevant fees such as the construction and procurement costs of the oil tanker and its equipment, tax, delivery, insurance, examination fees and technical support. Should GSI deliver the completed oil tanker earlier than the prescribed date, it will be entitled to an incentive fee at a rate of RMB10,000 per day. Should GSI deliver the oil tanker later than the prescribed date without prior consent from Sun Kong Petroleum, it will be subject to a penalty at a rate of RMB10,000 per day. If the delay is longer than 60 days, apart from the penalty payment, Sun Kong Petroleum is entitled to decline accepting the completed oil tanker or to agree on a later delivery date at a reduced consideration. The consideration represented the successful bidding price submitted by GSI as adjusted after arm's length negotiations between the parties. Factors that the Group has considered in the tender procedures include (i) the terms of tender proposals offered by participating bidders, including tender prices and their responses to the tender terms set by the Group; (ii) the backgrounds, technical qualifications and financial positions of participating bidders; and (iii) the track records and historical business relationships between the Group and participating bidders.

   Payment terms:

   40% of the consideration shall be paid within 7 days upon the signing of the Shipbuilding Agreement as first installment. 55% of the consideration shall be paid in four subsequent installments according to the construction progress of the oil tanker and the remaining 5% of the consideration shall be paid on the date falling six months after delivery of the completed oil tanker. The Group will finance the consideration payable under the Shipbuilding Agreement from its internal resources.

   Delivery:

   The oil tanker should be delivered to Sun Kong Petroleum by the 270th day from the date of the Shipbuilding Agreement, which is 15 November 2017.

2. REASONS FOR AND BENEFITS OF ENTERING INTO THE SHIPBUILDING AGREEMENT

   The Group entered into the Shipbuilding Agreement in order to upgrade the fleets of oil tankers of the Group, satisfy the operation needs of the Group and improve the competitiveness of its shipping fleet as a whole.

   In the tender process, the Group considered the above-mentioned factors and took into account that GSI has profound business performance, expertise and technical qualification in the construction of engineering ships and possesses over 30 years of experience in trading and construction of ships. Therefore, the Group decided to accept the tender from GSI.

   In light of the above, the Directors (including the independent non-executive Directors) consider that the terms of the Shipbuilding Agreement are fair and reasonable, the transaction contemplated under the Shipbuilding Agreement is on normal commercial terms and is in the interests of the Company and its shareholders as a whole.

3. LISTING RULES IMPLICATIONS

   As GNG, through its shareholding in CKSE, indirectly holds 702,000,000 ordinary shares in the Company, representing approximately 65.0% of the total number of issued shares of the Company as at the date of this announcement, GNG is a connected person of the Company under the Listing Rules. GSI is a wholly-owned subsidiary of GNG. Accordingly, GSI is regarded as a connected person of the Company under the Listing Rules and the transaction contemplated under the Shipbuilding Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

   As one or more of the applicable Percentage Ratios of the transaction under the Shipbuilding Agreement exceeds 0.1% but is lower than 5%, the Shipbuilding Agreement is subject to the reporting and announcement requirements, but is exempt from the circular, independent financial advice and shareholders' approval requirements under Chapter 14A of the Listing Rules.

   Mr. Xiong Gebing and Mr. Zhang Lei, being the executive Director and non-executive Director, respectively, as at the date of this announcement, are also the directors of CKSE. Mr. Zeng He and Mr. Cheng Jie, being the executive Directors, are also the directors of subsidiaries of CKSE. Each of Mr. Xiong Gebing, Mr. Zeng He, Mr. Cheng Jie and Mr. Zhang Lai is being regarded as having a material interest in the transaction contemplated under the Shipbuilding Agreement and they have abstained from voting on the board resolution approving the Shipbuilding Agreement.

4. INFORMATION ON THE PARTIES

The Group is mainly engaged in provision of management and other related services to high-speed waterway passenger transportation in Guangdong, Hong Kong and Macau; the operation and management of river trade cargo terminals in the Mainland China and Hong Kong; cargo transportation, warehousing and storage business; provision of diesel and lubricants for passenger ferries and cargo vessels in Hong Kong; and provision of operation and management of facilities maintenance services for properties and so forth in Macau.

GSI is principally engaged in domestic and international trading, development, design and construction of engineering ships.