Dida Inc. — Capital/Financing Update 2017

Dec 19, 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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COSCO SHIPPING ENERGY TRANSPORTATION CO., LTD.* 中遠海運能源運輸股份有限公司

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

(Stock Code: 1138)

PROPOSED ADOPTION OF THE A SHARE OPTION INCENTIVE SCHEME

This announcement is made by the Company pursuant to Rule 13.09 of the Listing Rules and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong).

The Company hereby announces that on 19 December 2017, the Board passed a resolution in respect of the proposed adoption of the Scheme and the proposed grant thereunder by the Company. The terms of the proposed Scheme are set out in this announcement.

PROPOSED ADOPTION OF THE SCHEME AND THE PRINCIPAL TERMS

A summary of the terms of the proposed Scheme and the proposed grant thereunder are as follows:

A. PURPOSE OF THE SCHEME

The purposes of the Scheme are:

1. to effectively bond the interests of Shareholders and the senior management of the Company, maximising Shareholders’ interest and increasing the value of state-owned assets;

2. to ensure the Company offers remuneration and incentive package which is competitive in the PRC labour market, attracting and incentivising key personnel of the Company to strive for the strategic goals of the Company; and

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1. to align the remuneration of the senior management and key personnel of the Company with the overall performance of the Company through the Scheme, motivating such persons to attend to and jointly strive for the long-term strategic targets of the Company.

The Scheme is formulated in accordance with relevant requirements under the Company Law, the Securities Law, the Trial Measures, the Incentive System Notice, the Administrative Measures, other relevant laws and regulations, and the Articles of Association.

B. SOURCE OF SHARES UNDER THE SCHEME

The Scheme is a share option incentive scheme. Share Option represents the right to be granted to a Participant by the Company to acquire certain number of Shares at a pre-determined price under certain conditions during a particular period of time.

Under the Scheme, the source of the underlying shares shall be the ordinary A Shares to be issued by the Company to the Participants.

C. NUMBER OF SHARE OPTIONS PROPOSED TO BE GRANTED UNDER THE SCHEME

The total number of Share Options that may be granted to the Participants under the Scheme shall not exceed 37,792,000, i.e. not exceeding approximately 0.94% of the Company’s total issued Shares as at the date of this announcement.

Subject to the fulfillment of the Conditions of Exercise, each Share Option entitles the Participant to acquire one A Share of the Company at the Exercise Price during the Validity Period.

D. DETERMINATION AND ALLOCATION OF PARTICIPANTS OF THE SCHEME

There are 137 Participants (which constitute approximately 4.1% of the total number of employees of the Company as of 31 December 2016) pursuant to the Scheme, including Directors (excluding independent Directors), senior management and other management and core technical personnel of the Company who have direct impact on the operation results and development of the Company.

The Participants do not include substantial Shareholders or controllers of the Company who individually or jointly hold 5% or more of the Shares, or their spouse, parents or children.

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The allocation of Share Options to be granted to Participants is set out below:

			Percentage
			of the total
			number of
			Share
		Share	Options
		Options to	under
Names	Positions	be granted	this grant
		(thousands)
Liu Hanbo (劉漢波)	General Manager	475	1.257%
Lu Junshan (陸俊山)	Secretary of Party	475	1.257%
	Committee
Yang Shicheng	Deputy General Manager	427	1.130%
(楊世成)
Qing Jiong (秦炯)	Deputy General Manager	427	1.130%
Xiang Yongmin	General accountant	427	1.130%
(項永民)
Luo Yuming (羅宇明)	Deputy General Manager	427	1.130%
Tu Shiming (屠士明)	Secretary of Committee for	427	1.130%
	Discipline Inspection
Sun Xiaoyan (孫曉艷)	Deputy General Manager	427	1.130%
Zhao Jinwen (趙金文)	Deputy General Manager	427	1.130%
Li Zhuoqiong (李倬瓊)	General counsel	380	1.006%
Feng Boming (馮波鳴)	Non-executive director	392	1.037%
Zhang Wei (張煒)	Non-executive director	392	1.037%
Lin Honghua (林紅華)	Non-executive director	326	0.863%
Other management and	core technical personnel	32,363	85.6%
(124 persons)
Total		37,792	100%

Note:

1. The number of Share Options to be granted to each Participant under the Scheme does not exceed 1% of the total Share capital of the Company on the date of this announcement.

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E. EXERCISE PRICE OF SHARE OPTIONS AND BASIS OF DETERMINATION

The Exercise Price of Share Options to be granted pursuant to the Scheme shall be RMB6.05 per Share.

The Exercise Price of Share Options to be granted is determined based on the highest of the following:

1. the average trading price of the A Shares on the last trading day immediately preceding the date of this announcement (RMB6.02);

2. the average of the trading prices of the A Shares for the last 20 trading days immediately preceding the date of this announcement (RMB6.04);

3. the closing price of the A Shares on the last trading day immediately preceding the date of this announcement (RMB6.01);

4. the average of the closing prices of the A Shares for the last 30 trading days immediately preceding the date of this announcement (RMB6.05);

5. RMB1.00, being the nominal value of an A Share.

During the period between the date of this announcement and the completion of Exercise of Share Options by the Participants, in the event of capitalisation issue, bonus issue, sub-division or consolidation of Shares, right issue or declaration of dividends of the Company, the Exercise Price of Share Options shall be adjusted accordingly.

F. TIMING FOR SHARE OPTIONS UNDER THE SCHEME

(1) Validity Period

The Scheme shall be effective for seven years from the Date of Grant.

(2) Date of Grant

Date of Grant will be determined by the Board upon approval of the Scheme by SASAC, and by Shareholders at the Shareholders’ meetings, and by other applicable regulatory authorities as may be required. The Date of Grant must be a trading day. Within 60 days from the Shareholders’ approval, the Company may grant Share Options to the Participants and complete the announcement and registration procedures in accordance with the relevant regulatory requirements.

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(3) Vesting Period

Vesting Period represents the period from the Date of Grant to the Exercise Date of the Share Options, which is 24 months pursuant to the relevant requirements of SASAC.

(4) Exercise Date

The Exercise Date must be a trading day.

If the Conditions of Exercise stipulated under the Scheme are fulfilled after expiry of the 24-month period from the Date of Grant, Participants shall Exercise their Share Options in stages within the next 60 months.

The arrangements of each stage of Exercise of the Share Options are as follows:

		Exercise
Exercise period	Duration	Proportion
First Exercise period	Commencing on the first trading day	33%
	after expiry of the 24-month period from
	the date of the initial grant and ending
	on the last trading day of the 36-month
	period from the Date of Grant
Second Exercise period	Commencing on the first trading day	33%
	after expiry of the 36-month period from
	the date of the initial grant and ending
	on the last trading day of the 48-month
	period from the Date of Grant
Third Exercise period	Commencing on the first trading day	34%
	after expiry of the 48-month period from
	the date of the initial grant and ending
	on the last trading day of the 84-month
	period from the Date of Grant

If the Conditions of Exercise are not fulfilled, the Share Options for that period shall not be Exercised and shall not be accumulated to the next exercise period, and such portion of the Share Options shall be cancelled by the Company.

(5) Lock-up period

Lock-up period represents the period during which no Shares issued to Participants upon Exercise shall be sold. Lock-up period under the Scheme will

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be implemented in accordance with the relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and the Articles of Association, and detailed requirements are set out below:

1. where the Participant is a Director or senior management of the Company, the number of Shares that may be transferred by the Participant per year during his term of office must not exceed 25% of the total number of Shares of the Company held by him; and he shall not transfer the Shares of the Company held by him within 6 months after his resignation;

2. where the Participant is a Director or senior management of the Company, all gains from the sale of Shares within 6 months of acquisition or from the acquisition of Shares within 6 months of sale by the Participant shall be accounted to the Company and the Board will collect all such gains;

3. if, during the validity period of the Scheme, there is any amendment to the relevant requirements regarding the transfer of Shares held by a Director and senior management of the Company under the relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and the Articles of Association, the amended relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and Articles of Association shall apply to the transfer of Shares held by such Participants.

G. CONDITIONS OF GRANT AND CONDITIONS OF EXERCISE UNDER THE SCHEME

1. Conditions of Grant of the Share Options

The following conditions must be fulfilled by the Company and the Participants before Share Options are granted:

• (1) None of the following circumstances has occurred to the Company:

• issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives an adverse opinion or indicates the inability to give an opinion;

• issue of an audit report containing an adverse opinion or indication of inability to give an opinion by a certified public accountant in the internal control report for the most recent accounting year;

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1. failure to conduct profit distribution in accordance with laws and regulations, the Articles of Association and public undertakings during the past 36 months;

2. prohibition from participation in share incentive schemes by laws and regulations;

3. other circumstances as determined by the CSRC.

4. (2) None of the following circumstances has occurred to a Participant:

5. having been declared an inappropriate candidate by the Shanghai Stock Exchange in the past 12 months;

6. having been declared an inappropriate candidate by the CSRC or its local bureaus in the past 12 months;

7. having been imposed with administrative penalties or prohibited from market entry by the CSRC or its local bureaus in the past 12 months due to material violation of laws and regulations;

8. being prohibited from acting as a Director or a member of senior management of the Company by the Company Law;

9. being prohibited from participating in share incentive schemes of listed companies by laws and regulations;

10. other circumstances as determined by the CSRC.

11. (3) The performance of the Company fulfills the following conditions:

12. return on net assets (i.e. earnings before interest, taxes, depreciation and amortization over net assets) shall be no less than 15% in the most recent accounting year before the grant of the Share Options; and

13. economic value added (EVA) shall meet the Company’s target set by SASAC.

Notes:

1. The above-mentioned “return on net assets” represents: the weighted average return on net assets attributable to the shareholders of the listed company (net of non-recurring profits and losses). In the event of refinancing by the Company, the net assets for the year of financing is calculated after deducting the proceeds of financing.

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1. The calculation of “return on net assets” and “EVA” as mentioned above shall exclude any interest held by the Company in China Shipping Bulk Co., Limited (中海散貨運輸有限公司) (“ CS Bulk ”) as the Company’s interests in CS Bulk has all been disposed of in or around 2016.)

2. (4) The performance of the Participant fulfills the following conditions:

The Participant obtains “pass” or better grading at the personal performance appraisal conducted by the human resources department of the Company in the most recent accounting year before the grant of the Share Options.

2. Conditions of Exercise of the Share Options

Participant’s right to Exercise the granted Share Options shall be subject to fulfilment of all of the following conditions:

• (1) None of the following circumstances has occurred to the Company:

• issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives an adverse opinion or indicates the inability to give an opinion;

• issue of an audit report containing an adverse opinion or indication of inability to give an opinion by a certified public accountant in the internal control report for the most recent accounting year;

• failure to conduct profit distribution in accordance with laws and regulations, the Articles of Association and public undertakings during the past 36 months;

• prohibition from participation in share incentive schemes by laws and regulations;

• other circumstances as determined by the CSRC.

• (2) None of the following circumstances has occurred to a Participant:

• having been declared an inappropriate candidate by the Shanghai Stock Exchange in the past 12 months;

• having been declared an inappropriate candidate by the CSRC or its local bureaus in the past 12 months;

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1. having been imposed with administrative penalties or prohibited from market entry by the CSRC or its local bureaus in the past 12 months due to material violation of laws and regulations;

2. being prohibited from acting as a Director or a member of senior management of the Company by the Company Law;

3. being prohibited from participating in share incentive schemes of listed companies by laws and regulations;

4. other circumstances as determined by the CSRC.

5. (3) Appraisal requirements of the Company’s performance

The performance targets of each Exercise period for Share Options:

Exercise Performance targets period

First Return on net assets shall be no less than 16% in the Exercise most recent accounting year before the Share Options period become effective; the net profits growth rate shall be no less than 4% as compared to 2017; the two aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry;

Second Return on net assets shall be no less than 17% in the Exercise most recent accounting year before the Share Options period become effective; the net profits growth rate shall be no less than 5% as compared to 2017; the two aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry;

Third Return on net assets shall be no less than 18% in the Exercise most recent accounting year before the Share Options period become effective; the net profits growth rate shall be no less than 5.5% as compared to 2017; the two aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry.

The economic value added (EVA) shall also meet the Company’s target set by SASAC.

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Notes:

1. The above-mentioned “return on net assets” represents: the weighted average return on net assets attributable to the shareholders of the listed company (net of non-recurring profits and losses). In the event of refinancing by the Company, the net assets for the year of financing is calculated after deducting the proceeds of financing. “Net profits growth rate” represents the growth rate of the net profits (net of non-recurring profits and losses) attributable to the shareholders of the listed company.

2. If the Conditions of Exercise are fulfilled, the Participant may Exercise in accordance with the requirements of the Scheme. If the performance of the Company does not meet the above conditions, the number of relevant Share Options of all Participants within the relevant Exercise period shall be cancelled by the Company.

3. 18 A shares listed companies, Hong Kong listed companies and companies listed in other stock exchanges with similar businesses as the Company have been selected as benchmark companies of the same industry according to the industry classification standard stipulated by CSRC.

4. (4) The performance of the Participant fulfills the following conditions:

The Participant obtains “pass” or better grading at the personal performance appraisal conducted by the human resources department of the Company in the most recent accounting year before the Share Options become effective.

H. ACCOUNTING TREATMENT OF THE SCHEME

(1) Calculation of the fair value of Share Options

According to the relevant requirements regarding the recognition of fair value under Enterprise Accounting Standard No. 22 — Financial Instruments: Recognition and Measurement, an appropriate valuation model shall be selected for the calculation of the fair value of Share Options. The Company uses Black-Scholes Model to calculate the fair value of Share Options and has used this Model to make a preliminary calculation of the fair value of the Share Options to be granted (formal calculation will be conducted at the time of grant): the value of each Share Option of the Company is approximately RMB2.25, and the aggregate value of 37,792,000 Share Options to be granted under the Scheme is RMB85,032,000.

(2) Amortisation method of Share Option expenses

According to the relevant requirements of Enterprise Accounting Standard No. 11 — Share- based Payments, the Company will update the expected amount of Share Options exercisable on each balance sheet date during the

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Vesting Period based on subsequent information such as the latest available number of Participants who are entitled to Exercise and the completion status of performance targets. Services received during the period will be accounted in relevant costs or fees and capital reserve based on the fair value of the Share Options on the Date of Grant.

• (1) Fair value and determination of Share Options

According to the relevant requirements under Enterprise Accounting Standard No. 11 — Share-based Payments and Enterprise Accounting Standard No. 22 — Financial Instruments: Recognition and Measurement, the Company selects Black-Scholes Model (B-S Model) as the pricing model. Based on the calculation by the Company on the date of this announcement, fair value of each Share Option amounted to RMB2.25 (formal calculation will be conducted upon the grant). Detailed reference factors are as follows:

• (1) Price of Share: RMB6.01/Share (close price of the A Shares on December 18 2017)

• (2) Exercise Price: RMB6.05/Share (exercise price set by the Board according to the regulations of CSRC and the SASAC)

• (3) Expected life: approximately 3.83 years (weighted expected effective period)

• (4) Expected volatility: 43.20% (based on the historical volatility rate of the Company)

• (5) Risk-free interest 3.80% (based on the 3.83-year yield to rate: maturity of the national bond rate)

• (6) Expected dividend: 0.00 % (not applicable)

• (2) Expected impact of Share Options on operating result for each period

The costs of Share Options incurred under the Scheme will be recorded as expenses in recurring profits and losses and will be amortised during the Vesting Period and the period when the Share Options may be Exercised.

Regardless of the stimulation effects of the Scheme on the performance of the Company, the Company expects that the amortisation of the costs of the Scheme will affect net profits of each year during the Validity Period, but the impact will not be significant.

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I. METHOD AND PROCEDURES OF ADJUSTMENT TO THE NUMBER AND EXERCISE PRICE OF SHARE OPTIONS

In the event of capitalisation issue, bonus issue, sub-division, rights issue or consolidation of Shares of the Company prior to any Exercise, the number of Share Options shall be adjusted accordingly in the following manner:

(1) Capitalisation issue, bonus issue and sub-division of Shares

Q = Q0� (1 + n)

Where: Q0 represents the number of Share Options before the adjustment; n represents the ratio of increase per Share resulting from the capitalisation issue, bonus issue and sub-division of Shares (i.e. the number of increased Shares per Share upon capitalisation issue, bonus issue or subdivision of Shares); Q represents the adjusted number of Share Options.

(2) Consolidation of Shares

Q = Q0 � n

Where: Q0 represents the number of Share Options before the adjustment; n represents the ratio of consolidation of Shares (i.e. one Share of the Company shall be consolidated into n Shares); Q represents the adjusted number of Share Options.

(3) Rights issue

Q = Q0 � P1� (1 + n)/(P1+ P2 � n)

Where: Q0 represents the number of Share Options before the adjustment; P1 represents the closing price as at the record date; P2 represents the subscription price of the rights issue; n represents the ratio of the rights issue (i.e. the number of Shares to be issued under the rights issue in proportion to the total Share capital of the Company before the rights issue); Q represents the adjusted number of Share Options.

(4) New issue of Shares

In the event of any new issue of Shares of the Company, no adjustment shall be made to the number of Share Options.

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In the event of any dividend distribution, capitalisation issue, bonus issue, sub-division, rights issue or consolidation of Shares of the Company prior to any Exercise, the Exercise Price shall be adjusted accordingly in the following manner:

(1) Capitalisation issue, bonus issue and sub-division of Shares

P = P0� (1 + n)

Where: P0 represents the Exercise Price before the adjustment; n represents the ratio of increase per Share resulting from the capitalisation issue, bonus issue and sub- division of Shares; P represents the adjusted Exercise Price.

(2) Consolidation of Shares

P = P0 � n

Where: P0 represents the Exercise Price before the adjustment; n represents the ratio of consolidation of Shares; P represents the adjusted Exercise Price.

(3) Declaration of dividend

P = P0 - V

Where: P0 represents the Exercise Price before the adjustment; V represents the dividend rate per Share; P represents the adjusted Exercise Price. After the adjustment, P shall be a positive number.

(4) Rights issue

P = P0� (P1 + P2� n)/(P1� (1 + n)

Where: P0 represents the Exercise Price before the adjustment; P1 represents the closing price as at the record date; P2 represents the subscription price of the rights issue; n represents the ratio of the rights issue (i.e. the number of Shares to be issued under the rights issue in proportion to the total Share capital of the Company before the rights issue); P represents the adjusted Exercise Price.

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(5) New issue of shares

In the event of any new issue of Shares of the Company, no adjustment shall be made to the Exercise Price of the Share Option.

The Shareholders’ meetings will authorise the Board to make adjustments to the Exercise Price and number of Share Options upon occurrence of any of the aforesaid circumstances. The Company shall engage legal adviser to advise on whether such adjustment is in compliance with the requirements under the Administrative Measures, the Articles of Association and the Scheme.

J. PROCEDURES OF ADOPTION OF THE SCHEME, GRANT OF SHARE OPTIONS BY THE COMPANY AND EXERCISE BY THE PARTICIPANTS

• (1) The procedures of adoption of the Scheme include, among other things:

• upon review and approval of the Scheme by SASAC, the Scheme will be submitted to the Shareholders’ meetings for consideration. During the voting process of the Scheme at the Shareholders’ meetings, independent Directors shall collect proxy voting rights regarding the Scheme from all Shareholders, and the Company will provide the choice of voting on site and via the Internet.

• upon consideration and approval of the Scheme at the Shareholders’ meetings, the Company will grant Share Options to Participants which may be capable of exercise over a specific period subject to the Conditions of Exercise referred to above. Date of Grant must be a trading day and shall comply with relevant requirements.

• (2) The procedures of grant of Share Options and Exercise by the Participants include, among other things:

• Grant procedures of Share Options

  • (1) The Company will issue the “Notice of grant of Share Options” to the Participants on the Date of Grant, notifying the Participants of the number, the date and the Exercise Price of and the arrangement for effecting the Share Options granted. The Participant will sign the “Notice of grant of Share Options” within three working days.

  • (2) The Company will sign the “Stock Options Grant Agreement” with the Participants whereby the obligations of and the relationship between the parties are stipulated.

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• (3) The Board will implement the grant of Share Options in accordance with the regulations of SASAC, CSRC, Shanghai Stock Exchange, China Securities Depository and Clearing Corporation Limited and other applicable regulatory authorities as may be required, make disclosure of the status of the grant of Share Options and report the status of the grant of Share Options to the SASAC.

• Exercise procedures of the Participants

Holders of Share Options shall pay the relevant subscription price to the Company on the Exercise Date and Exercise in accordance with the corresponding manner.

• (3) The amendment and termination procedures of the Scheme include, among other things:

• Amendment procedures of the Scheme

  • (1) If the Company intends to amend the Scheme prior to its consideration at the Shareholders’ meetings, such amendment shall be considered and approved by the Board.

  • (2) If the Company intends to amend the Scheme after it is approved at the Shareholders’ meetings, such amendment shall be considered and determined at general meeting given that such amendment shall not result in the following:

    • (i) accelerating the Exercise or the early termination of Share Options;

    • (ii) reducing the Exercise Price or the price of the grant of Share Options.

• Termination procedures of the Scheme

  • (1) The Scheme will automatically expire in seven years from the date of the approval of the Scheme at the Shareholders’ meeting.

  • (2) If the Board considers that it is necessary to terminate the Scheme before the expiry of the Scheme, such termination shall be considered and approved at general meeting.

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K. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE PARTICIPANTS

• (1) The rights and obligations of the Company include, among other things:

• The Company shall have the right to request the Participants to comply with the requirements of his job position as stipulated by the Company, and if the Participants cannot fulfil his job requirements or he fails the personal performance appraisal, the Company may cancel the Share Options which have not been Exercised;

• If the Participants breaches his obligation of integrity under the Company Law and the Articles of Association, or impairs the interests and reputation of the Company due to breach of law, violation of professional ethics, releasing confidential information of the Company, breach of duty or malfeasance, the Company shall cancel the Share Options which have not been Exercised; if the breach is serious, the Board shall have the right to recover all or part of the gains or interests deriving from the Share Options;

• The Company shall pay the individual income tax and other taxes on behalf of the Participants in accordance with PRC tax laws;

• The Company undertakes not to provide loans and financial support in any other forms, including providing guarantee for loans, to Participants under the Scheme;

• The Company shall discharge its obligations in a timely manner in relation to report and information disclosure under the Scheme in accordance with the relevant requirements;

• The Company shall actively support the Participants who have fulfilled the Conditions of Exercise to Exercise in accordance with the relevant requirements including those of the Scheme, CSRC, Shanghai Stock Exchange, China Securities Depository and Clearing Corporation Limited and other applicable regulatory authorities as may be required. However, the Company disclaims any liability for any loss suffered by a Participant arising from the incapability to Exercise as he desires due to reasons relating to CSRC, Shanghai Stock Exchange, China Securities Depository and Clearing Corporation Limited or other applicable regulatory authorities as may be required;

• Other relevant rights and obligations as stipulated by laws and regulations.

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• (2) The rights and obligations of the Participants include, among other things:

• A Participant shall comply with the requirements of his position as stipulated by the Company, and shall work diligently and responsibly, strictly observe professional ethics, and make contribution to the development of the Company;

• A Participant can decide whether to Exercise Share Options, as well as the number of Share Options to be Exercised, within the exercisable limit granted to him on a voluntary basis;

• Source of funds shall be self-financed by the Participants, and the source of funds should be legal and not in breach of laws, regulations and requirements from CSRC and other applicable regulatory authorities as may be required;

• Share Options granted to the Participants shall not be transferred or used as guarantee or repayment of debts;

• Any gains of the Participants generated from the Scheme are subject to individual income tax and other taxes according to PRC tax laws;

• Other relevant rights and obligations as stipulated by laws and regulations.

• L. HANDLING OF CHANGES IN RELATION TO THE COMPANY AND PARTICIPANTS

(1) Changes in relation to the Company

1. The Board shall be authorised to determine whether to continue, amend, suspend or terminate the Scheme upon occurrence of any of the following to the Company:

2. (1) change of control of the Company;

3. (2) situations such as the consolidation or demerger of the Company;

4. (3) other material change to the Company.

5. The Scheme shall be terminated immediately upon occurrence of any of the following to the Company:

6. (1) issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives an adverse opinion or indicates the inability to give an opinion;

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• (2) issue of an audit report containing an adverse opinion or indication of inability to give an opinion by a certified public accountant in the internal control of financial reporting for the most recent accounting year;

• (3) prohibition from participation in share incentive schemes by laws and regulations;

• (4) other circumstances under which the Scheme shall be terminated as determined by the CSRC.

In the event of occurrence of any of the above situations, all Share Options which are exercisable but not Exercised shall be terminated, and the Share Options which are not exercisable shall be cancelled.

(2) Changes in relation to the Participants

1. Upon occurrence of any of the following to a Participant, the Board may, on the date of the occurrence of such event, terminate his Share Options which are exercisable but not Exercised, cancel his Share Options which are not exercisable and the Board shall recover the gain by the Participants under the Scheme:

2. (1) the economic responsibility audit results show that he has not effectively performed his duties or there is a serious breach of duty or malfeasance acts;

3. (2) violation of PRC laws and regulations and Articles of Association;

4. (3) during his term of employment, he has been involved in bribery, corruption, theft, disclosure of commercial and technical secrets of the Company, real-time connected transactions which impair the interest and reputation of the Company, and illegal acts which have material adverse effect to the image of the Company, leading to the losses of the Company.

5. Upon occurrence of any of the following to a Participant which leads to the Participant losing his eligibility to participate in the Scheme, the Board may, on the date of the occurrence of such event, terminate his Share Options which are exercisable but not Exercised, and cancel his Share Options which are not exercisable:

6. (1) the Participant has been deemed as an inappropriate candidate by Shanghai Stock Exchange in the last 12 months;

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• (2) the Participant has been deemed as an inappropriate candidate by CSRC and its agencies in the last 12 months;

• (3) administrative punishment or market forbidden measures has been imposed against the Participant by CSRC and its agencies due to material violations of laws and regulations in the last 12 months;

• (4) subject to the circumstances where he shall not serve as directors or senior management personnel of the Company pursuant to the Company Law;

• (5) the job duties of the Participant have been changed or the employment relationship between the Participant and the Company has been terminated due to the impairment to the interests and reputation of the Company resulting from the Participant’s inability to fulfil job requirements, failure of the personal performance appraisal, violation of law, violation of professional ethics, leak of confidential information of the Company, breach of duty or malfeasance acts;

• (6) the Participant becomes independent Director, supervisor or other persons who cannot hold the Company’s Shares or Share options;

• (7) any circumstances which the Board determines to be serious violation of the Company’s regulations or serious impairment to the Company’s interests;

• (8) the Participant becomes a person who is not eligible to participate in the Scheme governed by the law, administrative regulations or departmental rules and approval by other applicable regulatory authorities as may be required;

• (9) other circumstances as determined by the Remuneration and Appraisal Committee of the Board.

• Upon occurrence of any of the following to a Participant, his Share Options which are exercisable but not Exercised shall retain the right to Exercise and shall be Exercised within six months, and his Share Options which are not exercisable shall be cancelled:

• (1) the Company proposes to terminate or release the employment relationship with the Participant due to objective reasons;

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• (2) the Company proposes not to renew the labour contract or engagement contract when it expires;

• (3) for Participant who retires as he reaches the retiring age as stipulated under the PRC law and the regulations of the Company, and he has worked for more than half a year and passed the personal performance appraisal in the year he retires, he can Exercise the Share Options for that year pursuant to the Scheme. As Participant cannot participate in personal performance appraisal after retirement, his Share Options become ineffective;

• (4) at the death of a Participant, his Share Options which are exercisable but not Exercised shall retain the right to Exercise and shall be Exercised within six months by his legal successors, and his Share Options which are not exercisable shall be cancelled;

• (5) other circumstances as determined by the Remuneration and Appraisal Committee of the Board.

• Upon occurrence of any of the following to a Participant, his Share Options which were not Exercised shall cease to be exercisable:

• (1) where the Participant unilaterally resigns from his position in the Company;

• (2) where the employment relationship is terminated by the Company due to personal issues of the Participant.

• Upon occurrence of any of the following to a Participant, his Share Options which are exercisable but not Exercised shall remain in force and his Share Options which were granted shall also remain in force and can be Exercised pursuant to the Scheme:

• (1) where the job duties of the Participant have been changed, but still remain as Directors, senior management or other management or core personnel of the Company, or being appointed to any position in subsidiary of the Company;

• (2) incapacity of the Participant arising in the course of his employment.

• Other circumstances not stated above and the handling method thereof shall be determined by the Remuneration and Appraisal Committee of the Board.

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IMPLICATIONS UNDER THE LISTING RULES

The Scheme constitutes a share option scheme pursuant to Chapter 17 of the Listing Rules.

Since the Share Options proposed to be granted under the Scheme involve A Shares only, and the determination of the Exercise Price is pursuant to relevant laws and regulations of the PRC, the Company has applied to the Stock Exchange for a waiver from strict compliance with Note (1) to Rule 17.03(9) of the Listing Rules in respect of the Exercise Price of the Share Options that may be granted under the Scheme.

For details of the determination of the Exercise Price under the Scheme, please refer to the paragraph headed “Exercise Price of Share Options and Basis of Determination” in this announcement.

SHAREHOLDERS’ MEETINGS AND CIRCULAR

An extraordinary general meeting and class meetings of the Company will be held to consider and approve the Scheme. A circular containing, among other things, (i) terms of the Scheme; (ii) details of the proposed grant; (iii) a notice convening the extraordinary general meeting of the Company; and (iv) a notice convening the class meeting of holders of H shares of the Company, will be despatched to holders of H Shares of the Company as soon as possible.

DEFINITIONS

In this announcement, unless otherwise requires, the following terms shall have the following meanings:

• “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 (Stock Code: 600026)

• “Administrative the Administrative Measures on Share Option Measures” Incentives of Listed Companies (Zhong Guo Zheng Jian Hui Ling No. 126)（《上市公司股權激勵管理辦法》

• （中國證監會令第 126 號））

• “Articles of the Articles of Association of the Company Association”

• “Board” the board of Directors of the Company

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“Company”

• COSCO SHIPPING Energy Transportation Co., Ltd.* (中遠海運能源運輸股份有限公司), a joint stock limited company established in the PRC, whose H shares and A shares are listed on Main Board of the Hong Kong Stock Exchange (Stock Code: 1138) and the Shanghai Stock Exchange (Stock Code: 600026), respectively

• “Company Law” the Company Law of the People’s Republic of China

• “Conditions of conditions to be fulfilled for a Participant to Exercise a Exercise” Share Option according to the Scheme

• “Conditions of Grant”

• conditions to be fulfilled for a Participant to be granted a Share Option according to the Scheme

• “CSRC”

• China Securities Regulatory Commission

• “Date of Grant” the date on which a Share Option is granted to a Participant by the Company, which must be a trading day

• “Director(s)” the director(s) of the Company

• “Exercise”

• a Participant exercising Share Option(s) to acquire A Shares pursuant to the exercise of Share Option(s) in accordance with the conditions stipulated under the Scheme

• “Exercise Date” the date on which a Participant is entitled to Exercise, which must be a trading day

• “Exercise Price”

• the price determined under the Scheme for a Participant to acquire Shares of the Company

• “H Shares” overseas listed foreign shares of nominal value of RMB1.00 each in the ordinary share capital of the Company which are listed on the Stock Exchange (Stock Code: 1138)

• “Hong Kong”

• Hong Kong Special Administrative Region of the PRC

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• “Incentive System the Notice on Issues concerning Regulating the Notice” Implementation of the Equity Incentive System by the State-Owned Listed Companies (Guo Zi Fa Fen Pei 2008 No. 171)（《關於規範國有控股上市公司實施股權 激勵制度有關問題的通知》（國資發分配 2008171 號））

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

• “Participant(s)” persons eligible to be granted Share Options under the Scheme

• “PRC” People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Macau Special Administrative Region and Taiwan

• “RMB” Renminbi, the lawful currency of the PRC

• “SASAC”

• the State-owned Assets Supervision and Administration Commission of the State Council, the PRC

• “Scheme” the A Share option incentive scheme of the Company proposed to be adopted

• “Securities Law” the Securities Law of the People’s Republic of China “Share(s)” A Share(s) and/or H Share(s)

• “Share Option(s)” the right to be granted to a Participant to acquire certain number of A Shares according to pre-determined conditions in a particular period of time

• “Shareholder(s)” shareholder(s) of the Company

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited

• “Trial Measures” Trial Measures on Implementation of Share Incentive Schemes by State Controlled Listed Companies (Domestic) (Guo Zi Fa Fen Pei 2006 No. 175（)《國有 控股上市公司（境內）實施股權激勵試行辦法》（國資發 分配 2006175 號））

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“Validity Period”

the period from the Date of Grant of a Share Option to the date on which the Share Option expires

“Vesting Period”

the period from the Date of Grant to the Exercise Date of a Share Option

By order of the Board

COSCO SHIPPING Energy Transportation Co., Ltd. Mr. Huang Xiaowen Chairman

Shanghai, the People’s Republic of China

19 December 2017

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Huang Xiaowen, Mr. Liu Hanbo and Mr. Lu Junshan as executive Directors, Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua as non-executive Directors, Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng as independent non-executive Directors.

• For identification purposes only

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