THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant, or other professional adviser.

If you have sold or transferred all your shares in COSCO SHIPPING Energy Transportation Co., Ltd., you should at once hand this circular, the form of proxy and the reply slip to the purchaser or transferee or to licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of COSCO SHIPPING Energy Transportation Co., Ltd.

==> picture [106 x 70] intentionally omitted <==

**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)

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES (2) CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEME\NT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND

(4) SPECIAL DEAL

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

Capitalised terms used in this cover shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 8 to 24 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 25 to 26 of this circular. A letter from Messis Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 27 to 49 of this circular.

A revised notice convening the EGM to be held at 10:00 a.m. on Friday, 26 July 2019 at 3rd Floor, Ocean Hotel, No. 1171 Dong Da Ming Road, Hongkou District, Shanghai, the People’s Republic of China in furtherance to the original notice despatched to the Shareholders on 31 May 2019 is set out on pages EGM-1 to EGM-4 of this circular.

A revised notice convening the H Shares Class Meeting to be held at 10:00 a.m. on Friday, 26 July 2019 at 3rd Floor, Ocean Hotel, No. 1171 Dong Da Ming Road, Hongkou District, Shanghai, the People’s Republic of China (to be held in the order of the extraordinary general meeting, class meeting for holders of A shares and H Shares Class Meeting) in furtherance to the original notice despatched to the Shareholders on 31 May 2019 is set out on pages HCM-1 to HCM-4 of this circular.

The respective revised proxy forms for use at the EGM and the H Shares Class Meetings are enclosed. Whether or not you are able to attend the above meetings, please complete and return the enclosed revised proxy forms in accordance with the instructions printed thereon as soon as practicable and in any event by not less than 24 hours before the time appointed for the holding of the meeting or any adjournment thereof (i) in case of holders of H Shares, to the Company’s Hong Kong branch share registrar, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, (ii) in case of holders of A shares, to the Office of the Board of Directors of the Company at 7th Floor, 670 Dongdaming Road, Hongkou District, Shanghai, the People’s Republic of China. Completion and return of the proxy form will not preclude you from attending and voting in person at the meeting or at any adjourned meetings should you so wish.

5 July 2019

* for identification purpose only

CONTENT

		Pages
DEFINITIONS . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . .		25
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . .		27
APPENDIX I –	PROPOSAL FOR NON-PUBLIC ISSUANCE OF
	A SHARES (SECOND REVISED VERSION) . . . . . . . . . . . . . . . .	I-1
APPENDIX II –	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . .	II-1
APPENDIX III –	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
REVISED NOTICE	OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1
REVISED NOTICE	OF H SHARES CLASS MEETING . . . . . . . . . . . . . . . . . . . . . . . . .	HCM-1

DEFINITIONS

In this circular, unless the context otherwise requires, the expressions below shall have the following meanings:

“2017 Class Meetings” the class meeting of A Shareholders and the class meeting of H Shareholders held on 18 December 2017
“2018 Class Meetings” the class meeting of A Shareholders and the class meeting of H Shareholders held on 17 December 2018
“2017 EGM” the extraordinary general meeting of the Company held on 18 December 2017
“2018 EGM” the extraordinary general meeting of the Company held on 17 December 2018
“2017 EGM Circular” the circular of the Company dated 4 December 2017 in respect of the approval of, among other things, the original terms of the Proposed Non-public Issuance of A Shares
“2018 EGM Circular” the circular of the Company dated 30 November 2018 in respect of, among other things, the Extension Resolutions
“Amendment Resolution” the resolution to be proposed at the EGM and the Class Meetings in relation to, amongst other things, the supplement to the Price Floor Mechanism
“A Share(s)” Renminbi-denominated domestic share(s) in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange
“A Shareholder(s)” holder(s) of A Share(s)
“A Shares Class Meeting” the class meeting of the A Shareholders
“Announcement” the announcement of the Company dated 29 May 2019 in relation to, among other things, the Amendment Resolution, the Supplemental Agreement and the New Whitewash Waiver

“Articles of Association” the articles of association of the Company

“associate(s)” or “close associate(s)” has the meaning ascribed to it under the Listing Rules
1 -

DEFINITIONS

“Average Trading Price” the average trading price of the A Shares during the 20 trading days immediately preceding the Price Determination Date, which is calculated by dividing the total turnover of the A Shares by the total trading volume of the A Shares during the 20 trading days immediately preceding the Price Determination Date
“Benchmark Price” for illustration purpose only, RMB6.81 being the net asset value per Share set out in the most recent audited consolidated financial statements of the Company as at the latest practicable date of the 2017 EGM Circular (i.e. 1 December 2017)
“Board” the board of Directors “Board Authorisation Extension the resolutions to extend the validity period of the authorisation Resolution” granted to the Board and any person authorised by the Board to handle all matters relating to the Proposed Non-public Issuance of A Shares, for a further period of 12 months, commencing from 18 December 2018, being the date after the expiry date of the original validity period, to 17 December 2019
“Cap” the maximum of 806,406,572 A Shares to be issued pursuant to the Proposed Non-public Issuance of A Shares
“Class Meetings” the A Shares Class Meeting and the H Shares Class Meeting “Company” COSCO SHIPPING Energy Transportation Co., Ltd* (中國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
“connected person(s)” has the meaning ascribed to it under the Listing Rules “controlling shareholder” has the meaning ascribed to it under the Listing Rules “COSCO Shipping” China COSCO Shipping Corporation Limited* (中國遠洋海運集團有限公司), a PRC state-owned enterprise and the indirect controlling shareholder of the Company
“COSCO Shipping Concert Group” COSCO Shipping and parties acting in concert with it for the purpose of the Takeovers Code, including CSG and its subsidiaries
2 -

DEFINITIONS

“CSG”	China Shipping Group Company Limited (中國海運集團有限公司)
	(original name: China Shipping (Group) Company* (中國海運（集
	團）總公司)), a PRC state-owned enterprise wholly-owned by
	COSCO Shipping and the direct controlling shareholder of the
	Company
“CSRC”	China Securities Regulatory Commission (中國證券監督管理委員
	會)
“Director(s)”	director(s) of the Company
“EGM”	the extraordinary general meeting of the Company to be convened
	to consider and, if thought fit, approve, among other things, (i) the
	Amendment Resolution, (ii) the Supplemental Agreement, (iii) the
	Specific Mandate, (iv) the New Whitewash Waiver and (v) the
	Special Deal
“Executive”	the Executive Director of the Corporate Finance Division of the
	SFC or any of its delegate(s)
“Extension Resolutions”	Share Issuance Extension Resolution and/or Board Authorisation
	Extension Resolution (as the case may be)
“Group”	the Company and its subsidiaries as at the date of this circular
“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 Main Board of the Hong Kong Stock Exchange
“H Shareholder(s)”	holder(s) of H Share(s)
“H Shares Class Meeting”	the class meeting of the H Shareholders
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“HKFRS”	the Hong Kong Financial Reporting Standards
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited

DEFINITIONS

“Independent Board Committee”
the independent board committee of the Company comprising Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng being all the independent non-executive Directors, which is formed in accordance with the Listing Rules and the Takeovers Code to advise the Independent Shareholders on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal
“Independent Financial Adviser”
Messis Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, which has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal
“Independent Shareholders”
Shareholders other than (i) COSCO Shipping and parties acting in concert with it and (ii) all other parties (if any) who are interested or involved in the Proposed Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal
“Issue Price”
the issue price of the A Shares underlying the Proposed Non-public Issuance of A Shares
“Latest Practicable Date”
2 July 2019, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“NAV Price Floor”
the net asset value per share (that is the net assets attributable to the shareholders of the ordinary shares of the Company as at the relevant financial year end date divided by the Company’s total share capital as at the relevant financial year end date) as set out at the latest audited consolidated financial statement of the Company, being one of the two limiting parameters underlying the Price Floor Mechanism
4 -

DEFINITIONS

“New Whitewash Waiver” a waiver sought to be granted by the Executive pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code in respect of the obligation of COSCO Shipping to make a general offer for all the issued A Shares (and a comparable offer to acquire all issued H Shares) not already owned by or agreed to be acquired by the COSCO Shipping Concert Group which may otherwise arise as a result of the Subscription, having taken into account the effect of the Amendment Resolution on the Proposed Non-public Issuance of A Shares
“Original Whitewash Waiver” a waiver granted by the Executive on 15 December 2017 pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code in respect of the obligation of COSCO Shipping to make a general offer for all the issued A Shares (and a comparable offer to acquire all issued H Shares) not already owned by or agreed to be acquired by the COSCO Shipping Concert Group which may otherwise arise as a result of the Subscription
“Participant(s)” persons who have been granted Share Options under the Share Option Incentive Scheme
“PRC” the People’s Republic of China excluding, for the purpose of this circular, Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“PRC GAAP” the Generally Accepted Accounting Principles in the PRC
“PRC Legal Advisers” Grandall Law Firm (Shanghai), the PRC legal advisers to the Company
“Price Determination Date”
the first day of the period when the A Shares are issued under the Proposed Non-public Issuance of A Shares
“Price Floor Mechanism” the mechanism by which the price floor in respect of the Issue Price is determined, being the higher of the Share Trading Price Floor and the NAV Price Floor
“Proposed Non-public Issuance of the proposed non-public issuance of not more than 806,406,572 A A Shares” Shares by the Company to not more than 10 specific target subscribers, including COSCO Shipping which proposes to participate via the Subscription
“Relevant Period” the period of six months preceding the date of the Announcement and ending on the Latest Practicable Date

“RMB”

Renminbi, the lawful currency of the PRC

DEFINITIONS

“SASAC”	State-owned Assets Supervision and Administration Commission of
	the State Council of the PRC (中華人民共和國國務院國有資產監
	督管理委員會)
“SFC”	the Securities and Futures Commission of Hong Kong
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong) as amended and supplemented from time to time
“Share Issuance Extension	the resolution to extend the validity period of the then Independent
Resolution”	Shareholders’ resolutions relating to the Proposed Non-public
	Issuance of A Shares, for a further period of 12 months,
	commencing from 18 December 2018, being the expiry date of
	the original validity period, to 17 December 2019
“Share(s)”	A Share(s) and H Share(s)
“Share Option Incentive Scheme”	the A Share option incentive scheme approved and adopted by the
	Company on 17 December 2018
“Share Option(s)”	the right granted to a Participant to acquire certain number of A
	Shares according to pre-determined conditions in a particular period
	of time
“Share Trading Price Floor”	90% of the average trading price of the A Shares during the 20
	trading days immediately preceding the Price Determination Date,
	being one of the two limiting parameters underlying the Price Floor
	Mechanism
“Shareholder(s)”	holder(s) of Share(s)
“Special Deal”	the Proposed Non-public Issuance of A Shares which constitutes a
	special deal to the Company under Rule 25 of the Takeovers Code
“special resolution”	votes representing more than two-thirds of voting rights held by
	Shareholders (including proxies thereof) attending the relevant
	general meeting
“Specific Mandate”	the specific mandate to be sought from the Independent
	Shareholders at the EGM and the Class Meetings to issue the A
	Shares under the Proposed Non-public Issuance of A Shares
“Subscription”	the proposed subscription of A Shares by COSCO Shipping
	pursuant to the Subscription Agreement (as supplemented by the
	Supplemental Agreement)

DEFINITIONS

“Subscription Agreement” the subscription agreement dated 30 October 2017 entered into between the Company and COSCO Shipping, pursuant to which COSCO Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not more than RMB4.2 billion under the Proposed Non-public Issuance of A Shares

“Supplemental Agreement” a supplemental agreement dated 29 May 2019 entered into between the Company and COSCO Shipping to incorporate the changes to the Proposed Non-public Issuance of A Shares in connection with the Amendment Resolution
“Takeovers Code” the Hong Kong Code on Takeovers and Mergers

“trading day(s)” a day on which the Shanghai Stock Exchange or the Hong Kong Stock Exchange (as the case may be) is open for dealing or trading in securities “%” per cent

For the purpose of this circular, translation of RMB into HK$ or vice versa have been calculated by using an exchange rate of RMB1.00 equal to HK$1.14. 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.

for identification purpose only.
7 -

LETTER FROM THE BOARD

==> picture [106 x 70] intentionally omitted <==

**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)

Executive Directors Mr. Liu Hanbo Mr. Zhu Maijin

Non-executive Directors Mr. Feng Boming Mr. Zhang Wei Ms. Lin Honghua

Independent Non-executive Directors

Mr. Ruan Yongping Mr. Ip Sing Chi Mr. Rui Meng Mr. Teo Siong Seng

Registered address in the PRC Room A-1015 No. 188 Ye Sheng Road China (Shanghai) Pilot Free Trade Zone People’s Republic of China

Principal place of business in Hong Kong RMS 3601-3602 36/F West Tower Shun Tak CTR 168-200 Connaught RD Central Hong Kong

5 July 2019

To the Shareholders,

Dear Sir or Madam,

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES (2) CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEMENT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND (4) SPECIAL DEAL

I. INTRODUCTION

Reference is made to the announcements of the Company dated 31 October 2017, 15 December 2017, 18 December 2017, 27 December 2017, 6 February 2018, 5 March 2018, 9 May 2018 and 30 October 2018, the 2017 EGM Circular and the 2018 EGM Circular in respect of, inter alia, the Proposed Non-public Issuance of A Shares, the Original Whitewash Waiver and the Extension Resolutions.

* for identification purpose only

LETTER FROM THE BOARD

At the 2017 EGM and the 2017 Class Meetings held on 18 December 2017, the then Independent Shareholders approved, among other things, the proposed non-public issuance of not more than 806,406,572 A Shares by the Company to not more than 10 specific target subscribers, including COSCO Shipping, under the Proposed Non-public Issuance of A Shares and the Original Whitewash Waiver. The Company has also entered into the Subscription Agreement with COSCO Shipping such that the Company has conditionally agreed to issue to COSCO Shipping such number of A Shares for an amount of not more than RMB4.2 billion under the Proposed Non-public Issuance of A Shares. At the 2018 EGM and the 2018 Class Meetings held on 17 December 2018, the then Independent Shareholders approved, among other things, the Extension Resolutions.

Reference is also made to the Announcement. As disclosed in the Announcement, on 29 May 2019, the Board proposed to adopt the Amendment Resolution in order to take into account the effect of dividends and other rights events (such as bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) on the Issue Price.

While the proceeds to be raised under the Proposed Non-public Issuance of A Shares are subject to a maximum of RMB5.4 billion, the actual amount that may be raised is subject to the results of the price inquiry exercise to be conducted pursuant to the Proposed Non-public Issuance of A Shares, and that the resultant shareholding structure of the Company following completion of the Proposed Non-public Issuance of A Shares shall be adjusted subject to the actual results of the proposed issue.

Incidental to the Amendment Resolution, on 29 May 2019, the Company also entered into the Supplemental Agreement with COSCO Shipping to incorporate the consequential changes in light of the Amendment Resolution.

The purpose of this circular is to provide you with, among other things:

(a) further details of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal;
(b) the letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal; and
(c) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders containing its recommendation in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.
9 -

LETTER FROM THE BOARD

II. AMENDMENT TO THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(1) Summary of principal terms of the original proposal for the Proposed Non-public Issuance of A Shares as set out in the 2017 EGM Circular

As set out in the 2017 EGM Circular, the Proposed Non-public Issuance of A Shares would be carried out by way of non-public issue of A Shares to not more than 10 specific target subscribers, including COSCO Shipping. The target subscribers other than COSCO Shipping include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other qualified investors in compliance with applicable laws and regulations. The final list of subscribers (other than COSCO Shipping) will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the 2017 EGM and the 2017 Class Meetings and the sponsor (the lead manager) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.

The maximum number of Shares to be issued under the Proposed Non-public Issuance of A Shares would be 806,406,572 A Shares (referred to as the “ Cap ” below). The Cap will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend (excluding cash dividend), bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between date of the announcement of the Company dated 31 October 2017 and the date of share issuance under the Proposed Non-public Issuance of A Shares. Subject to the Cap, the Board and its authorised person(s) were granted at the 2017 EGM and 2017 Class Meetings such authority as necessary for determining the final number of A Shares to be issued based on the market conditions and negotiations with the sponsor (the lead manager) with reference to the amount of proceeds to be raised and the actual amount of subscription received.

The issue price shall not be lower than both (i) 90% of the average trading price of the A Shares during the 20 trading days immediately preceding the Price Determination Date, which is calculated by dividing the total turnover of the A Shares by the total trading volume of the A Shares during the 20 trading days immediately preceding the Price Determination Date (that is, the Share Trading Price Floor) and (ii) the net asset value per share as set out at the latest audited consolidated financial statement of the Company (that is, the NAV Price Floor). The final issue price will be determined by the Board and its authorised person(s) with the authorization by the Shareholders at the 2017 EGM and the 2017 Class Meetings and the sponsor (the lead manager) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares. All the target subscribers will subscribe for the A Shares under the Proposed Non-public Issuance of A Shares at the same issue price in cash. COSCO Shipping will not participate in the price inquiry exercise for the Proposed Non-public Issuance of A Shares, and will accept the price inquiry results and subscribe for the A Shares at the same issue price as other target subscribers.

10 -

LETTER FROM THE BOARD

As set out in the 2017 EGM Circular, given the net asset value per Share as set out in the most recent audited consolidated financial statements of 2016 of the Company is RMB6.81, it is expected the minimum issue price would, subject to regulatory approval, be at least RMB6.81 (that is, the Benchmark Price). In the event that the issue price is expected to fall below the Benchmark Price, the Company will re-comply with the necessary approval requirements including, among other things, Independent Shareholders’ approval requirements under the Listing Rules and for a new whitewash waiver under the Takeovers Code. The issue price will be correspondingly adjusted (taking into account the decrease in value per share attributable to the Company as a result of distribution by the Company) if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of share issuance under the Proposed Non-public Issuance of the A Shares.

COSCO Shipping shall not transfer the A Shares subscribed under the Proposed Non-public Issuance of A Shares within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares. All other target subscribers shall not transfer the A Shares subscribed under the Proposed Non-public Issuance of A Shares within 12 months from the date of completion of the Proposed Non-public Issuance of A Shares.

In the 2017 EGM Circular, it was stated that the Proposed Non-public Issuance of A Shares would raise gross proceeds of RMB5.4 billion (subject to regulatory approval). The Company has also entered into the Subscription Agreement with COSCO Shipping such that the Company has conditionally agreed to issue to COSCO Shipping such number of A Shares for an amount of not more than RMB4.2 billion under the Proposed Non-public Issuance of A Shares.

(2) Supplement to the Price Floor Mechanism

11 -

LETTER FROM THE BOARD

It is proposed by the Board on 29 May 2019 that to take into account also the effect of dividends and other rights events (such as bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares), the Amendment Resolution will be proposed at the EGM and the Class Meeting to supplement the Price Floor Mechanism such that:–

(i) if there exists between (a) the date to which the latest audited consolidated statement of financial positions is made up to, and (b) the date of share issuance under the Proposed Non-public Issuance of the A Shares any ex-right or ex-dividend events (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares), the NAV Price Floor shall be adjusted downwards to take into account the effect of such event(s); and
(ii) if any such ex-right/ex-dividend event takes place during the 20-trading day reference period underlying the Share Trading Price Floor, such that the Company’s shares are quoted cum-right/dividend for part of the period and ex-right/dividend for the other part of the period, downward adjustments to the Share Trading Price Floor taking into account the effect of rights/dividends shall be applied to the trading prices of each cumdividend trading day throughout the entire 20-trading day period.

The Amendment Resolution will also supplement the Proposed Non-public Issuance of A Shares such that in the event no effective bid is made after the aforesaid price inquiry exercise, the floor price deduced from the Price Floor Mechanism will be determined as the final Issue Price. The Board expects the final Issue Price to be not lower than the Benchmark Price.

(3) Possible fluctuations in public subscription level and resultant shareholding interest in the Company held by the COSCO Shipping Concert Group

It was illustrated in the 2017 EGM Circular that, assuming (i) COSCO Shipping subscribes for A Shares for RMB4.2 billion at the Benchmark Price, (ii) other targeted subscribers apart from COSCO Shipping subscribe for A Shares for an aggregate of RMB1.2 billion at the Benchmark Price, and (iii) there being no other changes to the issued share capital of the Company save for the issuance of A Shares under the Proposed Non-public Issuance of A Shares, the COSCO Shipping Concert Group’s holding of voting rights in respect of all the Shares is expected to increase from approximately 38.56% to approximately 45.00% on a fully diluted basis. The above illustration, however, relies on a number of assumptions, including those relating to the Issue Price and the level of public subscription interest.

Apart from the Subscription Agreement (as supplemented by the Supplemental Agreement), as at the Latest Practicable Date, the Company has not entered into any contractual commitment with any other person regarding subscription of A Shares under the Proposed Non-public Issuance of A Shares and, accordingly, the level participation by other targeted subscribers in the Proposed Nonpublic Issuance of A Shares may be affected by a number of factors, including market conditions and the target subscriber’s own circumstances. In the event COSCO Shipping subscribes up to its full commitment of RMB4.2 billion under the Proposed Non-public Issuance of A Shares and the other

12 -

LETTER FROM THE BOARD

targeted subscribers in the aggregate subscribe for less than RMB1.2 billion, the shareholding interest in the Company held by the COSCO Shipping Concert Group will exceed 45.00% on a fully diluted basis.

Assuming there is no other changes to the issued share capital of the Company save for the issuance of A Shares under the Proposed Non-public Issuance of A Shares, the table below sets out an illustration of the shareholding structure of the Company as at the Latest Practicable Date and immediately upon completion of the Proposed Non-public Issuance of A Shares in the case of (i) both COSCO Shipping and all other target subscribers subscribe in full under the Proposed Non-public Issuance of A Shares such that a total gross proceeds of RMB5.4 billion is raised; and (ii) COSCO Shipping is the sole subscriber and no other target subscriber subscribes under the Proposed Nonpublic Issuance of A Shares such that a total gross proceeds of RMB4.2 billion is raised:–

				Immediately upon completion of the Proposed Non-	Immediately upon completion of the Proposed Non-
	As at	the Latest Practicable	Date	public Issuance	of A Shares at the Benchmark Price
		Percentage of in	Percentage of all		Percentage of in Percentage of all
	Class and No. of	the relevant class	voting rights of	Class and No. of	the relevant class voting rights of
Shareholder	voting rights	of voting rights	the Company	voting rights	of voting rights the Company

(i) 616,740,088 A Shares and 176,211,453 A Shares to be issued to COSCO Shipping and other target subscribers under the Proposed Non-public Issuance of A Shares respectively

COSCO Shipping and
parties acting in concert
with it
– COSCO Shipping	0	0	0	616,740,088	17.48%	12.78%
				A Share
– CSG	1,554,631,593	56.82%	38.56%	1,554,631,593	44.05%	32.22%
	A Shares			A Shares
Subtotal	1,554,631,593	56.82%	38.56%	2,171,371,681	61.53%	45.00%
	A Shares			A Shares
Other subscribers under the	–	–	–	176,211,453	4.99%	3.65%
Proposed Non-public				A Shares
Issuance of A Shares
Other existing shareholders	1,181,401,268	43.18%	29.30%	1,181,401,268	33.48%	24.49%
	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	26.86%
	H Shares			H Shares
Total	2,736,032,861	100%	67.86%	3,528,984,402	100%	73.14%
	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	26.86%
	H Shares			H Shares

13 -

LETTER FROM THE BOARD

Immediately upon completion of the Proposed NonAs at the Latest Practicable Date public Issuance of A Shares at the Benchmark Price Percentage of in Percentage of all Percentage of in Percentage of all Class and No. of the relevant class voting rights of Class and No. of the relevant class voting rights of Shareholder voting rights of voting rights the Company voting rights of voting rights the Company

(ii) 616,740,088 A Shares to be issued to COSCO Shipping as the only subscriber under the Proposed Non-public Issuance of A Shares

COSCO Shipping and
parties acting in concert
with it
– COSCO Shipping	0	0	0	616,740,088	18.39%	13.27%
				A Share
– CSG	1,554,631,593	56.82%	38.56%	1,554,631,593	46.37%	33.44%
	A Shares			A Shares
Subtotal	1,554,631,593	56.82%	38.56%	2,171,371,681	64.76%	46.71%
	A Shares			A Shares
Other existing shareholders	1,181,401,268	43.18%	29.30%	1,181,401,268	35.24%	25.41%
	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	27.88%
	H Shares			H Shares
Total	2,736,032,861	100%	67.86%	3,352,772,949	100%	72.12%
	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	27.88%
	H Shares			H Shares

Accordingly, while the proceeds to be raised under the Proposed Non-public Issuance of A Shares are subject to a maximum of RMB5.4 billion, the actual amount that may be raised is subject to the results of the price inquiry exercise to be conducted pursuant to the Proposed Non-public Issuance of A Shares, and that the resultant shareholding structure of the Company following completion of the Proposed Non-public Issuance of A Shares shall be adjusted accordingly based on the combination of the level of participation by other investors in the Proposed Non-public Issuance of A Shares and the Price Floor Mechanism.

(4) Proposal in relation to the supplement to the “Price Determination Date, Issue Price and pricing principles” in respect of the Proposed Non-public Issuance of A Shares

A resolution in relation to the supplement to the “Price Determination Date, Issue Price and pricing principles” in respect of the Proposed Non-public Issuance of A Shares (i.e. the supplement to the Price Floor Mechanism) will be submitted, by way of special resolutions, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

14 -

LETTER FROM THE BOARD

(5) Proposal in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)”

The “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)”, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 29 May 2019. The full text of the English translation of the “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)” is set out in Appendix I to this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The proposal in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)” will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

(6) Proposal in relation to the “Remedial Measures Regarding Dilution on Current Returns by the Proposed Non-public Issuance of A Shares”

Pursuant to the requirements set out in the “Opinion of the State Council on Further Facilitating the Healthy Development of the Capital Markets” 《國務院關於進一步促進資本市場健( 康發展的若干意見》), the “Opinions of the General Office of the State Council on Further Strengthening the Protection of the Legitimate Rights and Interests of Minority Investors in the Capital Markets” 《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》( ) and the “Guidance Opinion on Matters Pertaining to Dilution of Return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Restructuring” 《關於首發及再融( 資、重大資產重組攤薄即期回報有關事項的指導意見》), the Company has prepared the “Remedial Measures Regarding Dilution on Current Returns by the Proposed Non-public Issuance of A Shares”.

The “Remedial Measures Regarding Dilution on Current Returns by the Proposed Non-public Issuance of A Shares”, which was prepared in the Chinese language, was disclosed in the overseas regulatory announcement of the Company dated 29 May 2019 and Appendix I to this circular.

The proposal in relation to the “Remedial Measures Regarding Dilution on Current Returns by the Proposed Non-public Issuance of A Shares”, will be submitted, by way of ordinary resolution, for the Shareholders’ consideration and approval at the EGM.

(7) Proposal in relation to the Specific Mandate

Under the Proposed Non-public Issuance of A Shares, the Company will issue the A Shares under the Specific Mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings.

In this connection, the Board proposes to seek the approval from the Independent Shareholders at the EGM and the Class Meetings for granting the Specific Mandate to the Board to issue not more than 806,406,572 A Shares (subject to adjustment as set out in the paragraph “II. Amendment to the

15 -

LETTER FROM THE BOARD

Proposed Non-public Issuance of A Shares”) to not more than 10 specific target subscribers, including COSCO Shipping, which would raise gross proceeds of RMB5.4 billion (subject to regulatory approval).

The Cap, being 806,406,572 A Shares, represents (i) approximately 29.5% of the existing issued A Shares and approximately 20.0% of the existing total issued share capital of the Company as at the date of the Announcement; and (ii) approximately 22.8% of the enlarged issued A Shares and approximately 16.7% of the enlarged total issued share capital of the Company upon completion of the Proposed Non-public Issuance of A Shares.

The proposal in relation to the Specific Mandate will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

III. CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT

(1) Summary of principal terms of the Subscription Agreement

The subscription price will be determined on the same basis as other A Shares to be issued under the Proposed Non-public Issuance of A Shares. The final subscription price will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the 2017 EGM and the 2017 Class Meetings and the sponsor (the lead manager) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.

COSCO Shipping will not participate in the pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target subscribers.

The issue price will be correspondingly adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares.

The aggregate subscription price under the Subscription Agreement will be paid by COSCO Shipping to the Company in cash by bank transfer on the specific payment date as confirmed by the sponsor (the lead manager) in the notice of payment.

Pursuant to the Subscription Agreement, COSCO Shipping shall not transfer the A Shares subscribed by it under the Proposed Non-public Issuance of A Shares within 36 months from the date of completion of the Proposed Non-public Issuance of A Shares.

16 -

LETTER FROM THE BOARD

(2) The Supplemental Agreement and Implications under the Listing Rules

On 29 May 2019, the Company entered into the Supplemental Agreement with COSCO Shipping to incorporate consequential changes to the Subscription Agreement as a result of the Amendment Resolution.

As at the Latest Practicable Date, COSCO Shipping and its associates control or are entitled to exercise control over the voting rights in respect of 1,554,631,593 A Shares, representing approximately 38.56% of all the issued Shares in the Company. Accordingly, COSCO Shipping is a controlling shareholder of the Company and therefore a connected person of the Company. The entering into of the Supplemental Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua, who are non-executive Directors, hold directorship(s) or act as senior management in COSCO Shipping and/or its subsidiaries other than the Group, and accordingly, Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua have abstained from voting on the relevant Board resolutions approving the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal. Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua are also therefore not included in the Independent Board Committee for the purposes of Rule 2.8 of the Takeovers Code. As at the Latest Practicable Date, none of the aforementioned Directors hold any Shares. Save as aforementioned, none of the other Directors has a material interest in Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal and hence no other Director is expected to abstain from voting on such Board resolutions.

(3) Information on the parties to the Supplemental Agreement

The Company

The Company is a joint stock company established under the laws of the PRC with limited liability, the H Shares of which are listed on the Main Board of the Hong Kong Stock Exchange and the A Shares of which are listed on the Shanghai Stock Exchange. The Group is principally engaged in investment holding, oil shipment along the coast of the PRC and internationally, international liquefied natural gas shipment, international chemical transportation and vessel chartering.

COSCO Shipping

COSCO Shipping is a state-owned enterprise and is the indirect controlling shareholder of the Company through CSG. COSCO Shipping is principally engaged in international shipping, ancillary business in international maritime transportation, import and export of goods and technologies, international freight agency business, leasing of self-owned vessels, sales of vessels, containers and steel and maritime engineering.

17 -

LETTER FROM THE BOARD

(4) Proposal in relation to the Supplemental Agreement and the transactions contemplated thereunder

The proposal in relation to the Supplemental Agreement and the transactions contemplated thereunder will be submitted, by way of special resolution, for the Independent Shareholders’ consideration and approval at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

IV. FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company has not conducted any equity fund raising exercises during the 12 months immediately preceding the Latest Practicable Date.

V. REASONS FOR AND BENEFITS OF THE AMENDMENT RESOLUTION, THE SUPPLEMENTAL AGREEMENT AND THE NEW WHITEWASH WAIVER

As explained in the 2017 EGM Circular, the Board considers that the Proposed Non-public Issuance of A Shares is conducive to the comprehensive and sustainable development of the Company’s business and would provide funding for Company’s further development in its maritime transportation business, and that the Proposed Non-public Issuance of A Shares and the Subscription are on normal commercial terms that are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole.

The Amendment Resolution is proposed by the Board in light of recent market conditions, as well as indicative responses received from potential subscribers. The Board believes that the Amendment Resolution provides further clarity on how the Proposed Non-public Issuance of A Shares will proceed in response to varying subscription interests, and further rationalizes the Issue Price by taking into account the effect of exright and ex-dividend events as stated above. The Board is therefore of the view that it is in the interests of the Company and its Shareholders as a whole to propose the Amendment Resolution and the New Whitewash Waiver. In addition, as the Supplemental Agreement is incidental to the proposals underlying the Amendment Resolution, the Directors (excluding the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular below) are of the view that while the transactions contemplated under the Supplemental Agreement are not in the ordinary and usual course of business of the Group, the terms of the Supplemental Agreement are on normal commercial terms, and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Save for that which forms part of the strategic goals of the Group as a result of the restructuring of China Shipping (Group) and China Ocean Shipping (Group) Company, the details of which are set out in the Company’s circular dated 22 April 2016, it is the intention of COSCO Shipping that immediately after completion of the Subscription: (i) the continued operation of the principal businesses carried on the Company shall be maintained, (ii) there will be no major changes to the principal businesses of the Company (including any redeployment of the Company’s fixed assets), or to the continued employment of the employees of the Group, other than in the Group’s ordinary and usual course of business.

The intended use of proceeds to be raised from the Proposed Non-public Issuance of A Shares shall remain the same as to that disclosed in the 2017 EGM Circular (that is, the construction of 14 oil tankers and completion of acquisition of two Panamax oil tankers previously entered into).

18 -

LETTER FROM THE BOARD

As at the Latest Practicable Date, the construction of 14 oil tankers were still in progress and the acquisition of two Panamax oil tankers has completed. Certain instalments of the construction payment for the 14 oil tankers have already been made and the acquisition price of the two Panamax oil tankers has been fully paid with the internal resources of the Group. The amount used for the aforementioned payments prior to completion of the Proposed Non-public Issuance of A Shares will be substituted and replenished by the proceeds to be raised from the Proposed Nonpublic Issuance of A Shares in accordance with the relevant procedures as required by applicable laws and regulations.

VI. IMPLICATIONS UNDER THE TAKEOVERS CODE

(1) Application for the Whitewash Waiver

As at the Latest Practicable Date, COSCO Shipping and its associates hold the voting rights in respect of 1,554,631,593 A Shares and no H Shares, representing approximately 38.56% of the total issued share capital of the Company.

Upon completion of the Proposed Non-public Issuance of A Shares, assuming the Subscription is undertaken at the Benchmark Price and subject to the adjustment of the Issue Price, it is expected that the COSCO Shipping Concert Group’s holding of voting rights in respect of all the Shares will increase to a maximum of 46.71% on a fully diluted basis from its current aggregate holding approximately 38.56% of all the Shares (and the actual level of shareholding interests in the Company held by the COSCO Shipping Concert Group will depend on the final Issue Price and the level of participation by the other target subscriber(s)). As a result of such acquisition of voting rights in the Company, unless the New Whitewash Waiver is granted pursuant to the Takeovers Code, COSCO Shipping will incur an obligation to make a mandatory offer under Rule 26 of the Takeovers Code for all the Shares other than those already held or agreed to be acquired by the COSCO Shipping Concert Group.

The Executive granted the Original Whitewash Waiver on 15 December 2017, subject to (i) the issue of the new securities being approved by a vote of the Independent Shareholders at the 2017 EGM and the 2017 Class Meetings, to be taken on a poll; and (ii) unless the Executive gives prior consent, no acquisition or disposal of voting rights of the Company being made by COSCO Shipping and parties acting in concert with it between the date of the announcement of the Company on 31 October 2017 and the completion of the Subscription. The aforementioned condition (i) imposed by the Executive has been duly fulfilled as at the Latest Practicable Date.

Given the Amendment Resolution and its effect on the Proposed Non-public Issuance of A Shares, an application has been made to the Executive for the New Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Executive has agreed, subject to the approval of the Independent Shareholders at the EGM by way of poll and such other condition(s) as may be imposed by the Executive, to grant the New Whitewash Waiver. COSCO Shipping and parties acting in concert with it, and any other Shareholders who are involved or interested in the Proposed Non-public Issuance of A Shares, the Subscription, the Specific Mandate, the New Whitewash Waiver and the Special Deal are required to abstain from voting at the EGM in respect of the resolution approving the New Whitewash Waiver.

19 -

LETTER FROM THE BOARD

As advised by the PRC Legal Adviser, the Board is of the view that the amended pricing mechanism for the Proposed Non-public Issuance of A Shares under the Amendment Resolution is in compliance with the applicable PRC laws, regulations and regulatory requirements.

The Proposed Non-public Issuance of A Shares and the Subscription will be conducted in compliance with the relevant rules and regulations, including those prescribed by the CSRC in relation to the implementation of the issuance, the Listing Rules and the Takeovers Code. As at the Latest Practicable Date, the Company does not believe that the Proposed Non-public Issuance of A Shares and the Subscription give rise to any concerns in relation to compliance with other applicable rules or regulations (including the Listing Rules). If a concern should arise after the Latest Practicable Date, the Company will endeavour to resolve the matter to the satisfaction of the relevant authority as soon as possible but in any event before the despatch of this circular. The Company notes that the Executive may not grant the New Whitewash Waiver if the Proposed Non-public Issuance of A Shares and the Subscription (as supplemented by the Supplemental Agreement) do not comply with other applicable rules and regulations.

As advised by the PRC Legal Advisers, under the Administrative Measures on Takeover of Listed Companies 《上市公司收購管理辦法》( ), the obligation to make a mandatory general offer of the A Shares by COSCO Shipping as a result of the Subscription is not required for the Proposed Non-public Issuance of A Shares (as supplemented by the Amendment Resolution) given such obligation has been waived by approval of the Shareholders in the 2017 EGM.

The proposal in relation to the New Whitewash Waiver will be submitted, by way of ordinary resolution, for the Independent Shareholders’ consideration and approval at the EGM, and will require at least 75% of the vote cast on a poll by the Independent Shareholders.

(2) Special Deal in relation to the Proposed Non-public Issuance of A Shares

Pursuant to Rules 23 and 24 of the Rules for the Implementation Rules for the Non-public Issuance of Shares by Listed Companies 《上市公司非公開發行股票實施細則》( ), where the board resolution of the company has not identified specific target subscribers for the non-public issuance of shares, the sponsor shall issue invitation for subscription to eligible specific target subscribers after obtaining approval documents from the CSRC. The list of eligible specific target subscribers shall include: (i) investors who have submitted a letter of intent after the announcement of the board resolution by the company; (ii) the top 20 Shareholders of the Company; and (iii) not less than 20 securities investment fund management companies, 10 securities companies and five insurance institutional investors, which are eligible under the Measures for the Administration of Securities Offering and Underwriting 《證券發行與承銷管理辦法》( ).

According to the applicable PRC laws, regulations and regulatory requirements, foreign investors cannot subscribe in non-public issue of A shares of listed companies by way of cash unless they are approved qualified foreign institutional investors or foreign strategic investors. After considering the applicable PRC laws, regulations and regulatory requirements, and with a view to avoiding possible delay and uncertainty as a result of foreign investors’ participation in the fundraising exercise, the scope of targeted subscribers under the Proposed Non-public Issuance of A Shares will exclude all the H Shareholders (including approved qualified foreign institutional

20 -

LETTER FROM THE BOARD

investors, foreign strategic investors and approved PRC investors which could invest in H Shares, including the qualified domestic institutional investors and the southbound trading investors under the Shanghai-Hong Kong Stock Connect). The Company has been advised by the PRC Legal Advisers that the aforementioned scope of targeted subscribers is in compliance with the applicable PRC laws, regulations and regulatory requirements.

In addition, the identity of the target subscribers (and whether the target subscribers include existing A Shareholders) cannot be pre-determined as of the Latest Practicable Date. Therefore, given the top 20 Shareholders of the Company are required to be approached pursuant to the above PRC regulatory requirements for invitation to subscribe for A Shares under the Proposed Non-public Issuance of A Shares, and their subscription (or any other subscriber who is a Shareholder) may be accepted by the Company. Accordingly, the Proposed Non-public Issuance of A Shares will constitute a Special Deal under Rule 25 of the Takeovers Code which is not capable of being extended to all Shareholders and requires the consent of the Executive. Such consent, if granted, is expected to be subject to, among other things, (i) the Independent Financial Adviser publicly stating that in its opinion, the terms of the Special Deal are fair and reasonable and (ii) the approval of the Special Deal by the Independent Shareholders by way of poll at the EGM and Class Meetings. In addition, pursuant to the Articles of Association and the applicable PRC laws and regulations, if the rights attached to any class of shares are varied, a special resolution shall be passed at the Shareholders’ general meeting and by holders of Shares of the affected class passed at a separate general meeting of the holders of Shares of the class.

Accordingly and as is the case disclosed in the 2017 EGM Circular, the resolution in respect of the Special Deal will be submitted, by way of special resolution, for Independent Shareholders’ consideration and approval at the EGM and the Class Meetings. COSCO Shipping and parties acting in concert with it and those who are involved in or interested in the Proposed Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal will abstain from voting on the resolution to be proposed at the EGM and the Class Meetings to approve the Special Deal.

An application has been made by the Company to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeovers Code. Such consent, if granted, is expected to be subject to, among other things, (i) the Independent Financial Adviser publicly stating that in its opinion, the terms of the Special Deal are fair and reasonable as far as the Independent Shareholders are concerned, and (ii) the approval of the Special Deal by the Independent Shareholders by way of poll at the EGM and the Class Meetings.

(3) Adoption of the Share Option Incentive Scheme and the grant of Share Options

As set out in the 2018 EGM Circular and the announcement of the Company dated 17 December 2018, the Share Option Incentive Scheme has been approved and adopted in the 2018 EGM and the 2018 Class Meetings.

21 -

LETTER FROM THE BOARD

As set out in the announcement of the Company dated 27 December 2018, except one Participant who did not qualify for the grant of Share Options, the Board approved the grant of 35,460,000 Share Options to 133 Participants on 27 December 2018, of which certain grantees are shareholders of the Company.

Given that the Share Option Incentive Scheme was approved at the 2018 EGM and the 2018 Class Meetings and the Share Options were granted before the Company contemplated the amendment of terms of the Proposed Non-public Issuance of A Shares, such arrangement does not constitute a special deal under Rule 25 of the Takeovers Code taking into account the New Whitewash Waiver to be sought.

VII. EGM AND CLASS MEETINGS

The EGM will be convened to consider and, if thought fit, approve (i) the Amendment Resolution, (ii) the Supplemental Agreement, (iii) the Specific Mandate, (iv) the New Whitewash Waiver and (v) the Special Deal.

The Class Meetings will be convened to consider and, if thought fit, approve (i) the Amendment Resolution, (ii) the Supplemental Agreement, (iii) the Specific Mandate and (iv) the Special Deal.

At the EGM and/or the Class Meetings, resolutions relating to the Amendment Resolution, the Supplemental Agreement, the Specific Mandate and the Special Deal will be proposed by way of special resolutions; and resolution relating to the New Whitewash Waiver will be proposed by way of ordinary resolution.

The voting at the EGM and/or the Class Meetings in relation to the resolutions referred to above will be conducted by way of poll.

The Company originally proposed to convene the EGM, the A Shares Class Meeting and the H Shares Class Meeting at 2:00 p.m. on Monday, 15 July 2019 at 3rd Floor, Ocean Hotel, No. 1171 Dong Da Ming Road, Hongkou District, Shanghai, the People’s Republic of China. The said meetings are now postponed to be held at the same place on 10:00 a.m. on Friday, 26 July 2019. Please refer to the Company’s announcement dated 5 July 2019 for details.

A revised notice convening the EGM (with the revised proxy form) in furtherance to the original notice despatched to the Shareholders on 31 May 2019 is set out on pages EGM-1 to EGM-4 of this circular.

A revised notice convening the H Shares Class Meeting (with the revised proxy form) in furtherance to the original notice despatched to the Shareholders on 31 May 2019 is set out on pages HCM-1 to HCM-4 of this circular.

COSCO Shipping, being a subscriber under the Proposed Non-public Issuance of A Shares, has a material interest in the Proposed Non-public Issuance of A Shares. Therefore, COSCO Shipping and parties acting in concert with it and those Shareholders who are involved in or interested in the Proposed Nonpublic Issuance of A Shares are required to (i) abstain from voting on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal to be

22 -

LETTER FROM THE BOARD

proposed at the EGM and (ii) abstain from voting on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate and the Special Deal at the Class Meetings. In the event that a Shareholder becomes a subscriber under the Proposed Non-public Issuance of A Shares, such Shareholder will be required to abstain from voting at the EGM and/or the Class Meetings. Save as aforementioned, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, as at the Latest Practicable Date, no other Shareholder has a material interest in the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal and therefore no other Shareholder is required to abstain from voting on the relevant resolutions at the EGM and/ or the Class Meetings.

The Amendment Resolution and the New Whitewash Waiver are inter-conditional upon each other. Save for the amendments set out in the Amendment Resolution and other incidental changes the details of which are included in this circular, the other parts of the Proposed Non-public Issuance of A Shares remain valid and of full force and effect. Accordingly, if any of the Amendment Resolution and the New Whitewash Waiver is not approved at the EGM or the Class Meetings by the requisite majority of the Independent Shareholders, the proposal for the Amendment Resolution and the New Whitewash Waiver will lapse and be of no further effect, whereas the Original Whitewash Waiver would remain valid, and the Proposed Nonpublic Issuance of A Shares would proceed under the Extension Resolutions, which will remain valid until 17 December 2019 (i.e. 12 months after the expiry of the original validity period of the Shareholders’ resolutions and authorisation granted to the Board in relation to the Proposed Non-public Issuance of A Shares which was passed in the 2017 EGM and 2017 Class Meetings), on the basis as if these resolutions have not been proposed.

Whether or not you intend to attend the EGM and/or the Class Meetings, you are requested to complete and return the enclosed revised proxy form (for use at the EGM and/or the Class Meetings) in accordance with the instructions printed thereon as soon as possible to the Company’s Hong Kong H share registrar and transfer office, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) or the Office of the Board of Directors of the Company at 7th Floor, 670 Dongdaming Road, Hongkou District, Shanghai, the People’s Republic of China (in case of holders of A Shares) but in any event not less than 24 hours before the time appointed for the holding of the EGM and/or the Class Meetings (or any adjournment thereof). Completion and return of the said proxy form will not preclude you from attending and voting in person at the EGM and/or the Class Meetings or at any adjourned meeting should you so wish, but in such event the instrument appointing a proxy shall be deemed to be revoked.

VIII. RECOMMENDATION

The advice of Messis Capital Limited, which has been appointed by the Company as the Independent Financial Adviser with the approval of the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal, is set out on pages 27 and 49 of this circular.

The Independent Board Committee, after considering the advice from the Independent Financial Adviser, is of the view that while the Proposed Non-public Issuance of A Shares (taking into account the Amendment Resolution) and the Subscription are not conducted in the ordinary and usual course of business

23 -

LETTER FROM THE BOARD

of the Group, the terms of the Proposed Non-public Issuance of A Shares (taking into account the Amendment Resolution) and the Supplemental Agreement are on normal commercial terms and that the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of all the resolutions to be proposed at the EGM and the Class Meetings to approve the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

The Directors (excluding the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular below) are of the view that the resolutions to be proposed at the EGM and the Class Meetings are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends all the Shareholders to vote in favour of the resolutions to be proposed at the EGM and the Class Meetings.

IX. FURTHER INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on pages 25 to 26 of this circular, containing its recommendation in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal, and (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 27 to 49 of this circular, containing its recommendation in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

The Independent Shareholders are advised to read the aforesaid letters before deciding as to how to vote on the resolutions approving, among other things, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

By order of the Board COSCO SHIPPING Energy Transportation Co., Ltd.* Yao Qiaohong

Company Secretary

* for identification purpose only

24 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [106 x 70] intentionally omitted <==

**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)

5 July 2019

To the Independent Shareholders

Dear Sir or Madam,

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEMENT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND

(4) SPECIAL DEAL

We refer to the circular of the Company dated 5 July 2019 (the “ Circular ”), of which this letter forms part. Unless otherwise defined, capitalised terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal, details of which are set out in the “Letter from the Board” in the Circular. Messis Capital Limited has been appointed as the Independent Financial Adviser with our approval to advise the Independent Board Committee and the Independent Shareholders in this regards.

We wish to draw your attention to the “Letter from the Board” set out on pages 8 to 24 of the Circular and the “Letter from the Independent Financial Adviser” set out on pages 27 to 49 of the Circular and the additional information set out in the appendices of this Circular.

Having taken into account, among other things, the principal factors and reasons considered by, and the advice of, the Independent Financial Adviser as set out in the “Letter from the Independent Financial Adviser” in the Circular, we concur with the view of the Independent Financial Adviser and consider that while the Proposed Non-public Issuance of A Shares (taking into account the Amendment Resolution) and the Subscription (as supplemented by the Supplemental Agreement) are not conducted in the ordinary and

* for identification purpose only

25 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

usual course of business of the Group, the terms of the Proposed Non-public Issuance of A Shares (taking into account the Amendment Resolution) and the Supplemental Agreement are on normal commercial terms and that the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend you to vote in favour of the resolutions to be proposed at the EGM and the relevant Class Meeting for approving the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

Yours faithfully, Independent Board Committee Ruan Yongping Ip Sing Chi Rui Meng Teo Siong Seng Independent non-executive Directors

26 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser, for the purpose of inclusion in this circular, to the Independent Board Committee and the Independent Shareholders in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

==> picture [199 x 38] intentionally omitted <==

5 July 2019

To: The Independent Board Committee and the Independent Shareholders of COSCO SHIPPING ENERGY TRANSPORTATION CO., LTD.*

Dear Sir or Madam,

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION IN RELATION TO SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEMENT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND

(4) SPECIAL DEAL

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company to the Shareholders dated 5 July 2019 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

27 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

It was stated in the 2017 EGM Circular that the Issue Price shall be subject to the Price Floor Mechanism, that is, the Issue Price shall not be lower than both (i) the Share Trading Price Floor and (ii) the NAV Price Floor. The final Issue Price underlying the Proposed Non-public Issuance of A Shares will be determined by the Board and its authorized person(s) based on the results of a price inquiry exercise in which COSCO Shipping will not participate. The final Issue Price, when determined, will apply to all A Shares to be issued under the Proposed Non-public Issuance of A Shares (including those A Shares to be issued under the Subscription Agreement). It was also stated in the 2017 EGM Circular that the Issue Price will also be correspondingly adjusted (taking into account the decrease in value per share attributable to the Company as a result of distribution by the Company) if there occurs any ex-right or ex-dividend event (such as distribution of dividend (excluding cash dividend), bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of share issuance under the Proposed Non-public Issuance of the A Shares. It is proposed by the Board on 29 May 2019 that to take into account also the effect of dividends and other rights events (such as bonus issue, capitalisation of capital reserves, additional issuance or placing of new shares), the Amendment Resolution will be proposed at the EGM and the Class Meeting to supplement the Price Floor Mechanism. The Amendment Resolution will also supplement the Proposed Non-public Issuance of A Shares such that in the event no effective bid is made after the aforesaid price inquiry exercise, the floor price deduced from the Price Floor Mechanism will be determined as the final Issue Price.

The Subscription Agreement was entered into between the Company and COSCO Shipping on 30 October 2017, pursuant to which COSCO Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not more than RMB4.2 billion under the Proposed Non-public Issuance of A Shares. On 29 May 2019, the Company entered into the Supplemental Agreement with COSCO Shipping to incorporate consequential changes to the Subscription Agreement as a result of the Amendment Resolution. As at the Latest Practicable Date, COSCO Shipping and its associates control or are entitled to exercise control over the voting rights in respect of 1,554,631,593 A Shares, representing approximately 38.56% of all the issued Shares in the Company. Accordingly, COSCO Shipping is a controlling shareholder of the Company and therefore a connected person of the Company. The entering into of the Supplement Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Further and as is the case disclosed in the 2017 EGM Circular, given that the scope of targeted subscribers under the Proposed Non-public Issuance of A Shares will exclude all the H Shareholders and the top 20 Shareholders of the Company are required to be approached pursuant to the PRC regulatory requirements for invitation to subscribe for A Shares under the Proposed Non-public Issuance of A Shares, and their subscription (or any other subscriber who is a Shareholder) may be accepted by the Company, the Proposed Non-public Issuance of A Shares will constitute a Special Deal to the Company under Rule 25 of the Takeovers Code which is not capable of being extended to all Shareholders and requires the consent of the Executive. An application has been made to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeover Code.

28 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua, who are non-executive Directors, hold directorship(s) or act as senior management in COSCO Shipping and/or its subsidiaries other than the Group, and accordingly, Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua have abstained from voting on the relevant Board resolutions approving the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal. Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua are also therefore not included in the Independent Board Committee for the purposes of Rule 2.8 of the Takeovers Code. As at the Latest Practicable Date, none of the aforementioned Directors hold any Shares. Save as aforementioned, none of the other Directors has a material interest in the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal and hence no other Directors is expected to abstain from voting on such Board resolutions.

The Independent Board Committee (comprising Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng, and Mr. Teo Siong Seng who are the independent non-executive Directors) has been formed in accordance with Chapter 14A of the Listing Rules and Rule 2.8 of the Takeovers Code to advise the Independent Shareholders on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal. We, Messis Capital Limited, have been appointed as the Independent Financial Adviser with the approval of the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in these regards and to give our opinion for the Independent Board Committee’s consideration when making its recommendations to the Independent Shareholders.

As at the Latest Practicable Date, we did not have any relationships with or interests in the Company and any other parties that could reasonably be regarded as relevant to our independence. Apart from normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser, no arrangement exists whereby we will receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence. During the past two years, we were appointed as an independent financial adviser for the Company on three occasions, details of which are set out in the Company’s circulars dated (i) 4 December 2017 in relation to the Proposed Non-public Issuance of A Shares and the Subscription; (ii) 30 November 2018 in relation to the Extension Resolutions and; (iii) 30 November 2018 in relation to major and continuing connected transactions. During the past two years, we were also appointed as an independent financial adviser for COSCO SHIPPING Development Co., Ltd. (stock code: 2866), a connected person of the Company, for three occasions, details of which are set out in its circulars dated (i) 10 May 2018 in relation to the extension of validity period of resolutions regarding the revised proposed non-public issuance of A shares; and (ii) 4 September 2018 in relation to the continuing connected transactions for the revision of annual caps for master containers services agreement; and (iii) 10 May 2019 in relation to further extension of validity period of resolutions regarding the revised proposed non-public issuance of A shares. Notwithstanding the above, the previous engagements with the Company or its

29 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

connected person would not affect our independence from the Company and we are independent from the Company, in particular that we did not serve as a financial adviser to (i) the Company, (ii) COSCO Shipping or its subsidiaries, and (iii) any core connected person of the Company within 2 years prior to 4 June 2019, being date of making our independence declaration to the Stock Exchange pursuant to Rule 13.85(1) of the Listing Rules. Apart from normal professional fees paid or payable to us in connection with the appointments as the Independent Financial Adviser, we do not and did not have any relationships (business, financial or otherwise) amounted to significant connection (as referred to in Rule 2.6 of the Takeovers Code) with the Company within the past two years for us of a kind reasonably likely to create, or to create the perception of, a conflict of interest for us or which is reasonably likely to affect the objectivity of our advice. Accordingly, we consider that we are independent pursuant to Rule 13.84 of the Listing Rules and Rule 2.6 of the Takeovers Code.

BASIS OF OUR OPINION

In arriving at our recommendations, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the Company, the Directors and the management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information and representations which have been provided by the Company, the Directors and the management of the Company for which they are solely and wholly responsible, are true and accurate at the time they were made and will continue to be accurate as at the Latest Practicable Date and the Shareholders will be notified of any material changes to such statements, information, opinions and/or representations as soon as possible in accordance with Rule 9.1 of the Takeovers Code. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Company.

The 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 Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the 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 therein or the document misleading.

The Circular also includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. All the Directors jointly and severally accept full responsibility for the accuracy of the information in this Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Circular have been arrived at after due and careful consideration and there are no other facts not contained in this Circular, the omission of which would make any of the statements in this circular misleading.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any material facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the Company, the Directors and the management of

30 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Company, nor have we conducted an independent investigation into the business and affairs of the Group and any parties in relation to the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal. Except for its inclusion in the Circular, this letter is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions and recommendations, we have taken into consideration the following principal factors and reasons:

1. SUMMARY OF THE PRINCIPAL TERMS OF THE ORIGINAL PROPOSAL FOR THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES AND SUBSCRIPTION AGREEMENT AS SET OUT IN THE 2017 EGM CIRCULAR

As set out in the 2017 EGM Circular, the Proposed Non-public Issuance of A Shares would be carried out by way of non-public issue of A Shares to not more than 10 specific target subscribers, including COSCO Shipping. The target subscribers (other than COSCO Shipping) include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other qualified investors in compliance with applicable laws and regulations. The final list of subscribers (other than COSCO Shipping) will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the 2017 EGM and the 2017 Class Meetings and the sponsor (the lead manager) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.

The maximum number of Shares to be issued under the Proposed Non-public Issuance of A Shares would be 806,406,572 A Shares (referred to as the “ Cap ” below). The Cap will be adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between date of the announcement of the Company dated 31 October 2017 and the date of share issuance under the Proposed Non-public Issuance of A Shares. Subject to the Cap, the Board and its authorised person(s) were granted at the 2017 EGM and 2017 Class Meetings such authority as necessary for determining the final number of A Shares to be issued based on the market conditions and negotiations with the sponsor (the lead manager) with reference to the amount of proceeds to be raised and the actual amount of subscription received.

31 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

inquiry exercise in which COSCO Shipping will not participate. The final Issue Price, when determined, will apply to all A Shares to be issued under the Proposed Non-public Issuance of A Shares (including those A Shares to be subscribed by COSCO Shipping under the Subscription Agreement). It was also stated in the 2017 EGM Circular that the Issue Price will also be correspondingly adjusted (taking into account the decrease in value per share attributable to the Company as a result of distribution by the Company) if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of share issuance under the Proposed Non-public Issuance of the A Shares.

The Subscription Agreement was entered into between the Company and COSCO Shipping on 30 October 2017, pursuant to which COSCO Shipping has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not more than RMB4.2 billion under the Proposed Non-public Issuance of A Shares. The subscription price will be determined on the same basis as other A Shares to be issued under the Proposed Non-public Issuance of A Shares. COSCO Shipping will not participate in the pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target subscribers. The issue price will be correspondingly adjusted if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalisation of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of the Proposed Non-public Issuance of A Shares.

We noted that the basis of determining subscription price remain unchanged. We obtained and reviewed the aforesaid regulations (including《關於修改＜上市公司非公開發行股票實施細則＞的決定》 (Decision on Amending Implementing Rules on Non-Public Issuance of Shares by Listed Companies) published by CSRC on 15 February 2017 and《發行監管問答－關於引導規範上市公司融資行為的監管要求》 (the Issuance Regulatory Questions and Answers – Regulatory Requirements regarding Guiding and Regulating Listed Companies’ Financing Activities) published by the CSRC on 17 February 2017 and revised on 9 November 2018 (collectively, the “ New PRC Regulations ”) and the “Measure for Administration of the Issuance of Securities by Listed Companies” 《上市公司證券發行管理辦法》( ) (the “ Measures ”)) and acknowledged that the basis of determining the issue price is in compliance with the relevant regulations of the PRC. In addition, we have reviewed the Opinions Concerning Regulating the Work Relating to the Restructuring of State-owned Enterprises《關於規範國有企業改制工作的意見》issued by SASAC and noted that, among others, the pricing for the transfer of the shares of the listed stated-owned enterprises should be reasonable and make reference to the enterprises’ profitability and market performance and should be on the basis of not lower than the net asset value per share of the enterprises.

Having considered that (i) the basis of the subscription price is in compliance with the New PRC Regulations, the Measures and the Opinions Concerning Regulating the Work Relating to the Restructuring of State-owned Enterprises; (ii) the subscription price will be the same to all

32 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

subscribers; and (iii) COSCO Shipping shall not transfer the A Shares subscribed under the Proposed Non-public Issuance of A Shares within 36 months from the date of the completion of the Proposed Non-public Issuance of A Shares which were determined in accordance with the New PRC Regulations, we are of the view that the terms of the Proposed Non-public Issuance of A Shares and the Subscription Agreement are on normal commercial terms, fair and reasonable as far as the Independent Shareholders are concerned.

2. REASONS FOR AND BENEFITS OF PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

As disclosed in the 2017 EGM Circular, the Board considers that the Proposed Non-public Issuance of A Shares is conducive to the comprehensive and sustainable development of the Company’s business and would provide funding for Company’s further development in its maritime transportation business.

On 30 October 2017, the Board has approved the Proposed Non-public Issuance of A Shares, pursuant to which the Company will issue a maximum of 806,406,572 A Shares (subject to adjustment) to not more than 10 specific target subscribers, including COSCO Shipping, which would raise gross proceeds of RMB5.4 billion (inclusive of the subscription for an amount of not more than RMB4.2 billion by COSCO Shipping pursuant to the Subscription Agreement) and that the net proceeds from the Proposed Non-public Issuance of A Shares (after deducting all applicable costs and expenses incurred in connection with the Proposed Non-public Issuance of A Shares estimated to be approximately RMB24 million) are expected to be approximately RMB5.38 billion, which are intended to use (i) as to approximately RMB4.99 billion for the construction of 14 oil tankers; and (ii) as to approximately RMB0.41 billion for the completion of acquisition of two Panamax oil tankers previously entered into. To the extent the actual proceeds to be raised from the Proposed Non-public Issuance of A Shares are less than the aggregate amount of the proceeds as per the above allocation, the Company will make up for the shortfall by utilising its internal resources or other means of financing. As advised by the management of the Company, there is no change in the proposed use of proceeds from the Proposed Non-public Issuance of A Shares as set out in the 2017 EGM Circular.

According to the annual report of the Company for the year ended 31 December 2018 (the “ Annual Report 2018 ”), the Group is the world’s largest oil tanker owner in terms of transportation capacity. As of 31 December 2018, the Group owned and controlled 151 oil tankers with a total capacity of 21.88 million Dead Weight Tonnage (“ DWT ”), including 137 self-owned oil tankers with a capacity of 19.02 million DWT, 14 leased oil tankers with a capacity of 2.87 million DWT, and an order of 16 oil tankers with a capacity of 3.06 million DWT. The Group is also a leading player in the coastal crude oil and product oil transportation industry in the PRC. In the coastal crude oil

33 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

transportation sector, the Group has maintained its position as industry leader and a market share of over 55%. As stated in the Annual Report 2018 and after our discussion with the management of the Company, we understand that it is the Group’s strategies to maintain and being a leader in the global energy transportation industry with strong international competitiveness, brand influence and positive reputation from its clients, so as to accomplish its transformation from a participant to a leader in global energy transportation by expanding its vessels fleet size. As stated in the Annual Report 2018, the Group’s capital commitment for construction and purchase of vessels amounted to approximately RMB6.4 billion which will fall due from 2019 to 2021. In addition, the long term capital raised from the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s consolidated debt-to-asset ratio and the acquisition of the oil tankers can supplement and upgrade its shipping capacity on a timely basis and optimise the age composition of the fleet further to maintain and increase its shipping capacity and reduce its fleeting operating costs.

As disclosed in the unaudited consolidated first quarterly report of the Group for the three months ended 31 March 2019, which have been prepared in accordance with the Generally Accepted Accounting Principles of the PRC, the Group recorded a net profit of approximately RMB428 million for the three months ended 31 March 2019 as compared to the net loss of approximately RMB86 million for the corresponding period of 2018. We understand from the management of the Company that such turnaround was mainly due to (i) gradual increase global oil tanker demand since fourth quarter of 2018 and the Group strengthened its research analysis on the international tanker market and optimally strategised for rising opportunities in the market recovery ; (ii) ageing of existing tankers and environment conventions such as International Maritime Organisation 2020 sulfur cap have exerted further pressure on the profitability of older tankers, which is likely to encourage demolition; and (iii) the Group realised a pre-tax income of RMB138 million in the LNG transportation segment and thus a year-on-year growth of 89.7%. After taking into consideration that the recent gradual increase in global market demand in oil tanker demand and the Group’s strategies to expand its vessel fleet size as discussed above as well as complying the environment convention, we concur with the view of the Directors that it is justifiable to apply the net proceeds from the Proposed Non-public Issuance of A Shares for the construction and acquisition of oil tankers which could benefit the Group’s both operational and financial performance as a whole.

Based on the above, we concur with the view of the Directors that the utilisation of net proceeds from the Proposed Non-pubic Issuance of A Shares are in line with the business strategies of the Group and in the interests of the Company and the Shareholders as a whole.

Financing alternatives

According to the Annual Report 2018, as at 31 December 2018, the cash and cash equivalents were approximately RMB3.5 billion, which is expected to meet capital needs of regular operating cash flows of the Group. As such, the Company has considered other fund raising methods such as obtaining debt financing and conducting rights issue or public offering for the abovementioned plans of use of proceeds.

The Group’s net debt-to-equity ratio (as calculated by net debt over total equity) was approximately 94.0% as at 31 December 2018 and further raising capital from debt financing may lead to increase in the Company’s gearing position. As such, the Directors considered that taking into

34 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

account of the current gearing level of the Group, raising funds by equity financing with interest-free nature could reduce the net debt-to-equity ratio and will effectively reduce the Group’s financial risks, enhance the Group’s ability to continue as going concern and competitiveness in the industry. The Directors therefore concluded that equity financing can improve the leverage position of the Group as compared to debt financing.

As advised by the Directors, the Company has also considered other means of equity financing such as private placement of H Shares, rights issue or open offer. However, given that the issued H Share capital of the Company is significantly lower than the issued A Share capital of the Company, the expected size of fund to be raised will be less than approximately RMB5.4 billion. In addition, there is a significant premium of the price of A Shares trading on the Shanghai Stock Exchange over the price of H Shares trading on the Hong Kong Stock Exchange. If the Company conducts a fund raising exercise by issuing both new A Shares and new H Shares, assuming a pricing basis of not less than the average trading price of the A Share in the 20 trading days preceding the base day, the issue price will represent a premium over the historical trading prices of H Shares which the H Shareholders are not likely to subscribe the new H Shares.

The chart below illustrates a comparison between the daily closing prices of the A Share and the daily closing price of the H Share (presented in RMB equivalent based on an exchange rate of RMB1 to HK1.135) from 30 November 2018 up to the Latest Practicable Date (the “ Review Period ”).

==> picture [389 x 229] intentionally omitted <==

----- Start of picture text -----

8.00
7.00
6.00
5.00
4.00
3.00
2.00
Nov 2018 Dec 2018 Jan 2019 Feb 2019 Mar 2019 Apr 2019 May 2019 Jun 2019
Date
H share A share
Closing Price (RMB)
----- End of picture text -----

Source:

Website of the Hong Kong Stock Exchange and 巨潮資訊網 (Cninfo*, www.cninfo.com.cn, being a website designated by CSRC for the purpose of information disclosure)

35 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

During the Review Period, the closing prices of the H Share were in the range of HK$3.72 (or approximately RMB3.28) to HK$5.34 (or approximately RMB4.70) per H Share and the closing prices of the A Share were in the range of RMB4.40 to RMB7.16 per A Share.

In other words, the closing prices of H shares were lower than those of A Shares during the Review Period. If the Company were to conduct a fund raising exercise by issuance of new H Shares with a proceed of approximately RMB5.4 billion, assuming that an equivalent pricing basis is adopted to determine the benchmark price for the H Shares issuance (that is, being the Share Trading Price Floor), the number of H Shares to be issued will be substantially more than that required for the Revised Proposed Non-public Issuance of A Shares. This would lead to a greater dilution effect on the shareholding of the existing Shareholders and would not be in the interests of the Independent Shareholders.

Based on the above, in particular, (i) there is no change in the proposed use of proceeds from the Proposed Non-public Issuance of A Shares as set out in the 2017 EGM Circular and are in line with the business strategies of the Group; (ii) the long term capital raised from the Proposed Nonpublic Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s consolidated debt-to-asset ratio; (iii) the high net debt to equity ratio of the Group and further debt financing may worsen its gearing position; and (iv) other means of equity financing may lead to greater dilution effect on the shareholding of the existing Shareholders, we concur with the Directors’ view that the Proposed Non-public Issuance of A Shares is in the interests of the Company and the Shareholders as a whole.

3. BACKGROUND OF AND THE TERMS OF AMENDMENT RESOLUTION AND THE SUPPLEMENTAL AGREEMENT

As mentioned above and in the 2017 EGM Circular, the Issue Price will be correspondingly adjusted (taking into account the decrease in value per share attributable to the Company as a result of distribution by the Company) if there occurs any ex-right or ex-dividend event (such as distribution of dividend, bonus issue, capitalisation of capital reserves, additional issuance or placing of new Shares) between the Price Determination Date and the date of share issuance under the Proposed Non-public Issuance of the A Shares.

As advised by the Directors, in light of recent market conditions, as well as indicative responses received from potential subscribers, the Board propose the Amendment Resolution to supplement the Price Floor Mechanism such that:

(i) if there exists between (a) the date to which the latest audited consolidated statement of financial positions is made up to, and (b) the date of share issuance under the Proposed Non-public Issuance of the A Shares any ex-right or ex-dividend events (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares), the NAV Price Floor shall be adjusted downwards to take into account the effect of such event(s); and
36 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) if any such ex-right/ex-dividend event takes place during the 20-trading day reference period underlying the Share Trading Price Floor, such that the Company’s shares are quoted cum-right/dividend for part of the period and ex-right/dividend for the other part of the period, downward adjustments to the Share Trading Price Floor taking into account the effect of rights/dividends shall be applied to the trading prices of each cumdividend trading day throughout the entire 20-trading day period.

Reasons for and benefits of the Amendment Resolution and the Supplemental Agreement

As stated in the Letter from the Board, the Amendment Resolution is proposed by the Board in light of recent market conditions, as well as indicative responses received from potential subscribers. The Board believes that the Amendment Resolution provides further clarity on how the Proposed Non-public Issuance of A Shares will proceed in response to varying subscription interests, and further rationalises the Issue Price by taking into account the effect of ex-right and ex-dividend events as stated above. In addition, the Supplemental Agreement is incidental to the proposals underlying the Amendment Resolution.

Save for the amendments set out in the Amendment Resolution and other incidental changes, the other parts of the Proposed Non-public Issuance of A Shares remain valid and of full force and effect.

After taking into consideration that (i) the Amendment Resolution is proposed in light of recent market conditions and responses received from potential subscribers; (ii) the ex-right and exdividend events, if occurred, will have impact to the net assets value of the Group and the share trading price of the Company; (iii) the Issue Price will be determined based on (a) the Share Trading Price Floor and (b) the NAV Price Floor; and (iv) the other parts of the Proposed Non-public Issuance of A Shares remain valid and of full force and effect save for the Amendment Resolution and other incidental changes, we concur with the Directors’ view that the Amendment Resolution will help rationalises the Issue Price in light of the effect of ex-right and ex-dividend events and hence can provide clarity to the potential subscribers, and therefore is the Amendment Resolution and the entering of the Supplemental Agreement in the interests of the Company and the Shareholders as a whole.

37 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Fairness and reasonableness on the terms of the Amendment Resolution and the Supplemental Agreement

In assessing whether the Price Floor Mechanism in relation to the ex-right and ex-dividend events and the terms of the Supplemental Agreement are fair and reasonable and on normal commercial terms, we have conducted searches over the website of Stock Exchange (www.hkexnews.hk) with companies listed on both the Shanghai Stock Exchange and the Hong Kong Stock Exchange to identify transactions in nature similar to the Proposed Non-public Issuance of A Shares (the “ Comparables ”) for comparison purpose. We have identified an exhaustive list of 3 Comparables based on the aforesaid selection criteria during the Review Period.

As each of the Comparables has its own unique nature and characteristic in terms of, inter alia, business operation and environment, size, profitability and financial position, the comparison between the Company and the Comparables may not represent an identical comparison. We, however, consider such comparison could be treated as an indication as to the reasonableness and fairness of the price floor mechanism in relation to ex-right and ex-dividend events (such as bonus issue, capitalization of capital reserves, additional issuance or placing of new shares) and the corresponding terms of the Supplemental Agreement. The relevant details of the Comparables are set forth in the table below:

			Market
			Capitalisation as
Name of the			at the Latest	Date of	Price floor mechanism in relation to ex-right
listed issuer	Stock code	Principal business	Practicable Date	announcement	and ex-dividend events
Beijing	187	Principally engaged in the	Approximately	6 May 2019	If	any ex-right and ex-dividend event such as
Jingcheng	(H shares)	development, design, sales,	HK$2.7 billion			bonus issue of shares and capitalisation issue
Machinery		installation commissioning				occurs during the period from the pricing
Electric	600860	and repair of low-				benchmark date to the date of issue of the non-
Company	(A shares)	temperature storage and				public issuance of A shares, the issue price
Limited		transportation containers,				shall be adjusted accordingly.
		compressors and
		accessories
Haitong	6837	Principally engaged in	Approximately	25 April 2019	(i)	In the event the company distributes
Securities	(H shares)	security businesses	HK$160.6 billion	(note)		dividends, grant bonus shares, allots
Co., Ltd						shares, convert capital reserve into share
	600837					capital or carries out any other ex-right or
	(A shares)					ex-dividend activities during the period
						commencing from the balance sheet date
						of the audited financial reports for the last
						period before the non-public issuance of A
						shares to the issuance date of the non-
						public issuance of A shares, adjustment
						shall be made to the net assets per share
						accordingly.
					(ii) In the event that any ex-right or ex-
						dividend activity causes any adjustment in
						the share prices during the 20 trading
						days, the trading prices for the trading
						days before such adjustment shall be
						calculated on the basis of the adjusted
						price caused by the ex-right or ex-
						dividend.

38 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market
			Capitalisation as
Name of the			at the Latest	Date of	Price floor mechanism in relation to ex-right
listed issuer	Stock code	Principal business	Practicable Date	announcement	and	ex-dividend events
CSC Financial	6066	Mainly engaged in securities	Approximately	21 January	(i)	In the event that the company distributes
Co., Ltd	(H shares)	brokerage, securities	HK$163.1 billion	2019		dividends, grants bonus shares, allots
		investment consulting,				shares, converts capital reserve into share
	601066	financial advisers related to				capital or carries out any other ex-right or
	(A shares)	securities trading and				ex-dividend activities during the period
		securities investment				commencing from the balance sheet date
		activities, securities				of the latest audited financial reports to
		underwriting and sponsor,				the issuance date of the non-public
		securities self-management,				issuance of A shares, adjustments shall be
		securities asset				made to the net assets per share
		management, securities				accordingly.
		investment fund agent
		distribution, providing
		futures companies with			(ii)	In the event that there are ex-right or ex-
		medium introduction				dividend activities causing adjustment to
		services, margin financing,				the share prices during the 20 trading
		financial products agent				days, the trading prices for the trading
		distribution, insurances				days before such adjustment shall be
		facultative agent, stock				calculated on the basis of the price
		options market making,				adjusted by the ex-right or ex-dividend
		securities investment fund				activities.
		trusteeship and precious
		metal products sales
		businesses.

Note: The proposed non-public issuance of A shares was announced on 26 April 2018 and the board of Haitong Securities Co., Ltd approved on 25 April 2019 for the adjusted proposed non-public issuance of A shares.

Based on the comparable analysis above, we noted from two out of three of the Comparables that (i) in the event of the Comparables’ carries out any ex-right or ex-dividend activities during the period commencing from the balance sheet date of the latest audited financial reports to the issuance date of the non-public issuance of A shares, the net assets value per share, being one of the two limiting parameters underlying the floor price of the issuance price of the A shares, shall be adjusted accordingly; and (ii) in the event of the Comparables’ carries out any ex-right or ex-dividend activities causing adjustment to the share prices during the 20 trading days, the trading prices for the trading days before such adjustment shall be calculated on the basis of the price adjusted by the exright or ex-dividend, such that the corresponding average trading prices of the A shares during the 20 trading days immediately preceding the price determination date, being the other limiting parameters underlying the floor price of the issuance price of the A shares, shall be adjusted. Based on the above, we are of the view that the terms of the Amendment Resolutions and the Supplemental Agreement in relation to the Price Floor Mechanism are not uncommon and are in line with the market practice.

Apart from the Price Floor Mechanism in relation to the ex-right and ex-dividend events, we also noted that the Amendment Resolution will also supplement the Proposed Non-public Issuance of A Shares in a way that in the event no effective bid is made after the aforesaid price inquiry exercise, the floor price deduced from the Price Floor Mechanism will be determined as the final Issue Price. Having considered that (i) the final Issue Price (i.e. the floor price deduced from the Price Floor Mechanism) is in compliance the Price Floor Mechanism and hence the New PRC Regulations, the Measures and the Opinions Concerning Regulating the Work Relating to the Restructuring of State-

39 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

owned Enterprises in the event no effective bid is made after the price inquiry exercise; which can provide further clarity on the determination of the Issue Price; (ii) it is expected the final Issue Price to be not lower than the Benchmark Price; and (iii) in the event that the Issue Price is expected to fall below the Benchmark Price, the Company will re-comply with the necessary approval requirements including, among other things, Independent Shareholders’ approval requirements under the Listing Rules and for a new whitewash waiver under the Takeovers Code, we are of the view that the terms of the Amendment Resolution and the Supplemental Agreement are on normal commercial terms and fair and reasonable as far as the Independent Shareholders are concerned.

4. POSSIBLE FLUCTUATIONS IN PUBLIC SUBSCRIPTION LEVEL AND RESULTANT SHAREHOLDING INTEREST IN THE COMPANY HELD BY THE COSCO SHIPPING CONCERT GROUP

Apart from the Subscription Agreement, as at the Latest Practicable Date, the Company has not entered into any contractual commitment with any other person regarding subscription of A Shares under the Proposed Non-public Issuance of A Shares and, accordingly, the level participation by other targeted subscribers in the Proposed Non-public Issuance of A Shares may be affected by a number of factors, including market conditions and the target subscriber’s own circumstances. In the event COSCO Shipping subscribes up to its full commitment of RMB4.2 billion under the Proposed Non-public Issuance of A Shares and the other targeted subscribers in the aggregate subscribe for less than RMB1.2 billion, the shareholding interest in the Company held by the COSCO Shipping Concert Group will exceed 45.00% on a fully diluted basis.

40 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Issuance of A Shares such that a total gross proceeds of RMB5.4 billion is raised; and (ii) COSCO Shipping is the sole subscriber and no other target subscriber subscribes under the Proposed Nonpublic Issuance of A Shares such that a total gross proceeds of RMB4.2 billion is raised:–

				Immediately upon completion of	Immediately upon completion of	the Proposed
				Non-public	Issuance of A Shares at the
	As at the	Latest Practicable Date			Benchmark Price
		Percentage of			Percentage of
		in the	Percentage of		in the	Percentage of
	Class and No.	relevant class	all voting	Class and No.	relevant class	all voting
	of voting	of voting	rights of the	of voting	of voting	rights of the
Shareholder	rights	rights	Company	rights	rights	Company

(i) 616,740,088 A Shares and 176,211,453 A Shares to be issued to COSCO Shipping and other target subscribers under the Proposed Non-public Issuance of A Shares respectively

COSCO Shipping and
parties acting in
concert with it
– COSCO Shipping	0	0	0	616,740,088	17.48%	12.78%
				A Share
– CSG	1,554,631,593	56.82%	38.56%	1,554,631,593	44.05%	32.22%
	A Shares			A Shares
Subtotal	1,554,631,593	56.82%	38.56%	2,171,371,681	61.53%	45.00%
	A Shares			A Shares
Other subscribers under	–	–	–	176,211,453	4.99%	3.65%
the Proposed Non-				A Shares
public Issuance of A
Shares
Other existing	1,181,401,268	43.18%	29.30%	1,181,401,268	33.48%	24.49%
shareholders	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	26.86%
	H Shares			H Shares
Total	2,736,032,861	100%	67.86%	3,528,984,402	100%	73.14%
	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	26.86%
	H Shares			H Shares

41 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Immediately upon completion of	Immediately upon completion of	the Proposed
				Non-public	Issuance of A Shares at the
	As at the	Latest Practicable Date			Benchmark Price
		Percentage of			Percentage of
		in the	Percentage of		in the	Percentage of
	Class and No.	relevant class	all voting	Class and No.	relevant class	all voting
	of voting	of voting	rights of the	of voting	of voting	rights of the
Shareholder	rights	rights	Company	rights	rights	Company

(ii) 616,740,088 A Shares to be issued to COSCO Shipping as the only subscriber under the Proposed Non-public Issuance of A Shares

COSCO Shipping and
parties acting in
concert with it
– COSCO Shipping	0	0	0	616,740,088	18.39%	13.27%
				A Share
– CSG	1,554,631,593	56.82%	38.56%	1,554,631,593	46.37%	33.44%
	A Shares			A Shares
Subtotal	1,554,631,593	56.82%	38.56%	2,171,371,681	64.76%	46.71%
	A Shares			A Shares
Other existing	1,181,401,268	43.18%	29.30%	1,181,401,268	35.24%	25.41%
shareholders	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	27.88%
	H Shares			H Shares
Total	2,736,032,861	100%	67.86%	3,352,772,949	100%	72.12%
	A Shares			A Shares
	1,296,000,000	100%	32.14%	1,296,000,000	100%	27.88%
	H Shares			H Shares

Accordingly, while the proceeds to be raised under the Proposed Non-public Issuance of A Shares are subject to a maximum of RMB5.4 billion, the actual amount that may be raised is subject to the results of the price inquiry exercise to be conducted pursuant to the Proposed Non-public Issuance of A Shares, and that the resultant shareholding structure of the Company following completion of the Proposed Non-public Issuance of A Shares shall be adjusted accordingly based on level of participation by other investors in the Proposed Non-public Issuance of A Shares.

Upon completion of the Proposed Non-public Issuance of A Shares (assuming there is no other changes to the issued share capital of the Company save for the issuance of A Shares under the Proposed Non-public Issuance of A Shares), in the case of both COSCO Shipping and all other target subscribers subscribe in full under the Proposed Non-public Issuance of A Shares such that a total

42 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

gross proceeds of RMB5.4 billion is raised, (i) the percentage of all voting rights of the Company of the public A Shareholders will be decreased from approximately 29.3% to approximately 24.5%; and (ii) the percentage of all voting rights of the Company of the public H Shareholders will be decreased from approximately 32.1% to approximately 26.9%.

On the worst case scenario, while in the case of COSCO Shipping is the sole subscriber and no other target subscriber subscribes under the Proposed Non-public Issuance of A Shares such that a total gross proceeds of RMB4.2 billion is raised, (i) the percentage of all voting rights of the Company of the public A Shareholders will be decreased from approximately 29.3% to approximately 25.4%; and (ii) the percentage of all voting rights of the Company of the public H Shareholders will be decreased from approximately 32.1% to approximately 27.9%.

Although there will be dilution effect to the shareholding interest of existing public shareholders of H Shares as a result of the Proposed Non-public Issuance of A Shares, we have, however, taken into account (i) the reasons for and benefits of the Proposed Non-public Issuance of A Shares; (ii) the proposed use of proceeds is in line with the business strategies of the Group; (iii) the long term capital raised from the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s gearing position; (iv) alternative fund raising methods considered by the Company as set out in the section headed “2. Reasons for and benefits of the Proposed Non-public Issuance of A Shares” are not in the interests of the Company and the Shareholders as a whole; and (v) the fairness and reasonableness of the basis of determining the Issue Price, the Amendment Resolution and the terms of the Subscription Agreement and Supplemental Agreement as mentioned above, we consider that the Proposed Non-public Issuance of A Shares is an acceptable means of funds raising by the Company and the shareholding dilution effects upon completion of the Proposed Non-public Issuance of A Shares is acceptable so far as the Independent Shareholders are concerned.

5. POSSIBLE FINANCIAL EFFECTS TO THE GROUP OF THE PROPOSED NONPUBLIC ISSUANCE OF A SHARES

As advised by the Directors, the Proposed Non-public Issuance of A Shares and the Subscription would have the following financial effects to the Group:

(i) Net assets value and net assets value per Share

As referred to the Annual Report 2018, the net assets value attributable to owners of the Company of the Group as at 31 December 2018 was approximately RMB28.1 billion as adjusted by the effect of payment of dividend. The Directors expect that the Group’s net assets value would increase after completion of the Proposed Non-public Issuance of A Shares as the net proceeds from the Proposed Non-public Issuance of A Shares will bring in additional funds to the Group. Regarding the impact on net asset value per Share, in the event that the issue price is equal to the NAV Price Floor, being the net asset value per Share as set out in the latest audited consolidated financial statement of the Company, it is expected that the net assets value per Share will be decreased slightly from approximately RMB6.972 per Share to approximately RMB6.968 per Share upon completion of the Issuance (after taking into account

43 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

certain costs in relation to the Issuance). However, having considered the overall benefits of the Issuance in the long run, we consider that the benefits outweigh the possible minimal reductions in the net assets value per Share.

(ii) Gearing

The Directors expect that the Group’s consolidated debt-to-asset ratio will be reduced from approximately 48.9% as at 31 December 2018 to approximately 45.1% immediately after the completion of the Proposed Non-public Issuance of A Shares, assuming the net proceeds from the Proposed Non-public Issuance of A Shares (after deducting all applicable costs and expenses incurred in connection with the Proposed Non-public Issuance of A Shares and which is estimated to be approximately RMB24 million) are expected to be approximately RMB5.38 billion, in view of the fact that additional funds will be brought to the Group without any increase in debt.

Based on the above, we concur with the Directors’ view that the Proposed Non-public Issuance of A Shares would have an overall positive effect on the financial position of the Group. It should be noted that the aforementioned analysis is for illustrative purposes only and do not purport to represent how the financial position of the Group will be upon completion of the Proposed Non-public Issuance of A Shares.

6. THE NEW WHITEWASH WAIVER

Upon completion of the Proposed Non-public Issuance of A Shares, assuming the Subscription is undertaken at the Benchmark Price, it is expected that the COSCO Shipping Concert Group’s holding of voting rights in respect of all the Shares will increase to a maximum of 46.71% on a fully diluted basis from its current aggregate holding approximately 38.56% of all the Shares (and the actual level of shareholding interests in the Company held by the COSCO Shipping Concert Group will depend on the final Issue Price and the level of participation by the other target subscriber(s)). As a result of such acquisition of voting rights in the Company, unless the New Whitewash Waiver is granted pursuant to the Takeovers Code, COSCO Shipping will incur an obligation to make a mandatory offer under Rule 26 of the Takeovers Code for all the Shares other than those already held or agreed to be acquired by the COSCO Shipping Concert Group.

44 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given the Amendment Resolution and its effect on the Proposed Non-public Issuance of A Shares, an application has been made to the Executive for the New Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. COSCO Shipping and parties acting in concert with it, and any other Shareholders who are involved or interested in the Proposed Non-public Issuance of A Shares, the Subscription, the Specific Mandate, the New Whitewash Waiver and the Special Deal are required to abstain from voting at the EGM in respect of the resolution approving the New Whitewash Waiver.

The Amendment Resolution and the New Whitewash Waiver are inter-conditional upon each other. If any of the Amendment Resolution and the New Whitewash Waiver is not approved at the EGM/Class Meetings by the requisite majority of the Independent Shareholders, the proposal for the Amendment Resolution and the New Whitewash Waiver will lapse and be of no further effect, whereas the Original Whitewash Waiver would remain valid, and the Proposed Non-public Issuance of A Shares would proceed on the basis as if these resolutions have not been proposed.

Having considered (i) the benefits of the Proposed Non-public Issuance of A Shares as mentioned in the previous sections in this letter, in particular (a) the Proposed Non-public Issuance of A Shares is a reasonable financing means available to the Group as compared to debt financing and other means of equity financing; (b) the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s net debt to equity ratio; (c) the Proposed Non-public Issuance of A Shares would provide further funding for the acquisition of oil tankers to implement the business strategies of the Group; (d) the basis of determining the Issue Price is in compliance with the New PRC Regulations, the Measures and the Opinions Concerning Regulating the Work Relating to the Restructuring of State-owned Enterprises; and (e) the dilution effect to the Independent Shareholders as a result of the Proposed Non-public Issuance of A Shares is acceptable due to the reasons as elaborated under the section headed “Possible fluctuations in public subscription level and resultant shareholding interest in the Company held by the COSCO Shipping Concert Group” of this letter; (ii) the benefits of the Amendment Resolution as mentioned in the previous sections in this letter, in particular, the Amendment Resolution provides further clarity on how the Proposed Non-public Issuance of A Shares will proceed in response to varying subscription interests, and further rationalizes the Issue Price by taking into account the effect of ex-right and ex-dividend events; and (iii) save for the Amendment Resolution and other incidental changes, the other parts of the Proposed Non-pubic Issuance of A Shares remain valid and of full force and effect, we are of the view that the granting of the New Whitewash Waiver is fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

7. THE SPECIAL DEAL

45 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

including the qualified domestic institutional investors and the southbound trading investors under the Shanghai-Hong Kong Stock Connect). The Company has been advised by its PRC legal advisers that the aforementioned scope of targeted subscribers is in compliance with the applicable PRC laws, regulations and regulatory requirements.

In addition, the identity of the target subscribers (and whether the target subscribers include existing A Shareholders) cannot be pre-determined as of the Latest Practicable Date. Therefore, given the top 20 Shareholders of the Company are required to be approached pursuant to the above PRC regulatory requirements for invitation to subscribe for A Shares under the Proposed Non-public Issuance of A Shares, and their subscription (or any other subscriber who is a Shareholder) may be accepted by the Company. Accordingly, the Proposed Non-public Issuance of A Shares will constitute a Special Deal to the Company under Rule 25 of the Takeovers Code which is not capable of being extended to all Shareholders and requires the consent of the Executive. An application has been made by the Company to the Executive for its consent to the Special Deal pursuant to Rule 25 of the Takeovers Code. Such consent, if granted, is expected to be subject to, among other things, (i) the Independent Financial Adviser publicly stating that in its opinion that the terms of the Special Deal are fair and reasonable and (ii) the approval of the Special Deal by the Independent Shareholders by way of poll at the New EGM and Class Meetings. In addition, pursuant to the articles of association of the Company and the applicable PRC laws and regulations, if the rights attached to any class of shares are varied, a special resolution shall be passed at the Shareholders’ general meeting and by holders of Shares of the affected class passed at a separate general meeting of the holders of Shares of the class.

As set out in the Letter from the Board and as in the case disclosed in the 2017 EGM Circular, we are given to understand that;

(i) pursuant to Rules 23 and 24 of the Implementation Rules for the Non-public Issuance of Shares by Listed Companies, where the board resolution of the Company has not identified specific target subscribers for the non-public issuance of shares, the sponsor shall issue invitation for subscription to eligible specific target subscribers after obtaining approval documents from the CSRC. The list of eligible specific target subscribers shall include: (i) investors who have submitted a letter of intent after the announcement of the board resolution by the company; (ii) the top 20 shareholders of the company; and (iii) not less than 20 securities investment fund management companies, 10 securities companies and five insurance institutional investors, which are eligible under the Measures for the Administration of Securities Offering and Underwriting 《證券發行與承銷管理辦法》( );
(ii) according to the relevant provisions such as the Implementation Rules for the Proposed Non-public Issuance of A Shares by Listed Companies, the final issue price will be determined by the Board and its authorised person(s) with the authorisation by the Shareholders at the EGM and the Class Meetings and the sponsor (the lead manager) based on the price inquiry results in accordance with the price priority principle and applicable laws and regulations, after obtaining the approval documents issued by the CSRC in respect of the Proposed Non-public Issuance of A Shares.
46 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to the “Letter from the Board”, COSCO Shipping will not participate in the price inquiry exercise for the Proposed Non-public Issuance of A Shares, and will accept the price inquiry results and subscribe for the A Shares at the same issue price as other target subscribers.

In the event no effective bid is made after the aforesaid price inquiry exercise, the floor price deduced from the Price Floor Mechanism will be determined as the final Issue Price;

(iii) the H Shareholders (other than COSCO Shipping) are not entitled to subscribe for A Shares under the Proposed Non-public Issuance of A Shares; and
(iv) COSCO Shipping and parties acting in concert with it and those Shareholders who are involved in or interested in the Proposed Non-public Issuance of A Shares are required to (i) abstain from voting on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal to be proposed at the EGM and (ii) abstain from voting on the Amendment Resolution and the Special Deal at the Class Meetings.

Taking into account (i) the Special Deal is in compliance with the Implementation Rules for the Proposed Non-public Issuance of A Shares by Listed Companies; (ii) COSCO Shipping will not participate in pricing exercise for the Proposed Non-public Issuance of A Shares, but will accept results of market inquiry and subscribe for the A Shares at the same subscription price as other target subscribers; (iii) all the A Shareholders, who are interested to participate in the Proposed Non-public Issuance of A Shares, are entitled to express interest and participate to subscribe; (iv) all the H Shareholders are not entitled to subscribe for A Shares under the Proposed Non-public Issuance of A Shares to ensure the independence of H Shareholders; (v) COSCO Shipping and parties acting in concert with it and those Shareholders who are involved in or interested in the Proposed Non-public Issuance of A Shares are required to abstain from voting on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal to be proposed at the EGM and abstain from voting on the Amendment Resolution, the Supplemental Agreement, the Specific Mandate and the Special Deal at the Class Meetings; (vi) greater dilution effect to the shareholding of the existing Shareholders would be resulted if the Company conducts a fund raising exercise by issuance of new H Shares in Hong Kong; and (vii) all Independent Shareholders are entitled to vote at the EGM and the Class Meetings for or against the special resolution in relation to the Special Deal, we are of the view that the approval of the Special Deal by the Independent Shareholders at the EGM and/or the Class Meetings is fair and reasonable as far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

47 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

CONCLUSION AND RECOMMENDATION

Having taken into account the above-mentioned principal factors and reasons, in particular:

there is a gradual increase in global oil tanker market demand since fourth quarter of 2018, and hence led Group’s financial performance turnaround from net loss of approximately RMB86 million for the 3 months ended 31 March 2018 to net profit of approximately RMB428 million for the 3 months ended 31 March 2019. The Proposed Non-public Issuance of A Shares would provide further funding for the acquisition of oil tankers to implement the business strategies of the Group as a leader in global energy transportation;
the proceeds raised under the Proposed Non-public Issuance of A Shares would optimise the Company’s capital structure and reduce the Company’s net debt to equity ratio;
the Proposed Non-public Issuance of A Shares is a reasonable financing means available to the Group as compared to debt financing and other means of equity financing;
the basis of determining the Issue Price is in compliance with the New PRC Regulations, the Measures and the Opinions Concerning Regulating the Work Relating to the Restructuring of State-owned Enterprises;
the dilution effect to the Independent Shareholders as a result of the Proposed Non-public Issuance of A Shares is acceptable;
the Proposed Non-public Issuance of A Shares would have an overall positive effect on the financial position of the Group;
the Amendment Resolution can help rationalises the Issue Price in light of the effect of exright and ex-dividend events and hence can provide clarity to the potential subscribers;
the analysis on fairness and reasonableness on the terms of the Amendment Resolution and the Supplemental Agreement as set out in the section headed “3. Background of and the terms of Amendment Resolution and the Supplemental Agreement”;
save for the Amendment Resolution and other incidental changes, the other parts of the Proposed Non-pubic Issuance of A Shares remain valid and of full force and effect;
the analysis on fairness and reasonableness of granting the New Whitewash Waiver as set out in the section headed “6. The New Whitewash Waiver”, and
48 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the analysis on fairness and reasonableness of the Special Deal as set out in the section headed “7. The Special Deal”,

we are of the opinion that while the Amendment Resolution and the entering of the Supplemental Agreement are not conducted in the ordinary and usual course of business of the Group, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal are in the interests of the Company and the Shareholders as a whole, and the terms of the Amendment Resolution and the Supplemental Agreement are on normal commercial terms, and are fair and reasonable as far as the Independent Shareholders concerned.

Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the resolutions to be proposed at the EGM and the relevant Class Meeting for approving the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and the Special Deal.

For identification purpose only

Yours faithfully, For and on behalf of Messis Capital Limited Thomas Lai Vincent Cheung Chief Executive Officer Managing Director

Mr. Thomas Lai is a licensed person registered with the Securities and Futures Commission and regarded as a responsible officer of Messis Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 20 years of experience in corporate finance industry.

Mr. Vincent Cheung is a licensed person registered with the Securities and Futures Commission and regarded as a responsible officer of Messis Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 10 years of experience in corporate finance industry.

49 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

The below sets out the English translation of the text of the Company’s proposal in respect of the Proposed Non-public Issuance of A Shares. This appendix contains information including analysis which is prepared pursuant to the relevant requirement prescribed under the Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring (CSRC Announcement [2015] No. 31) 《關於首發及再融資、重大資產重組攤薄即期回報有 ( 關事項的指導意見》 ) issued by the CSRC. Such analysis (including assumptions) adopted in preparation thereof are for illustration purposes only and does not constitute a commitment, profit forecast or performance commitment by the Company.

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

(Registered address: Room A-1015, 188 Yesheng Road, Pilot Free Trade Zone, Shanghai, China)

==> picture [106 x 70] intentionally omitted <==

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

MAY 2019

* for identification purposes only

I-1 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

STATEMENT OF THE COMPANY

The Company and all members of the board of directors (the “Board”) warrant the truthfulness, accuracy and completeness of the information herein without any false interpretations, misleading statements and material omissions.
Following the completion of the Non-public Issuance of A Shares, the Company shall be responsible for any of its changes in operation and profits, and the investors shall be responsible for investment risks caused by the Non-public issuance of A Shares.
The Proposal is the interpretation made by the Board for the Non-public Issuance of A Shares, and any statement against the information herein shall be deemed as misrepresentation.
In case of any doubts, the investors shall consult their own stock brokers, lawyers, professional accountants or other professional advisers.
Any information herein shall not represent material judgment, confirmation, approval or verification of competent authorities for the Non-public Issuance of A Shares. The effectiveness and completion of any matters relating to Non-public Issuance of A Shares herein have not yet been approved or verified by the competent authorities.
I-2 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

SPECIAL NOTES

The matters relating to the Non-public Issuance of A Shares were considered and approved the tenth meeting of the Board of 2017, the twelfth meeting of the Board of 2017, the third Extraordinary General Meeting (“EGM”) of 2017, the first A shares class meeting of 2017 and the first H shares class meeting and approved by the SASAC on December 13, 2017; On 15 December 2017, The SFC has granted the Whitewash Waiver, as well as the consent to the Special Deal, in respect of the Proposed Non-public Issuance of A Shares.

As required by the SFC, a new request for consent for the Whitewash Waiver issued by the SFC is needed with related procedure concerning a special deal due to the change of the basic information of the Original Whitewash Waiver. The above items are subject to consideration and approval of the General Meeting, A shares class meeting and H shares class meeting.

This Non-public Issuance still requires verification and approval by the CSRC.

The target subscribers of the Issuance are no more than 10 specific subscribers including COSCO Shipping, the Indirect Controlling Shareholder of the Company.

The target subscribers other than COSCO Shipping include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other domestic legal investors and natural persons that meet the provisions of the CSRC. A securities investment fund subscribing through over two funds managed by it will be regarded as one target subscriber. Any trust investment companies as target subscriber may only pay the subscription price with their own funds. The H shareholders of the Company are not to subscribe for the shares under the Non-public Issuance of A Shares. (In case of other provisions on the target subscribers under laws, administrative regulations, administrative rules of the CSRC or normative documents, such provisions shall prevail.)

The final list of subscribers (other than COSCO Shipping) will be determined by the Board of the Company and its authorised person(s) with the authorisation by the Shareholders at the General Meeting after consultation with the sponsor (the lead underwriter) of the Non-public Issuance of A Shares based on actual circumstances of the subscription of target subscribers, after obtaining the approval from the CSRC in respect of the Non-public Issuance of A Shares. The target subscribers will subscribe shares under the Issuance with cash.

The Price Determination Date of the Non-public issuance of A Shares is the first day of the Issuance. The issue price of the Non-public issuance of A Shares shall not be lower than the 90% of the average trading price of the A Shares during the 20 trading days immediately preceding the Price Determination Date (the average trading price of the A Shares during the 20 trading days immediately preceding the Price Determination Date = the total trading amount of A Shares during the 20 trading days immediately preceding the Price Determination Date/the total trading volume of A Shares during the 20 trading days immediately preceding the Price Determination Date) and shall not be lower than the latest audited net asset value per share as at the date of the Issuance.
I-3 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

If any such ex-right/ex-dividend event takes place during the 20-trading day reference period underlying the Share Trading Price Floor, such that the Company’s shares are quoted cum-right/ dividend for part of the period and ex-right/dividend for the other part of the period, downward adjustments to the Share Trading Price Floor taking into account the effect of rights/dividends shall be applied to the trading prices of each cum-dividend trading day throughout the entire 20-trading day period.

If there exists between the date to which the latest audited consolidated statement of financial positions is made up to, and the date of share issuance under the Proposed Nonpublic Issuance of the A Shares any ex-right or ex-dividend events (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares), the NAV Price Floor shall be adjusted downwards to take into account the effect of such event.

The specific price of the Issuance shall be determined by the Board and by its authorized persons with the authorisation by the Shareholders at the General Meeting of the Company and the sponsor (the lead underwriter) by accepting market quotations built upon the said Issue Price and with reference to bid prices of target subscribers in a price priority pursuant to relevant provisions such as Implementation Rules, after obtaining the approval from CSRC in respect of the Non-public Issuance.

COSCO Shipping will not participate in market quotations process but is subject to the result of market quotations. The subscription price attributable to it is the same as to other target subscribers. If no valid market quotation is achieved during this market quotations process, COSCO Shipping will still participate in purchase of the Issuance shares via Price Floor.

Pursuant to the Supervision Q&A on Issuance – Regulatory Requirements relating to Guidance on Standardizing Financing Activities of Listed Companies 《發行監管問答( –關於引導規範上市公司融資行為的監管要求》) promulgated by the CSRC, the number of shares to be issued under the Nonpublic Issuance of A Shares shall be no more than 20% of the total share capital of the Company prior to the Issuance, i.e. no more than 806,406,572 shares (including), the specific number of shares to be issued shall be determined by the Board of the Company and its authorized persons after consultation with the sponsor (the lead underwriter) under the authorisation at the General Meeting based on the actual circumstances of the subscription. The MAXIMUM NUMBER OF A SHARES under the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend matters of A shares of the Company; such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the Board Resolution Date of the Non-public Issuance of A Shares to the date of the Issuance.

COSCO Shipping is committed to subscribing for the shares under the Non-public Issuance of the Company with cash and the total amount of subscription will not exceed RMB4.2 billion.

All of the shares under the Non-public Issuance of A Shares to be subscribed by COSCO Shipping shall not be transferred within 36 months from the completion of the Issuance; and the shares to be subscribed by other target subscribers shall not be transferred within 12 months from the completion of the Issuance. The shares will be dealt with according to relevant provisions of CSRC and SSE following the end of lock-up period.
I-4 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

The gross proceeds from the Non-public Issuance of A Shares shall be RMB5.4 billion (the amount finally approved by the CSRC shall prevail). Excluding issuance expenses, the net proceeds will be used for following purposes: (1) acquisition of 14 oil tankers; (2) acquisition of two Panamax oil tankers (72,000-tonne class).
The resolutions with respect to the Non-public Issuance of A Shares will be valid within 12 months from the date of approval the extension of the validity period of the shareholders’ resolutions relating to the Proposed Non-public Issuance of A Shares at the second EGM of 2018, the first A shares class meeting of 2018 and the first H shares class meeting of 2018.
The Non-public Issuance will not cause changes in the controlling shareholder or beneficial controller of the Company and will not result in the distribution of shareholdings not meeting listing requirements.
The undistributed accumulated profits of the Company before the Issuance shall be shared by the existing and new shareholders upon completion of the Issuance.
According to the requirements of the Notice Regarding Further Implementation of Cash Dividends Distribution by Listed Companies 《關於進一步落實上市公司現金分紅有關事項的通知》( ) and the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies 《上市公司監管指引第( 3號－上市公司現金分紅》), Investors shall pay attention to the details on the Company’s existing profit distribution policy, profit distribution for the last three years and our Shareholders’ dividends distribution return plan under “Section V Profit Distribution” herein.
According to the requirements of the Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring 《關於首發( 及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) promulgated by the CSRC, the Company has made analysis on the dilution of current returns arising from the Issuance. For more information, please refer to “Section VI Analysis on Dilution of Current Returns Arising from the Non-public Issuance and Remedial Measures” herein.
I-5 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

DEFINITIONS

In the Proposal, unless the context requires otherwise, the capitalized terms used herein shall have the following meanings:

Company/COSCO SHIP ENGY/ COSCO SHIPPING Energy Transportation Co., Ltd., formerly Issuer/Listed Company known as “COSCO SHIPPING Development Co., Ltd.” Indirect Controlling Shareholder/ China COSCO Shipping Corporation Limited COSCO Shipping/Group Direct Controlling Shareholder/ China Shipping Group Co., Ltd., formerly known as “China China Shipping Shipping (Group) Company” COSCO Group China Ocean Shipping Co., Ltd., formerly known as “China Ocean Shipping (Group) Company”

Non-public Issuance of A Shares/ Issuance of A shares to specific subscribers by COSCO SHIP Non-public Issuance/Issuance ENGY through the non-public issuance Proposal Proposal for the Non-public Issuance of A Shares by COSCO SHIPPING Energy Transportation Co., Ltd. General Meeting the general meeting of COSCO SHIPPING Energy Transportation Co., Ltd. Board the board of directors of COSCO SHIPPING Energy Transportation Co., Ltd.

Articles of Association Energy the Articles of Association of COSCO SHIPPING Transportation Co., Ltd.

Actual Controller State-owned Assets Supervision and Administration Commission of the State Council

Price Determination Date the first date in the period of the Non-public Issuance

Share Subscription Agreement the Share Subscription Agreement Between COSCO the Share Subscription Agreement Between SHIPPING Energy Transportation Co., Ltd. and China COSCO Shipping Corporation Limited entered into by the Issuer and COSCO Shipping on 30 October 2017

Supplemental Agreement to Share Subscription Agreement

A supplemental agreement dated 29 May 2019 entered into between the Company and COSCO Shipping to incorporate the changes to the Proposed Non-public Issuance of A Shares in connection with the Amendment Resolution

I-6 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

Company Law	the Company Law of the People’s Republic of China
Securities Law	the Securities Law of the People’s Republic of China
Listing Rules	the Rules Governing the Listing of Stocks on the Shanghai Stock
	Exchange (2019 Revision)
Implementation Rules	Implementing Rules on Non-public Issuance of Shares by Listed
	Companies (2017 Revision) (上市公司非公開發行股《票實施細則
	（2017修訂）》)
CSRC	China Securities Regulatory Commission
SFC	Securities & Futures Commission of Hong Kong
SSE	The Shanghai Stock Exchange
SASAC	State-owned Assets Supervision and Administration Commission of
	the State Council
Grandall	Grandall Law Firm (Shanghai)
Baker Tilly/Baker Tilly China/	Baker Tilly China (Special General Partnership)
Accountant
RMB, RMB10,000 and RMB100	Renminbi 1 Yuan, Renminbi 10,000 Yuan, Renminbi 100 million
million	Yuan, respectively
VLCC	very large crude carriers, an oil tanker with a capacity of 200,000
	DWT to 320,000 DWT
SUEZMAX oil tanker	SUEZMAX, an oil tanker with a capacity of 120,000 DWT to
	200,000 DWT
AFRAMAX oil tanker	AFRAMAX, an oil tanker with a capacity of 80,000 DWT to
	120,000 DWT
PANAMAX oil tanker	PANAMAX, an oil tanker with a capacity of 60,000 DWT to
	80,000 DWT
LNG carrier	a vessel designed for transporting liquefied natural gas at a
	temperature of minus 163 degrees Celsius

I-7 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

COA	contract of affreightment, a contract between a ship-owner and the
	charterer, in which the ship-owner agrees to complete the
	transportation of specified goods for the charterer in the ship
	during a specified time
Collective Scheme	a wealth management product developed by securities firms or fund
	subsidiaries, that pools money from the customers and investment
	in pre-agreed equity or fixed income investment products by the
	professional investors
Net asset value per share	final net assets attributable to the Company’s common shareholders
	÷ the total share capital at the end of the period
BP	one of the world’s largest oil and petrochemical conglomerate
Clarksons	a leading international integrated shipping service provider
Drewry	an independent international shipping research and consultancy

In the Proposal, any discrepancies in any tables between totals and sums of amounts listed are due to rounding.

I-8 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

SECTION I SUMMARY OF THE PROPOSAL FOR THE NON-PUBLIC ISSUANCE OF A SHARES

I. BASIC INFORMATION OF THE ISSUER

Legal name: 中遠海運能源運輸股份有限公司 English name: COSCO SHIPPING Energy Transportation Co., Ltd. Registered address: Room A-1015, 188 Yesheng Road, Pilot Free Trade Zone, Shanghai, China Office address: 670 Dongdaming Road, Hongkou District, Shanghai A shares listed: The Shanghai Stock Exchange Abbreviation for A shares: COSCO SHIP ENGY Code of A shares: 600026 H shares listed: The Stock Exchange of Hong Kong Limited Abbreviation for H shares: COSCO SHIP ENGY Code of H shares: 01138 Legal representative: Liu Hanbo Incorporation date: 3 May 1994 Postal code: 200120 Tel: 021-65967678 Fax: 021-65966160 Company website: http://energy.coscoshipping.com E-mail: [email protected]

Business scope: Main businesses: transport of coastal, ocean and Yangtze River cargos, ship chartering, agency and forwarding operation of cargos; sideline businesses: ship trading, repair and manufacturing of containers, agency for purchase and sale of accessories and spare parts of ships, consulting on and transfer of ship technologies, marine and mechanical management of domestic costal bulk carriers and oil tankers, overhaul and maintenance of ships, and management of international ships (Businesses that require pre-approvals according to the laws and regulations can only be conducted after obtaining approvals from the relevant authorities).

II. BACKGROUND AND PURPOSE OF THE NON-PUBLIC ISSUANCE

(I) Background of the Non-public Issuance

1. The shipping industry integration has entered a new stage and scale development has become the industry trend

The shipping industry is a capital and technology intensive industry with significant investment. During the process of strategic adjustment of the industry, the global shipping market has experienced large-scale enterprise mergers, acquisitions, integration and restructuring, which will facilitate the eastward centralization and scale development of shipping industry. In 2016, various merger cases has further explicated that scale development has become the mainstream trend of shipping industry, such as that two domestic large shipping groups, COSCO Group and China Shipping, underwent restructuring, the Sinotrans & CSC Group (中外運長航集團) consolidated into China Merchants Group as a whole, CMA

I-9 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

CGM SA (法國達飛) acquired the Neptune Orient Lines (NOL) (東方海皇), Hapag-LIoyd (赫伯羅特) acquired the UNITED ARAB SHIPPING CO. (S.A.G) (阿拉伯聯合輪船) and Maersk Line acquired the Hamburg SÜd (漢堡南美). COSCO SHIP ENGY can purchase and build various types of oil tankers through the Non-public Issuance, which will help to expand the scale and enhance the capabilities of the Company, as well as improve the competitiveness of the Company in global market.

2. “Be a powerful shipping country” has become the national strategy, the “Belt and Road” strategy promotes the globalization layout

In 2014, the State Council issued the Certain Opinions Concerning the Promotion of the Healthy Development of Marine Industry 《關於促進海運業健康發展的若干意見》( ), and the Ministry of Communications issued the Plan for Implementation of the Certain Opinions of the State Council Concerning the Promotion of the Healthy Development of Marine Industry 《貫( 徹落實〈國務院關於促進海運業健康發展的若干意見〉的實施方案》), which officially make “Be a powerful shipping country” a national strategy, and plan comprehensive construction path from four aspects, namely “General requirements”, “Key tasks”, “Protective measures” and “Organization and implementation”, to offer extensive policy opportunities for development of shipping industry. With the “Belt and Road” construction initiated by China being warmly responded by Asia and worldwide, the energy companies in China have accelerated their pace of overseas expansion, and participate in the exploration and development of overseas oil and gas resources proactively. Meanwhile, the State attracts the overseas energy companies to invest in domestic energy cooperation projects and stablish strategic alliance in respect of refining and sale of petroleum. Under the new energy layout of “Going out” and “Introducing in” of China, the Company establishes worldwide network and cooperates with various large domestic and international energy enterprises, implements the “Expand the east, Explore the west” strategy proactively and opens up the “third country” transportation, to seek for more cooperation opportunities.

3. The focus of energy consumption keeps moving eastward, “state oil state transport” facilitates the rise of oil shipping industry

The increasing demand of petroleum globally has driven the rapid growth momentum of the turnover of petroleum marine shipping. As driven by the continuous decrease in the crude oil import by Europe and America and the continuous increase in the crude oil import by AsiaPacific countries like China and India, the focus of international shipping resources continues to move eastward, especially moving towards China. According to the estimation of Drewry, by 2020, the shipping demand of global oil tankers will amount to 12,946 billion tonne nautical miles, representing an increase of 9.2% as compared to 2016, among which, the shipping demand of crude oil will be 9,976 billion tonne nautical miles, representing an increase of 8.1% as compared to 2016. According to the 2018 Report on Development in the Foreign and Domestic Oil & Gas issued by the China National Petroleum Corporation Economic and Technological Research Institute in January 2019, the net import of China’s oil in 2018 is about 440 million tons, an increase of 11% year-on-year. The dependence ratio on foreign oil has reached 69.8%. With the continuous reform of oil and gas, the State has released the import rights of crude oil and the use rights of imported crude oil, local

I-10 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

production capacities of oil refining continue to increase, and the crude oil import market of China still has large incremental space. Under the guidance of the “State oil, state transport” strategy, the market share of the domestic crude oil transportation enterprises to the crude oil import transportation market of China will keep increasing, therefore facilitate the leap of domestic oil tanker fleet.

4. The Company will develop energy transportation in both scale and market share, seize the industry and policy strategic opportunities

Pursuant to the group integration, the Company underwent restructuring of material assets in the first half of 2016, delaminated the bulk shipping business and expanded the energy transportation. After the completion of restructuring, the Company became the listed platform of COSCO Shipping specializing in energy transportation, the principal activities of the Company are oil transportation and LNG transportation, and the scale and capability of the Company has achieved qualitative development. As of December 31, 2018, the total shipping capacity of the Company’s oil tanker fleet ranked top in the world, with self-owned[1] and charted-in oil tanker vessels amounting to 151, and capacity of 21,880 thousand deadweight tons; the Company, taking this fundraising project into consideration, has the order of 16 oil tankers with capacity of 3,060 thousand deadweight tons. At the same time, the Company consolidated the equity interests of the large two LNG transportation companies in China into one platform. As of December 31, 2018, the Company operated 26 LNG vessels with capacity of 4,350 thousand m[3] ; the Company has the order of 12 vessels with capacity of 2,080 thousand m[3] . With the strong support of national policies, such as “Be a powerful shipping country”, the “Belt and Road” initiative and “state oil shipped by state vessels”, and depending on the large energy market and increasing demand of energy transportation of China, the Company still needs to further expand the energy transportation capacity and keep its competitiveness in long run.

5. Strong support for “China vessels made in China” policy and promote the sustainable development of marine system

The vessel industry is a modern comprehensive and strategic industry providing technology and equipment for waterborne traffic, ocean resources development and national defense construction, which forms integral part for the nation to develop high-end equipment manufacturing and provides basis and important support for the implementation of “Be a powerful shipping country” strategy. Made in China 2025 《中國製造( 2025》) even makes “ocean engineering equipment and high technology vessels” among one of the top ten key development fields to accelerate its development. At present, China’s vessel industry ranks first in the world in terms of “vessels manufactured”, “newly received orders” and “orders at hand”, which clearly shows that China has been a giant in vessel manufacturing. However, in respect of the manufacturing of high-end vessel types, such as new energy-saving and environment protective oil tanker and LNG carriers, China still lacks competitiveness and the domestic vessel factories urges for capital to support their transformation and upgrade, and realize the “China vessels made in China” for high-end vessel types. The proceeds from the

1 “self-owned” herein includes capacity of both the vessels owned and operated by the Company and the vessels owned but leased out by the Company.

I-11 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Issuance will be used to build and acquire oil tankers, which will be manufactured by domestic vessel factories, providing strong support for the sustainable development of China’s vessel industry and national marine system.

(II) Purposes of the Non-public Issuance

1. To seize the advantageous opportunities of low cost of vessel manufacturing and realize the capacity expansion in a cost-efficient way

The energy transportation industry shows an outstanding trend of economies of scale and the global energy consumption presents a new characteristic, the vessel fleet of various energy transportation enterprises are developing in large-scale. The Company also initiatives the “scale of the vessel fleet continues to be leading in the world” development strategy to increase its competitiveness capacities and expand its competitiveness edges. According to statistics of the database of Clarksons, in the second half of 2017, the market costs of main vessel types of international oil tankers was lower than the average market cost of last two decades. With the slow recovery of global economy and affected by the supply and demand of the market and the price of raw materials like steel, it is expected that the price of vessel manufacturing will decrease in limited space. Taking VLCC as an example, the cost of a new building VLCC in January 2019 was $93 million, an increase of about 14% from the $81.5 million/vessel at the end of 2017. It would be helpful to reduce the average depreciation cost of vessels by manufacturing new vessels with lower cost, enhancing the profitability of the oil tanker fleet of the Company. Therefore, the Company intends to seize advantageous opportunities and expand the shipping capacity in cost-effective way with the proceeds from the Issuance.

2. To optimize the vessel type and age structure of vessel, build a world-leading oil tanker fleet

Based on the vessel manufacturing progress of orders hold by the Company before the fundraising project, the Company’s vessel fleet will have no capacity under construction after 2018, and the existing capacities will gradually enter aged stage. If the Company fails to replenish and update its capacity in time, by the end of “the 13th Five-Year Plan”, over half self-owned vessels of the Company will have an age over 10 years, more worse, up to 34 tankers will have an age over 15 years. The operating cost of old vessels will be higher than that of new vessels significantly. The proceeds from the Non-public Issuance will be used to build various new types oil tankers, which can optimize the age structure of the vessel continuously during the period of 13th Five-Year Plan, establish a world-leading oil tanker fleet, and helps to reduce the operating cost of the vessels, such as the fuel cost. Meanwhile, by manufacturing and purchasing various new type of oil tankers, the Company is well positioned to seize the development opportunities of different stages in each of the segmental markets of energy transportation, enhance its competitiveness in each segmental market and increase the operation results of the Company.

I-12 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

3. To reduce the debt-to-asset ratio and optimize the capital structure

As of December, 2018, the liabilities of the Group amounted to RMB34,144 billion, and the debt-to-asset ratio reached 53.84%. Through the Non-public Issuance, the Company will raise stable long-term capital and optimize capital structure. Besides, it will broaden debt financing potential and further enhance the financial stability, thus contributing to the overall performance of the business and sustainable development of the Company.

4. The Issuance reflects the Group’s powerful support for the Company’s development

With the main focus on the four aspects of its strategy of “expanding its scale, enhancing its profitability, strengthening its ability to overcome cyclical effect and becoming international global company”, COSCO Shipping attaches great importance to the development of the “6+1” industrial clusters covering shipping, logistics, finance, manufacturing of equipment, shipping services, socialized industry and Internet-related operations based on innovative business models, so as to further enhance integration of shipping elements and spare no efforts to establish a world-leading integrated logistics supply chain provider. The Company is a professional energy transportation platform focusing on oil and gas shipping businesses in COSCO Shipping, which is the one of the best quality assets within the Group. Participation of COSCO Shipping in the Non-public Issuance and active increase of its shareholding in the Company demonstrate the strong support from COSCO Shipping in the development of the Company and its firm confidence in the long-term development of the Company.

III. TARGET SUBSCRIBERS AND THEIR RELATIONSHIPS WITH THE COMPANY

The target subscribers of the Issuance are no more than ten specific subscribers including COSCO Shipping, the indirect controlling shareholder of the Company.

In addition to COSCO Shipping, other target subscribers include securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other domestic corporation investors and natural persons that meet the provisions of the CSRC. A securities investment fund management company subscribing with over two funds managed by it will be regarded as one subscriber. Trust investment companies may only subscribe with their own funds. The H shareholders of the Company are not allowed to subscribe for the shares under the Non-public Issuance of A Shares. (If otherwise prescribed in laws, administrative regulations, administrative rules or regulative documents of the CSRC with respect to the target subscribers upon issuance, those relevant provisions shall prevail.)

In addition to COSCO Shipping, the ultimate target subscribers will be determined by the Board of the Company and its authorized person(s) with the authorization by the general meetings through negotiation with the sponsor of the Non-Public Issuance of A Shares (lead underwriter) based on the bid prices of targeted subscribers, after obtaining the approval in respect of the Non-Public Issuance of A Shares from the CSRC. All target subscribers shall subscribe for the shares under the Issuance in cash.

I-13 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

The specific issuance price will be determined by the Board and its authorized person(s) with the authorization by the general meetings of the Company and the sponsor (the lead underwriter) through acceptance of market quotations built upon the Issue Price described in the preceding paragraph and with reference to bid prices of targeted subscribers in accordance with the price priority principle and relevant provisions such as the Implementation Rules, after obtaining the approval documents issued by the CSRC in respect of the Non-public Issuance.

COSCO Shipping will not participate in the price inquiry exercise in the market but will accept market price inquiry results, and its subscription price is the same as that for other target subscribers. If no valid market quotation is achieved during this market quotations process, COSCO Shipping will still participate in purchase of the Issuance shares via Price Floor.

COSCO Shipping undertakes to subscribe for shares under the Non-Public Issuance in cash with the total subscription amount not more than RMB 4.2 billion. Upon completion of the Non-public Issuance, there will be no changes in the Actual Controller of the Company.

IV. PROPOSAL FOR THE NON-PUBLIC ISSUANCE

(I) Class and nominal value of the Shares to be issued

The Shares to be issued under the Non-Public Issuance are domestically listed in RMB denominated ordinary shares (A Shares) with a nominal value of RMB1.00 each.

(II) Method of issuance and date of issue

The A shares will be issued by way of Non-Public Issuance to specific subscribers. The Company will, within six months following the approval of the CSRC, issue the A shares in due course.

(III) Target subscribers and ways of subscription

The target subscribers of the Non-Public Issuance shall not be more than ten specific subscribers, including COSCO Shipping, the indirect controlling shareholder of the Company.

The other target subscribers except COSCO Shipping will include securities investment and fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors, other domestic legal investors and natural person that meet the requirements of the CSRC. A securities investment fund subscribing through over two funds managed by it will be regarded as one subscriber. Trust investment companies acted as the target subscribers may only pay the subscription price with their own funds. The H shareholders of the Company shall not be allowed to subscribe for A shares under the Non-Public Issuance (If otherwise prescribed in laws, administrative regulations, administrative rules and regulative documents of the CSRC with respect to the target subscribers, those relevant provisions shall prevail).

I-14 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

After the target subscribers (except for COSCO Shipping) obtain the approval in respect of the Non-Public Issuance of A shares from the CSRC, the Board and its authorized representatives will decide the ultimate subscribers based on the status of subscription in respect of the Non-Public Issuance of A shares in accordance with the authorization granted by the Shareholders at the general meeting after consultation with the sponsor (lead underwriter). All target subscribers subscribe for the A shares in cash.

(IV) Price Determination Date, issuance price and pricing principles

The Price Determination Date of the Non-Public Issuance of A shares is the first day of the Issuance.

The issuance price of the Non-Public Issuance of A shares will not be lower than (i) 90% of the average trading price of the A shares of the Company over the 20 trading days immediately preceding the Price Determination Date (the average trading price of A shares over the 20 trading days preceding the Price Determination Date = total turnover of shares over the 20 trading days preceding the Price Determination Date/the total trading volume of shares over 20 trading days preceding the Price Determination Date), and (ii) the latest audited net assets value per share upon the Company’s Issuance.

If there exists between the date to which the latest audited consolidated statement of financial positions is made up to, and the date of share issuance under the Proposed Non-public Issuance of the A Shares any ex-right or ex-dividend events (such as distribution of dividend, bonus issue, capitalization of capital reserves, additional issuance or placing of new Shares), the NAV Price Floor shall be adjusted downwards to take into account the effect of such event.

The final price of the Non-public Issuance shall be determined by the Board and by its authorized persons as well as the sponsor (lead underwriter) in accordance with the authorization granted by the Shareholders at the general meeting through acceptance of market quotations built upon the Issue Price described in the preceding paragraph and with reference to bid prices of targeted subscribers in accordance to the price priority principle, pursuant to relevant provisions such as the Implementation Rules, after obtaining the approval from CSRC regarding the Non-public Issuance.

COSCO Shipping will not participate in the market price inquiry exercise but will accept the price inquiry result derived from market quotations. If no valid market quotation is achieved during this market quotations process, COSCO Shipping will still participate in purchase of the Issuance shares via Price Floor.

I-15 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(V) Number of shares to be issued

According to the Supervision Q&A on Issuance – Regulatory Requirements relating to Guidance on Standardizing Financing Activities of Listed Companies 《發行監管問答( –關於引導規範上市公司融資行為的監管要求》) promulgated by the CSRC, not more than 20% of total capital of the Company before the Non-Public Issuance (namely 806,406,572 A shares, including 806,406,572 shares) will be issued under the Non-Public Issuance. To the extent of the above Issuance, the Board and its authorized representative(s) shall determine the final number of the A shares to be issued in accordance with the authorization granted by the Shareholders at the general meeting and based on the total amount of funds raised and the actual subscription condition after consultation with the sponsor (lead underwriter). The Issue Price of the Non-public Issuance will be adjusted accordingly in cases of ex-right or ex-dividend matters of A Shares of the Company; such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the price determination date to the date of the Issuance.

COSCO Shipping undertakes to subscribe for shares under the Non-Public Issuance in cash, total subscription funds not more than RMB 4.2 billion.

(VI) Lock-up period

A Shares under the Non-Public Issuance to be subscribed by COSCO Shipping shall not be transferred within 36 months from the completion of the Non-public Issuance, the shares to be subscribed by other target subscribers shall not be transferred within 12 months from the completion of the Non-public Issuance, which will be implemented according to requirements of CSRC and SSE after lock-up period.

(VII) Arrangement relating to the accumulated undistributed profits

All the existing and new shareholders upon completion of the Non-Public Issuance will be entitled to the accumulated undistributed profits of the Company prior to the Non-Public Issuance.

(VIII) Place of listing

After the expiration of the lock-up period of the Non-Public Issuance, the Company will apply to the SSE for the listing of, and permission to deal in, the A shares to be issued under the NonPublic Issuance.

(IX) Validity Period of the resolutions

The resolutions with respect to the Non-public Issuance of A Shares will be valid within 12 months from the date of approval the extension of the validity period of the shareholders’ resolutions relating to the Proposed Non-public Issuance of A Shares at the second EGM of 2018, the first A shares class meeting of 2018 and the first H shares class meeting of 2018.

I-16 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

V. AMOUNT AND USE OF PROCEEDS FROM THE NON-PUBLIC ISSUANCE OF A SHARES

The total proceeds raised from the Non-Public Issuance of A Shares shall be RMB5.4 billion (the amount finally approved by the CSRC shall prevail). The net proceeds after deducting issuance fees and expenses will be used for (1) acquisition of 14 oil tankers; (2) acquisition of two Panamax oil tankers (72,000-tonne class).

VI. WHETHER THE NON-PUBLIC ISSUANCE CONSTITUTES A CONNECTED TRANSACTION

Before the Issuance, COSCO Shipping who proposes to participate in the subscription was the indirect controlling shareholder of the Company, and indirectly held a total of 38.56% equity interest in the Shares of the Company via China Shipping. Thus, the Issuance will constitute a connected transaction. The Company has strictly complied with relevant regulations to fulfill the procedures for reviewing the connected transaction and consider and approve that China Shipping has abstained from voting at the general meeting and the A Shares Class Meeting in relation to the Issuance.

VII. WHETHER THE NON-PUBLIC ISSUANCE CAUSES THE CHANGE IN THE CONTROL OF THE COMPANY

Before the Issuance, COSCO Shipping indirectly held a total of 38.56% equity interest in the shares of the Company through China Shipping and thus was an indirect controlling shareholder of the Company. SASAC hold 100% equity interests in COSCO Shipping, and is the actual controller of the Company.

According to the proposal of the Non-Public Issuance, and assuming that the issuance price is RMB6.81 per share, COSCO Shipping subscribes RMB4.2 billion and other target subscribers 1.2 billion. The shareholding of COSCO Shipping in the Company, directly or indirectly, is 45.00%[2] upon the completion of the Issuance, and COSCO Shipping will remain to be the indirect controlling shareholder of the Company. The SASAC shall remain as the beneficial controller of the Company. Therefore, the Issuance will not result in the change in control of the Company.

VIII. APPROVAL OBTAINED AND TO BE OBTAINED FOR THE NON-PUBLIC ISSUANCE

The matters relating to the Non-public Issuance of A Shares were considered and approved at the tenth meeting of the Board of 2017, the twelfth meeting of the Board of 2017, the third EGM of 2017, the first A shares class meeting of 2017 and the first H shares class meeting and approved by the SASAC on December 13, 2017; On 15 December 2017, The SFC has granted the Whitewash Waiver, as well as the consent to the Special Deal in respect of the Proposed N on-public Issuance of A Shares.

As required by the SFC, due to the change of the basic information of the Original Whitewash Waiver, the Non-public Issuance is still subject to the fulfillment of following the procedures:

Re consent to the Whitewash Waiver shall be issued by The Executive;

2 If other target subscribers fail to subscribe 1.2 billion yuan, and COSCO SHIPPING Group subscribes 4.2 billion yuan, COSCO Shipping Group will directly and indirectly hold more than 45.00% of the Company’s shares

I-17 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Consent to the special deal shall be issued by the SFC;
Consideration and approval at the General Meeting, A shares class meeting and H shares class meeting of the Company;
The Non-public Issuance shall be subject to the approval of the CSRC.
I-18 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

SECTION II PARTICULARS OF THE TARGET SUBSCRIBERS OF THE NON-PUBLIC ISSUANCE AND SUMMARY OF THE SHARE SUBSCRIPTION AGREEMENT AND THE SUPPLEMENTAL AGREEMENT

The Non-public Issuance of A Shares are proposed to be issued to no more than ten specific subscribers (including COSCO Shipping) which meet the requirements of the CSRC. In addition to COSCO Shipping, other target subscribers are securities investment fund management companies, securities companies, trust investment companies, finance companies, insurance institutional investors, qualified foreign institutional investors, other domestic legal investors and natural person that meet the requirements of the CSRC. A securities investment fund management company subscribing through over two funds managed by it will be regarded as one subscriber. Trust investment companies may only pay the subscription price with their own funds. The holders of H shares of the Company shall not participate in the subscription of the Non-public Issuance of A Shares. If the laws, administrative regulations, administrative rules or normative documents of the CSRC have other provisions on the target subscribers at the time of issuance, such provisions shall prevail.

COSCO Shipping is the indirect controlling shareholder of the Issuer, the basic information of which is as follows:

I. BASIC INFORMATION OF COSCO SHIPPING

(I) Profile of COSCO Shipping

Company name: China COSCO Shipping Corporation Limited Domicile: No. 628 Minsheng Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC Legal representative: Xu Lirong

Registered capital: RMB11,000,000,000 Date of establishment: 5 February 2016

Unified creditability code: 91310000MA1FL1MMXL

The scope of business includes international shipping, ancillary business in international maritime transportation; engagement in import and export of goods and technologies; maritime, land, air freight agency business; leasing of self-owned vessels; sales of vessels, containers and steel; design of maritime engineering equipment; investment in docks and ports, sales of communication equipment, information and technology services; warehousing (other than hazardous chemicals); engagement in technological development, transfer of technology, technological consultancy, technological services in relation to shipping, spare parts and related fields, equity investment funds. (Projects that are subject to the approval in accordance with applicable laws shall carry out operating activities only after the approval by relevant authorities)

I-19 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(II) Shareholding and control

As at 31 December 2018, China Shipping directly held 153,692,460,000 A shares of COSCO SHIP ENGY, China Shipping and its subsidiaries held 1,770,700,000 A shares of COSCO SHIP ENGY through Collective Scheme, and held a total of 155,463,160,000 A shares of COSCO SHIP ENGY, accounting for 38.56% of the total share capital of COSCO SHIP ENGY, being the direct controlling shareholder of the Issuer.

The sole shareholder of China Shipping is COSCO Shipping. COSCO Shipping is affiliated to the SASAC, and is a central enterprise directly managed by the SASAC. The SASAC is the only investor and beneficial controller of COSCO Shipping.

As of the announcement date of the Proposal, the shareholding and control in relation of the Issuer was as follows:

==> picture [216 x 210] intentionally omitted <==

----- Start of picture text -----

State-owned Assets Supervision and
Administration Commission of the State Council
100.00%
China COSCO Shipping Corporation Limited
100.00%
China Shipping Group Co., Ltd.
38.56%
COSCO SHIPPING Energy Transportation
Co., Ltd.
----- End of picture text -----

(III) Developments of principal businesses in the last three years

In August 2015, COSCO Group and China Shipping commenced the implementation of reform and restructuring. In 18 February 2016, China COSCO Shipping Corporation Limited was formally established and listed in Shanghai; In May 2016, the SASAC gratuitously transferred 100% of its equity interest in COSCO Group and 100% of its equity interest in China Shipping to COSCO Shipping, thus COSCO Group and China Shipping became the wholly-owned subsidiaries of COSCO Shipping.

I-20 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

Internet-related operations based on innovative business models, and became a multi-industry cluster and the world’s leading integrated logistics supply chain services group with shipping, integrated logistics and related financial service as its pillar.

(IV) Brief financial statements in last year

According to the Audit Report (Tian Zhi YeZi [2019] No. 20668) issued by Baker Tilly China Certified Public Accountants LLP, the brief financial statements in last year of the COSCO Shipping are as follows:

1. Main figures in the consolidated balance sheets as at 31 December 2018

Unit: RMB

Items	Consolidated statements
Total assets	808,106,566,707.10
including: current assets	201,224,055,427.28
non-current assets	606,882,511,279.82
Total liabilities	527,865,057,215.07
including: current liabilities	223,079,169,255.49
non-current liabilities	304,785,887,959.58
Owner’s equity	280,241,509,492.03

2. Main figures in consolidated statement of profit for the year of 2018

Unit: RMB

Items	Consolidated statements
Total operating revenue	278,414,661,403.54
Total operating costs	248,908,903,153.07
Operation profit	15,760,770,044.29
Total profit	20,086,342,973.43
Net profit	14,599,113,316.00

3. Main figures in consolidated statement of cash flow for the year of 2018

Unit: RMB

Items	Consolidated statements
Net cash flow generated from business activities	26,081,870,198.67
Net cash flow generated from investing activities	(57,822,107,974.63)
Net cash flow generated from financing activities	19,156,383,204.75
Net increase in cash and cash equivalents	(10,007,265,075.24)

I-21 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(V) Punishments imposed on the target subscribers and its directors, supervisors and senior management in the last five years

COSCO Shipping and its directors, supervisors and senior management have neither been subject to administrative punishments (except for those obviously unrelated to the securities market) and criminal punishments nor involved in any major civil suit or arbitration in relation to economic disputes in the last five years.

(VI) Horizontal competition and connected transactions

1. Horizontal competition

COSCO SHIP ENERGY completed its restructuring in 2016 and disposed all its bulk shipping business and acquired 100% of equity interest in Dalian Ocean, which is engaged in oil shipping. As a result, the principal activities of COSCO SHIP ENGY and its subsidiaries were changed to oil shipping and LNG transportation businesses.

China Shipping is a Direct Controlling Shareholder of COSCO SHIP ENGY. Except for COSCO SHIP ENGY, other enterprises controlled by China Shipping are mainly engaged in general cargo transportation, as well as diversified businesses such as shipping finance, logistics, shipbuilding and maritime services, rather than oil shipping and LNG transportation businesses. Therefore, there is no horizontal competition between China Shipping and COSCO SHIP ENGY as well as its subsidiaries.

COSCO Shipping is the only shareholder of China Shipping, and an Indirect Controlling Shareholder of COSCO SHIP ENGY. The headquarter of COSCO Shipping is only equipped with management function and doesn’t operate any specific business. Other enterprises controlled by COSCO Shipping including COSCO Group, COSCO SHIPPING Capital Insurance Co., Ltd., COSCO SHIPPING Heavy Industry Company Limited, COSCO SHIPPING Bulk Co., Ltd. and COSCO SHIPPING Logistics Co., Ltd. are not engaged in oil shipping and LNG transportation businesses. Therefore, there is no horizontal competition between COSCO Shipping and COSCO SHIP ENGY as well as its subsidiaries.

In view of the above, there will be no horizontal competition in the principal business of the Company and COSCO Shipping, China Shipping as well as other enterprises controlled by these companies, which are not engaged in oil shipping and LNG transportation businesses.

2. Connected transaction

The Company has made adequate disclosure about the existing related parties, connected relationship and connected transaction. The connected transaction is based on the business development needs and also an act of making compensation of equal value principle according to the actual situations at arm’s length, the prices are fair without deviating from the comparable market price and the necessary procedures have been performed. The connected transaction does not affect the independence of the operation of the Company, and causes no detriment to the interest of minority shareholders.

I-22 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

COSCO Shipping proposes to subscribe for A shares under the Non-public Issuance, which constitutes a connected transaction with the Company. Meanwhile, operation of investment projects through the Non-public Issuance involves the daily connected transaction with COSCO Shipping. The Company will stringently fulfill the information disclosure obligation and deliberation procedures in related to connected transactions, maintain its independence as a Listed Company and safeguard the interest of the Listed Company and other shareholders in strict compliance with the relevant laws, regulations and rules as well as other requirements in related to connected transactions by conforming to the principle of fairness, justness and openness.

(VII) Material transactions between the Company and the target subscribers for the 24 months prior to the disclosure of the proposal for Issuance

Within the 24 months prior to the day of the proposal of the Issuance, save for transactions disclosed by the Company in periodic reports or temporary announcements, the Company has not conducted any other material connected transactions with COSCO Shipping and its controlled enterprises.

II. SUMMARY OF SHARE SUBSCRIPTION AGREEMENT AND SUPPLEMENTAL AGREEMENT

The subscription agreement dated 30 October 2017 entered into between the Company and COSCO Shipping, and a supplemental agreement with conditional effect dated 29 May 2019 entered into between the Company and COSCO Shipping to incorporate the changes to the Proposed Non-public Issuance of A Shares in connection with the Amendment Resolution, details of which are set out below:

(I) Parties

Issuer: COSCO SHIPPING Energy Transportation Co., Ltd. Subscriber: China COSCO Shipping Corporation Limited

(II) Issuance of Shares

If all the preconditions as required in the agreement are satisfied, COSCO SHIP ENGY agrees to issue A shares to COSCO Shipping through Non-public Issuance and COSCO Shipping agrees to subscribe for the same issued by COSCO SHIP ENGY.

The shares of COSCO SHIP ENGY to be issued under the Non-public Issuance are domestic listed Renminbi ordinary shares (A shares) at a nominal value of RMB1.00 per share.

Both parties agree that, COSCO SHIP ENGY will issue A shares at an issue price of not less than 90% of the average trading price of A shares for the 20 trading days preceding the Price Determination Date of the Non-public Issuance (the average trading price of A shares for the 20 trading days preceding the Price Determination Date = the total trading amount of A shares for the 20

I-23 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

trading days preceding the Price Determination Date ÷ the total trading volume of A shares for the 20 trading days preceding the Price Determination Date) and not less the latest audited net assets per share to COSCO Shipping.

The final issue price of the Non-public Issuance shall be determined by the Board and its authorized persons of COSCO SHIP ENGY upon obtaining the approval documents in relation to the Non-public Issuance from the CSRC by the Board under the authorization granted by the General Meeting of COSCO SHIP ENGY, who accept inquiry on the basis of Issue Price as determined in the abovementioned paragraph according to relevant provisions under the Implementation Rules, and the sponsor (lead underwriter) based on the bid prices offered by the subscribers from the price inquiry results and according to the price priority principle.

COSCO Shipping will not participate in price inquiry exercise in the form of market auction but will accept the price inquiry results, and its subscription price is the same as the other target subscribers. If no valid market quotation is achieved during this market quotations process, COSCO Shipping will still participate in purchase of the Issuance shares via Price Floor.

COSCO Shipping agrees to subscribe for the A shares from COSCO SHIP ENGY in cash at the final determined price.

Both parties agree that, the number of A shares under the Non-public Issuance shall be determined by the Board and its authorized persons as authorized by the General Meeting of COSCO SHIP ENGY according to the gross proceeds, actual circumstance of the subscription upon the issuance after consultation with the sponsor (lead underwriter) of the Issuance. The maximum number of A shares under the Non-public Issuance will be adjusted accordingly in cases of ex-right or exdividend matters of A shares of COSCO SHIP ENGY such as distribution of dividend, bonus issue, conversion of capital reserve into share capital, issuance of new shares or placement of shares during the period from the Board Resolution Date to the date of Issuance.

COSCO Shipping undertakes to subscribe for the A shares under the Non-public Issuance with a subscription amount of not more than RMB4.2 billion.

I-24 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

COSCO Shipping undertakes that upon completion of the Issuance, it will not transfer the A shares for a period of 36 months from the date of the Non-public Issuance. COSCO Shipping agrees to issue lock-up commitment and complete lock-up procedures for A shares subscribed for under the Non-public Issuance in accordance with relevant laws, regulations and relevant requirements of the CSRC, the Shanghai Stock Exchange as well as COSCO SHIP ENGY.

Upon expiration of the lock-up period, A shares issued to COSCO Shipping under the Nonpublic Issuance will be listed and traded on the Shanghai Stock Exchange.

(III) Preconditions

The Non-public Issuance shall be conditional upon:

Approval of COSCO SHIP ENGY internally. The Non-public Issuance has been effectively approved by the Board, General Meeting, A Shares class meeting and H Shares class meeting of COSCO SHIP ENGY;
Approval of the SASAC. Relevant matters concerning the Non-public Issuance have been approved by the SASAC;
Whitewash waiver has been granted by the executives of the Securities & Futures Commission in relation to the matters concerning the Non-public Issuance (if necessary);
Approval of the CSRC. Relevant matters concerning the Non-public Issuance have been approved by the CSRC.

(IV) Method of payment

COSCO Shipping agrees, provided that all the pre-conditions set forth in the agreement are fulfilled, the proceeds raised from the Non-Public Issuance of A Shares shall be paid by COSCO Shipping in full to the account specifically opened for the Non-Public Issuance by the sponsor (lead underwriter) on the designated payment date determined by the sponsor (the lead underwriter).

The sponsor (lead underwriter) shall notify COSCO Shipping at least two working days in advance of the designated payment date.

COSCO SHIP ENGY will designate a certified public accountant firm with qualifications for securities and futures trading to verify the subscription capital paid by COSCO Shipping.

(V) Arrangement for the undistributed accumulated profits

Both parties agree that the undistributed accumulated profits of the Company before the NonPublic Issuance will be shared by both the new shareholders and the existing shareholders after the Non-Public Issuance.

I-25 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(VI) Responsibility for breach of the agreement

Except for force majeure events, non-performance or failure to properly perform the obligations, or breach of any representation and/or warranty, under the agreement by any party to the agreement, shall be deemed as a default. Such party (the “Defaulting Party”) shall remedy its default within 30 days (the “Remedy Period”) upon receipt of the notice demanding the remedy issued by the non-defaulting party to the agreement (the “Non-Defaulting Party”). If the Defaulting Party fails to remedy its default upon expiration of the Remedy Period, the Non-Defaulting Party has the right to demand the Defaulting Party to bear the liability for breach of the agreement and to compensate the Non-Defaulting Party for all the losses caused by it.

When the agreement comes into force, if COSCO Shipping fails to pay the subscription money in accordance with the provisions of the agreement on schedule, it shall pay a penalty at 0.05% of the subscription amount to COSCO SHIP ENGY for each day of delay, and COSCO Shipping shall compensate COSCO SHIP ENGY for all direct economic losses arising from its delayed payment, and continue to fulfill its obligations of payment under the agreement.

When the agreement comes into force, if COSCO Shipping expressly disclaims any subscription or fails to pay the subscription amount within 30 days upon receipt of the notice demanding the subscription money issued by COSCO SHIP ENGY, COSCO SHIP ENGY shall have the right to cancel the agreement unilaterally by written notice without any responsibility, and the agreement will be cancelled on the next day from the date of the said written notice to terminate the agreement issued by COSCO SHIP ENGY. COSCO Shipping shall pay an overdue fine to COSCO SHIP ENGY for its delayed payment as well as a penalty equivalent to 1.5% of the subscription amount under the agreement. Also, COSCO Shipping shall compensate COSCO SHIP ENGY for all the losses suffered or incurred by COSCO SHIP ENGY as a result of such default (including but not limited to the underwriting fees, attorneys’ fees and auditors’ fees paid by COSCO SHIP ENGY for the Non-Public Issuance).

Upon the signing of the agreement, if the agreement is invalid due to the non-fulfillment of the pre-conditions stipulated in the agreement; the parties shall not pursue any responsibility of each other.

The terms of the responsibility for breach of the agreement shall survive after the rescission or termination of the agreement.

I-26 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

SECTION III FEASIBILITY ANALYSIS BY BOARD ON THE USE OF PROCEEDS RAISED IN THE ISSUANCE

I. PLAN ON THE USE OF PROCEEDS RAISED IN THE ISSUANCE

The total proceeds to be raised from the Non-public Issuance shall be RMB5.4 billion (the amount finally approved by the CSRC shall prevail) and will be used for the following purposes after deducting the cost of Issuance:

No. Project name 1 acquisition of 14 oil tankers 2 completion of acquisition of two Panamax oil tankers (72,000-tonne class) Total	Total investment in the projects1 581,068 68,371 649,439	Unit: RMB10,000 The amount of proceeds used in the projects on the date of the announcement of the Board resolution The amount of proceeds to be used in the projects2 – 498,747 20,873 41,253 20,873 540,000	Unit: RMB10,000 The amount of proceeds used in the projects on the date of the announcement of the Board resolution The amount of proceeds to be used in the projects2 – 498,747 20,873 41,253 20,873 540,000
			540,000

Note 1: the total investment of above projects amounted to US$972,030,000, equivalent to RMB6,494,390,000 (the exchange rate of US dollar against RMB for acquisition of 14 oil tankers projects was calculated on the basis of US$1 = RMB6.70 as agreed in the contracts; the total investment for completion of acquisition of two Panamax oil tanker (72,000-tonne class) project was calculated on the actual payment);

Note 2: the amount of proceeds to be used in the projects is the total proceeds to be raised before deducting the cost of Issuance.

Before receiving the proceeds, the Company will, depending on the actual situation of the progress of the projects, finance these projects by its self-raised fund which shall be replaced once the proceeds have been received according to procedures required by relevant regulations. If the net amount of the proceeds raised from the Issuance is less than the aggregate amount of the proceeds proposed to be invested in the aforementioned projects, the Company will make up for the shortfall through its self-raised fund. Based on the actual net proceeds raised from the Issuance, the Board and its authorized persons may adjust and eventually decide the projects to be invested in, the priorities of and the investment amount of each project, in compliance with relevant laws and regulations.

I-27 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

II. OVERVIEW OF INVESTMENT PROJECTS IN CONNECTION WITH PROCEEDS RAISED IN THE ISSUANCE

(I) Basic information of the project

1. Acquisition of 14 oil tankers

On 30 October 2017, the tenth meeting of the Board of the Company in 2017 considered and approved the acquisition of four VLCC oil tankers and three Suezmax oil tankers from Dalian Shipbuilding Industry Co., Ltd. (“Dalian Shipbuilding”) and acquisition of five Aframax oil tankers (including two LR2 product oil tankers) and two Panamax oil tankers (65,000-tonne class) from Guangzhou Shipyard International Company Limited (“Guangzhou Shipyard International”) and China Shipbuilding International Trading Company Limited, respectively.

On November 2, 2017, COSCO Shipping Group approved the Company to build 14 oil tankers at Dalian Shipbuilding and Guangzhou Shipyard International, which was stated in the “Reply on the 14 New Building Oil Tankers of COSCO Shipping Energy (COSCO Shipping Qi [2017] No. 673)”.

On November 20, 2017, the Company entered into a shipbuilding contract with Dalian Shipbuilding, stipulating that Dalian Shipbuilding shall build four 319,000 DWT VLCCs and three 15.8 DWT Suezmax tankers for the Company. The total price of the seven vessels shall be RMB3,673,154,400. On December 18, 2017, the above items in respect of the seven tankers were considered and approved at the third EGM of 2017 of the Company.

On December 15, 2017, the Company entered into a shipbuilding contract with Guangzhou Shipyard International and China Shipbuilding International Trading Co., Ltd., as joint sellers, stipulating that Guangzhou Shipbuilding International shall build five Aframax tankers (including two LR2 product tankers) and two 65,000-ton Panamax tankers, the total price of the seven ships was RMB2,137,514,400.

The total price of above 14 oil tankers was RMB5,810,680,000.

2. Completion of Acquisition of two Panamax oil tankers (72,000-tonne class)

On 24 June 2015, COSCO Group issued the “Reply on Acquisition of Three VLCC and Five Product Oil Tankers (72,000-tonne class) by Dalian Ocean Shipping Company Limited” (COSCO Zhanfa [2015] No. 178) 《關於大遠公司訂造( 3艘VLCC和5艘7.2萬噸成品油輪的批復》（中遠戰發 [2015] 178號）), agreed that Dalian Tanker, a subsidiary of the Company to acquire two Panamax oil tankers (72,000-tonne class) from China Shipbuilding Industry Group Co., Ltd. (中國船舶重工集團有限公司) at the total agreed price of US$104,770,000. The two Panamax tankers (72,000 tons) were expected to be delivered in November 2017 and March 2018, respectively, and have been officially delivered so far.

I-28 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

The purchase and payment of two Panamax tankers (72,000 tons) project was invested and constructed by Dalian Tanker, a wholly-owned subsidiary of the Company, and the funds raised were invested in the project construction through entrusted loans. The total investment of 2 Panamax tankers (72,000 tons) project shall be replaced by the procedures stipulated by relevant laws and regulations after the funds are raised.

(II) Analysis on the Necessity of the Proceeds Raised in the Issuance

1. Respond to the building of national “maritime power” strategy, capture the strategic opportunities of business development

In 2014, the State Council issued the Certain Opinions Concerning the Promotion of the Healthy Development of Marine Industry 《關於促進海運業健康發展的若干意見》( ) and the Ministry of Transport issued the Plan for Implementation of the Certain Opinions of the State Council Concerning the Promotion of the Healthy Development of Marine Industry 《貫徹落( 實〈國務院關於促進海運業健康發展的若干意見〉的實施方案》), which signify that building “maritime power” has formally become a national strategy and explicitly state some key tasks such as “to optimize of the structure of maritime fleet”, “to improve the global maritime network” and “to promote the transformation and upgrading of shipping enterprises”. During the “Thirteen-five” period, the Ministry of Transport issued the “Thirteen-five” Development Plan for Water Transportation 《水運( “十三五”發展規劃》), further states that “to improve the carrier support capacity for crude oil and other key materials”. Energy transport is an important component of the maritime industry, the building of national “maritime power” strategy requires China to speed up the development of energy transport.

With the major market for global economic growth transferring from western countries to eastern countries, the major market for global energy consumption transfers the same way. According to the BP World Energy Outlook 2017 《( BP世界能源展望2017年版》) published by BP, the conventional major market for energy demand has been replacing by emerging market and China will be the largest growth market for energy. According to the forecast in the 2018 Report on Development in the Foreign and Domestic Oil & Gas Industries 《( 2018年國內外油氣行業發展報告》) published by the CNPC Economics & Technology Research Institute in January 2019, China’s reliance on foreign supplies of oil will reach new high of 69.8%. In light of the increasing energy consumption in China, petrochemical enterprises in the country will follow the state’s the “Belt and Road” initiative construction by proactively engaging in the exploration and development of oil and gas in foreign countries to promote our global presence. Under the state’s “Going Out” strategy for energy and the strategic deployment of “state oil, state transport” (國油國運), strategic opportunities will arise for the energy shipping industry.

2. Domestic imported crude oil usage rights and crude oil import rights have been expanded, which has stimulated purchase demand for imported crude oil

As a strategic resource, oil is critical for our economic growth. The orderly expansion of imported crude oil usage rights and crude oil import rights will promote the competing integration of domestic petroleum and petrochemical industries, facilitate domestic overall

I-29 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

refining efficiency and reduce refining costs. In this regard, in 2015, the National Development and Reform Commission issued the Notice on Issues related to the Management of Imported Crude Oil Usage Rights of the National Development and Reform Commission 《國家發展改( 革委關於進口原油使用管理有關問題的通知》), permitting eligible local refineries to use imported crude oil. According to the notice of the Ministry of Commerce, from 2015 to 2019, the permitted quota of crude oil for non-state-owned trading are 37,600,000 tons, 87,600,000 tons, 87,600,000 tons, 142,420,000 tons and 202,000,000 tons, respectively.

The expansion of qualifications for importing crude oil to local refineries and the increasing market competition among local refineries have effectively stimulated purchase demand for imported crude oil.

3. Expand and upgrade the scale of the fleet to maintain the leading shipping capacity in the world

As of 31 December 2018, the Company, excluding this fundraising project, has 151 owned, charted-in and ordered oil tankers, with a shipping capacity of 21,880,000 DWT. According to the statistics of Clarksons on the shipping capacity of other shipowners in the world, the Company ranks first in terms of shipping capacity. However, in light of the significant scale effect of shipping industry, increasing market competition and frequent merger and restructuring among enterprises, each energy shipping enterprise will develop into large scale. Currently, although the Company maintains leading position in its total shipping capacity, it does not have clear advantage in large oil tankers such as VLCC. Therefore, the Company will proactively expand and upgrade the scale of its fleet to strengthen its competitivity and sharp its competitive advantages.

4. Optimize the age composition of the fleet to reduce the Company’s operating costs

As of 31 December 2018, the Company has 151 oil tankers in operation, with a shipping capacity of 21,880,000 DWT, including 52 VLCC oil tankers, 3 Suezmax oil tankers, 12 Aframax oil tankers, 33 Panamax oil tankers, 51 Handysize oil tankers. Given the average operating cycle of single vessel is 20 years, based on the shipbuilding schedule and progress before the fundraising project, after 2018, the Company will lack shipping capacity in progress and the existing shipping capacity will be aging gradually.

If the Company fails to replenish and update its capacity in time, till the end of “the 13th Five-Year Plan”, over half self-owned vessels of the Company will have an age over 10 years, more worse, up to 34 tankers will have an age over 15 years. The aging of vessels will extremely impair our competitivity in the market and lead to the increase in operating costs such as repair and maintenance costs and fuel consumption costs. Therefore, the Company shall supplement and upgrade its shipping capacity on a timely basis and optimize the age composition of the fleet further to maintain and increase its shipping capacity and reduce its fleeting operating costs.

I-30 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

5. Diversify and scientize vessel models to improve the Company’s competitivity in niche markets

Recently, the global overall economic growth has experienced slowdown and developed countries have started the “Reindustrialization” focused on “Industry Upgrade” and “Refocus” (i.e. to upgrade to the upper part of the value chain such as design, research and development and standards). Meanwhile, the United States has effectively promoted the strategy of “Energy Independence”. The above factors have driven the transfer of the major market for global energy consumption from western countries to eastern countries and new characteristics have formed in each niche market for energy shipping:

(1) As impacted by the relatively rapid economic growth in emerging countries, the increase in crude oil export in the Americas, such as United States, Brazil, plus the gradual increase of China’s reliance on imported crude oil and other factors, the portion of crude oil through long distance transportation to China and India will increase and the shipping demand for VLCC will remain moderate growth in the future.
(2) The major routes of Suez oil tankers represent the routes from West Africa to Continental Europe, from the Black Sea to Mediterranean and from Caribbean to Baia Hermosa. Aframax oil tankers mainly serve in regional short-distance transportation of crude oil. Impacted by comprehensive factors such as the increase in trading volume of energy between Middle East and India, the upgrade and expansion of Panama Canal and the development of new routes between Vostochny Port and China, the shipping demand for Suez oil tankers and Aframax oil tankers will remain moderate growth in the future.
(3) The demand and supply of the shipping capacity of the transportation market for domestic trading of crude oil is stable and balanced. In the market, the shipping capacity is satisfied by general models with less large shallow-draft vessels that meet particular requirements. As a result, some personalized transportation requirements from customers are not satisfied. In particular, with the production increase in refineries and the changes in oil sources, demand for shallow-draft vessels with large capacity that can traffic in rivers and berth in small wharf arises in the market and there is a structural shortfall for the supply of shipping capacity of new shallow-draft Panamax oil tankers.

Therefore, the Company will build its fleet on the principle of diversification and scientization to capture interim growth opportunities in each niche market for energy shipping, improve its competitivity in niche markets and effectively mitigate the effect of current downturn in the shipping market.

I-31 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(III) Analysis on the Feasibility of the Proceeds Raised in the Issuance

1. The state’s policies support the building of modern energy shipping fleet

In August 2014, the State Council issued the Certain Opinions Concerning the Promotion of the Healthy Development of Marine Industry 《關於促進海運業健康發展的若( 干意見》), which sets forth seven important tasks, i.e. optimizing maritime fleet composition, perfecting global maritime network, promoting transformation and upgrade of marine enterprises, vigorously developing modern shipping service industry, deepening the reform and opening-up of marine industry, enhancing international competitiveness of marine industry and boosting safe and green development to protect the state’s economic security and marine interests. In October 2014, the Ministry of Communications issued the Plan for Implementation of the Certain Opinions of the State Council Concerning the Promotion of the Healthy Development of Marine Industry 《貫徹落實〈國務院關於促進海運業健康發展的若干意見〉( 的實施方案》), which details specific supportive measures and sets forth requirements such as making efforts to build modern marine fleet and striving to develop energy-saving, environmental and economically efficient vessels.

In November 2015, the Ministry of Finance issued the Administrative Measures on Subsidies for the Retirement and Disassembling of Vessels and the Standardization of Vessel Models 《船舶報廢拆解和船型標準化補助資金管理辦法》( ) to accelerate the structural adjustment and promote the transformation and upgrade for our shipbuilding industry and shipping industry by encouraging the elimination of obsolete sea crafts, inland crafts and fishing crafts and guiding the building or rebuilding of energy-efficient demonstration vessel.

Relevant national strategies and specific supporting measures provide strong policy support for this investment project.

2. The development of emerging market countries continue to drive global energy demand growth

Despite the economic in developed countries not yet fully recovered with weak energy demand, as well as the slowdown of economic growth in emerging market countries with industrial restructuring and other factors, since 2012, global energy consumption growth tends to slow down, but in Asia, South America and Africa and other emerging markets, the industrialization and urbanization process continues to advance, population size continues to expand. Such economies still have much room for the economic development, and will become the main driving force for global energy demand growth in the future.

According to the forecast of BP World Energy Outlook 2017 《( BP世界能源展望2017年版》), the growth rate of global energy consumption is expected to be 1.3% between 2015 and 2035, and almost all new energy demand comes from the fast-growing emerging economies, with China and India increasing More than half, while China will be the largest energy growth market. The growth of global energy consumption has led to the demand for energy shipping

I-32 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

market. With the adjustment of energy consumption regional structure from western countries to eastern countries, the demand for energy shipping market will further be increased, which will provide good development opportunities for the Company.

3. Shipbuilding prices are relatively low in history, which is conducive to low-cost expansion of capacity

Since the second half of 2017, the global economic has experienced recovery at a slow pace, the international energy consumption structure remain in the adjustment stage. In order to seize the interim development opportunities for energy transport market segments, the Company need to expand its transport capacity. In recent years, due to the downturn of international shipping market, the global shipbuilding market continued to decline, shipbuilding prices fell sharply.

The profile of new ship contract prices for each type of oil tankers between 2008 and March 2019

==> picture [364 x 218] intentionally omitted <==

----- Start of picture text -----

Unit: US$ in million
180
160
140
120
100
80
60
40
20
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Aframax Suezmax VLCC Panamax
----- End of picture text -----

Source: Clarksons

Taking into account of the appreciation of the Renminbi, inflation, the increase in labor costs and the implementation of new shipbuilding standards leading to the increase in shipbuilding costs and other factors in the past decade, the prevailing actual shipbuilding price has been significantly lower than the level in 2004. In addition, due to the impact of market supply and demand, as well as the current recovery of steel and other raw materials prices, it is expected that further decrease in shipbuilding expenditure will be limited. The ship price is at a historic low point when locked by the fundraising project of the Company. Shipbuilding at this stage can help companies achieve capacity expansion with low costs.

I-33 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

4. The Company has competitive strengths and infrastructure required for fleet expansion

The Company has good cooperation relations with over 200 foreign and domestic petrochemical companies and oil trading companies, including three domestic petroleum companies SINOPEC, CNOOC and CNPC as well as famous foreign oil companies such as Exxon Mobil, British Petroleum plc, Vitol Group, Glencore International, Trafigura. Highquality and stable customer resources has laid foundation for the Company to expand its fleets.

Based on the stable customer base and the growing demand for energy transportation, the Company continued to expand its capacity in recent years, and has the first total tanker capacity in the world. During the continuous capacity expansion, the Company has accumulated rich experience on choosing reasonable type, quantity and construction time for new vessels in order to optimize the structure of its fleets.

In addition, the oil tankers of the Company cover most of vessel types. The interaction between domestic and international trade, the large and small fleet and the black and white oil can be realized, enable the Company to maximize the effectiveness of new vessels.

5. Improving capital structure to reduce debt-to-asset ratio

Energy transportation industry is a high-investment and capital intensive industry, it is also a strong cyclical industry, thus it is exposed to greater risk relating to macroeconomic volatility. As at the end of 2016, 2017 and 2018, the consolidated debt-to-asset ratio of the Company is 52.74%、53.20% and 53.84%, respectively. As compared with listed companies of A shares in the shipping industry, the debt-to-asset ratio of the Company is at the middle level.

I-34 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Debt-To-Asset Ratios of Comparable Companies in The Industry in 2016-2018

Stock code		Debt-to-Asset Ratio	Debt-to-Asset Ratio	Debt-to-Asset Ratio
Stock code	Stock short name	Debt-to-Asset Ratio
		As at 31 December 2018	As at 31 December 2017	As at 31 December 2016
600026.SH	COSCO SHIP ENERGY	53.84	53.20	52.74
601919.SH	COSCO SHIPPING Holdings	75.30	67.18	68.62
601872.SH	China Merchants Energy Shipping	59.31	49.02	45.69
600428.SH	COSCO SHIPPING Specialized	55.76	55.25	55.76
000520.SZ	Chang Jiang Shipping Group Phoenix	39.94	39.12	49.63
600798.SH	Ningbo Marine	39.86	45.64	49.65
	Average	54.00	51.57	53.68
	Median	54.80	51.11	51.20

Source: Wind

The Issuance can significantly increase the net assets of the Company and effectively improve its capital structure. According to the Company’s financial information of the end of 2018, the consolidated debt-to-asset ratio of the Company will be reduced to 49.62% after the completion of the Issuance, which will effectively reduce the Company’s financial risks, enhance the Company’s ability to continue as going concern and competitiveness in the industry.

(IV) Economic benefit of projects

1. Acquisition of 14 oil tankers

The 14 oil tankers acquired include four VLCC oil tankers, three Suez oil tankers, five Aframax oil tankers (including two LR2 product oil tankers) and two Panamax oil tankers (65,000-tonne class).

I-35 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

After calculation, the internal rate of return for acquisition of four VLCC oil tankers is 8.5% with a static payback period of 11 years and a dynamic payback period of 17 years.

The internal rate of return for acquisition of three Suez oil tankers is 7.4% with a static payback period of 12 years and a dynamic payback period of 19 years.

The internal rate of return for acquisition of three Aframax oil tankers is 7.4% with a static payback period of 13 years and a dynamic payback period of 21 years.

The internal rate of return for acquisition of two Aframax LR2 oil tankers is 7.2% with a static payback period of 13 years and a dynamic payback period of 21 years.

The internal rate of return for acquisition of two Panamanian oil tankers (65,000-tonne class) is 16.7% with a static payback period of 6 years and a dynamic payback period of 8 years.

2. Acquisition of two Panamax oil tankers (72,000-tonne class)

After calculation, the internal rate of return for acquisition of two Panamax oil tanker (72,000-tonne class) is 9.37% with a static payback period of 9 years and a dynamic payback period of 13 years.

(V) Project registration and environmental evaluation

1. Acquisition of 14 oil tankers

On 30 October 2017, the tenth meeting of the Board of the Company in 2017 considered and approved the acquisition of four VLCC oil tankers and three Suez oil tankers from Dalian Shipbuilding Industry Co., Ltd. and acquisition of five Aframax oil tankers (including two LR2 product oil tankers) and two Panamax oil tankers (65,000-tonne class) from Guangzhou Shipyard International Company Limited and China Shipbuilding International Trading Company Limited, respectively.

2. Completion of Acquisition of two Panamax oil tankers (72,000-tonne class)

On 24 June 2015, COSCO Group approved Dalian Tanker, a subsidiary of the Company to appoint Dalian Shipbuilding to build two Panamax oil tanker (72,000-tonne class) in accordance with the Approval of Order of Three VLCC and Five 72,000-tonne Product Oil Tankers by DO Company (Zhong Yuan Zhan Fa [2015] No. 178).

None of the investment projects is involved in obtaining the EIA approval issued by the environmental protection department in advance.

I-36 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

SECTION IV DISCUSSION AND ANALYSIS OF BOARD ON THE IMPACTS OF THE ISSUANCE ON THE COMPANY

I. CHANGES IN THE BUSINESSES AND ASSETS INTEGRATION INITIATIVES, ARTICLES OF ASSOCIATION, SHAREHOLDING STRUCTURE, STRUCTURE OF SENIOR MANAGEMENT AND BUSINESS STRUCTURE OF THE COMPANY AFTER THE ISSUANCE
(I) Change in business and Whether there is an integration plan for assets

The principle businesses of the Company are oil shipments and LNG shipment. The business scope of the Company will remain unchanged upon completion of the Non-public Issuance of A Shares. The successful use of the proceeds will enable the Company to further enhance and optimize the capacity of fleets, ship types and ship age structure without causing the integration of the business and asset of the Company.

(II) Adjustment to the Articles of Association

Upon the completion of the Non-public Issuance of A Shares, the Company will make amendments to the terms with respect to provisions relevant to registered capital, total share capital and share capital structure under the Articles of Association. Other than that, the Company has no other plans to amend or adjust the Articles of Association as a result of the Issuance.

(III) Change in the shareholding structure

As of 31 December 2018, the total share capital of the Company is 4,032,032,861 shares, of which China Shipping and its subsidiaries held 1,554,631,593 A shares in total, representing 38.56% of the total share capital of the Company. China Shipping is the direct controlling shareholder of the Company. As the sole shareholder of China Shipping, COSCO Shipping is an indirect controlling shareholder of the Company. In addition, the SASAC is the beneficial controller of the Company.

Assuming the price of the Non-public Issuance of A Shares is RMB6.81 per share, the proceeds will amount to 5.4 billion, of which COSCO Shipping will subscribe no more than 4.2 billion in total, the Company intends to totally issue 792,951,541 A Shares, of which COSCO Shipping will subscribe 616,740,088 shares. The particulars of change in the shareholding structure of the Company before and after the Issuance will be as follows:

I-37 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

Unit Share, Percentage

Name of Shareholder China Shipping and its subsidiaries COSCO Shipping Total of shares directly and indirectly held by COSCO Shipping Other investors (no more than nine investors) Other public shareholders Total share capital	Shareholding before the Issuance Number of shares held Shareholding proportion 1,554,631,593 38.56% – – 1,554,631,593 38.56% – – 2,477,401,268 61.44% 4,032,032,861 100.00%	Shareholding after the Issuance Number of shares held Shareholding proportion 1,554,631,593 32.22% 616,740,088 12.78% 2,171,371,681 45.00% 176,211,453 3.65% 2,477,401,268 51.35% 4,824,984,401 100.00%	Shareholding after the Issuance Number of shares held Shareholding proportion 1,554,631,593 32.22% 616,740,088 12.78% 2,171,371,681 45.00% 176,211,453 3.65% 2,477,401,268 51.35% 4,824,984,401 100.00%
			45.00% 3.65% 51.35%
			100.00%

Note: The above estimates are based on the share capital structure of the Company as of 31 December 2018; number of shares held by other public shareholders includes the numbers of A shares and H shares held by public shareholders.

COSCO Shipping will, directly and indirectly, hold a total of 45.00%[3] of the Company upon the completion of the Issuance. China Shipping shall remain as the direct controlling shareholder, COSCO Shipping shall remain as an indirect controlling shareholder of the Company and the SASAC shall remain as the actual controller of the Company. Therefore, the Non-public Issuance of A Shares will not result in the change in control of the Company.

(IV) Change in the structure of senior management

As of the date of the announcement of this proposal, the Company does not have a plan with respect to the change of the structure of senior management. Upon completion of the Non-public Issuance of A Shares, no change will occur to the senior management of the Company except for reallocation of normal human resources. In the future, if the Company intends to change its senior management structure, it will comply with necessary legal procedures and information disclosure obligation in accordance with relevant requirements.

3 If the subscription of the target subscribers are less than 1.2 billion RMB, on the condition that the subscription of COSCO Group reaches 4.2 billion RMB, the direct and indirect shareholding ratio of COSCO Group to the Company will exceed 45%

I-38 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(V) Change in business structure

The projects invested with the proceeds of the Company are carried out focusing on its principle business, and will improve the Company’s capacity and service levels and enhance its market competitiveness upon completion. Upon completion of the Non-public Issuance of A Shares, there will be no changes in business structure of the Company.

II. CHANGES IN FINANCIAL CONDITION, PROFITABILITY AND CASH FLOWS OF THE COMPANY UPON COMPLETION OF THE ISSUANCE

Upon completion of the Non-public Issuance of A Shares, the total assets and net asset of the Company will increase accordingly while the gearing ratio will reduce accordingly and financial position will be improved to a large extent. Particulars of the impacts of the Issuance on financial condition, profitability and cash flows of the Company are as follows:

(I) Impact on financial position of the Company

After the proceeds from the Non-public Issuance of A Shares are in place, both of total assets and net assets of the Company will increase accordingly, capital strength will be effectively enhanced, which will help to lower the financial risks of the Company and provide guarantee to its sustainable development.

(II) Impact on the Company’s profitability

After the actual receipt of the proceeds to be raised from the Non-public Issuance of A Shares, since both net assets and total share capitals of the Company will increase, it takes time to reflect the economic benefit generated from the projects to be invested with the proceeds raised, therefore, it may lead to some degree of decline in financial indicators such as return on net assets and earnings per share of the Company in the short term.

However, the projects to be invested with the proceeds raised will enhance the operation capacity and optimize the vessel types and age of the Company, meanwhile, the introduce of new vessel will effectively reduce the Company’s fuel consumption and maintenance charges to improve the operating cost of the Company, therefore, there will be a significant increase in the Company’s market competitiveness.

(III) Impact on the Company’s cash flows

Upon completion of the Non-public Issuance of A Shares, the cash inflows from financing activities of the Company will be increased substantially in the short term. As the projects to be invested with the proceeds raised will be implemented in the future, the cash outflow of the Company generated from investment activities will be increased and the operational strength will be further improved, which helps to increase the net cash flows from operating activities of the Company.

I-39 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

III. CHANGE IN BUSINESS RELATIONSHIP, MANAGEMENT RELATIONSHIP, CONNECTED TRANSACTIONS AND INDUSTRY COMPETITION BETWEEN THE COMPANY AND THE CONTROLLING SHAREHOLDERS AS WELL AS THEIR ASSOCIATES

Upon completion of the Non-public Issuance of A Shares, no substantial changes will occur to the business and management relationship between the Company and controlling shareholders as well as its associates due to the Non-public Issuance of A Shares.

For details of the change in the connected transactions and industry competition, please refer to “ (VI) Horizontal competition and connected transactions” under “I. Basic Information of COSCO Shipping” in “Section II Particulars of the Target Subscribers of the Non-public Issuance and Summary of the Share Subscription Agreement”.

IV. WHETHER THERE IS EMBEZZLEMENT OF FUNDS OR ASSETS BY THE CONTROLLING SHAREHOLDER AND ITS AFFILIATES, OR WHETHER GUARANTEE IS PROVIDED BY THE COMPANY TO THE CONTROLLING SHAREHOLDER AND ITS AFFILIATES AFTER THE ISSUANCE

Upon completion of the Issuance, the capital or assets of the Company will not be misappropriated by controlling shareholders or its associates. In addition, there will not be any form of illegal guarantee provided by the Company to the controlling shareholders or its associates.

V. WHETHER THE DEBT STRUCTURE OF THE COMPANY IS REASONABLE AND WHETHER THERE WILL BE A SUBSTANTIAL INCREASE IN THE LIABILITIES (INCLUDING CONTINGENT LIABILITIES) OR A TOO LOW DEBT-TO-ASSET RATIO OR AN UNREASONABLE FINANCIAL COST THROUGH THE ISSUANCE

As of 31 December 2018, the debt-to-asset ratio of the Company in the consolidated statements was 53.84%. Upon completion of the Issuance, the net asset of the Company will be increased and the debt-toasset ratio will be decreased. The Issuance will not significantly increase the Company’s liabilities (including contingent liabilities), nor will it cause a too low debt-to-asset ratio or an unreasonable financial cost.

VI. RISKS RELATED TO THE ISSUANCE OF SHARES

(I) Risks Relating to the Market

1. Risks relating to the fluctuation in macro-economy

Energy is the important resource guarantee for the economic development and the physical foundation of modern civilization. The shipping of oil and LNG operated by the Company has a close connection with the macroeconomic development of the world. The prosperity of the global and China’s economy directly affects the level of energy consumption and indirectly affects the operation of the Company. When the macro-economy is booming, the

I-40 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

demand for energy resources will increase rapidly, and will, in turn, increase the shipping demand for these resources. However, when the macro-economy is in recession, the shipping demand for the energy resources will be affected inevitably.

In 2008, as affected by the financial crisis, the global economy suffered a severe damage with demand for energy consumption in the world depressed and demand growth falling, the global energy transportation market has been depressed in recent years due to such influence. Although after 2009 the economic stimulus policies of governments in the world has picked up the market prosperity in some degree, the uncertainty of the global economic recovery has left the energy transportation market still at a lingering stage. Meanwhile, although China’s economy has supported sustained growth in the world energy market in recent years, however, as the China’s economy enters “New Normal” stage with economic structural adjustment and economic slowdown, it is uncertain which level of influence will the China’s economic development have on global energy consumption, and all will bring some uncertainty to the Company’s primary business expansion and development.

2. Market competition risks relating to the energy transportation industry

In the short term, the international crude oil transportation market will continue to be sluggish due to the imbalance between supply and demand of market capacity. The large amount of new capacity in the early stage still needs time to digest, and the competition in the energy transportation industry grows more and more fierce. Although the Company has continuously optimized its vessel types and age structure as well as made a scientific and reasonable planning of business and shipping line structure to improve its competitiveness, however, energy transportation enterprises are in the trend of pursuing large scale vessels with increasing investment in marine technology and information equipment, which may challenge the Company in various aspects such as hull structure, service capacity, information system and management efficiency.

3. Competition risks relating to other energy and transportation modes

Maritime shipping has the advantages of large shipping capacity and low price, it is a major mode of transportation for commodities, particularly it has outstanding advantages in the transportation of cargoes such as petroleum, coal and iron ore, but other modes of transportation still pose a certain level of competition to maritime shipping. For example, the connection of crude oil transportation pipelines and the construction of deep water terminals in coastal ports of the PRC will reduce the demand for secondary transshipments of crude oil. In addition, in recent years, influenced by the factors such as the turmoil in the Middle East that threatened the world’s energy security and the changes in the world’s energy consumption structure, the world’s major energy consumers are actively pursuing diversified energy strategies. For example, the United States vigorously develops domestic leaf rock oil resources, EU continues to implement clean fuel strategy, Japan, India and other countries actively develop natural gas, all of which will have certain adverse impact on the crude oil ocean shipping markets.

I-41 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(II) Risks relating to business and operation

1. Risks relating to fluctuation in performance

The Company’s main business includes oil shipping and LNG transportation, of which oil the former accounts for a large proportion, serving as the major factor that affecting the Company’s profitability. As the energy shipping industry is greatly affected by factors such as changes in macroeconomic situation at home and abroad, fluctuations in crude oil prices, and supply of market capacity, the Company’s operating income and gross profit have certain volatility, which casts influence on the Company’s overall profitability. In 2016, 2017 and 2018, the comprehensive gross profit margin under the Company’s pro forma were 32.43%, 22.74% and 15.61%, respectively, and the net profit were 1,364,654,500 yuan, 1,885,190,000 yuan and 323,485,700 yuan respectively[4] . Affected by the decline in the industry’s prosperity, the Company faces greater operational pressures in 2018. If the macroeconomic situation, crude oil price and market capacity supply fluctuate greatly in the future, it may surely affect the Company’s business operations.

2. Risks relating to fluctuation in freight price

Freight price is one of the key factors that determine the profitability of the energy transportation industry, therefore, the fluctuation in freight price will bring uncertainty to the operating benefits of the Company. Although the Company have enhanced the stability of freight price through signing COA contracts with large domestic petroleum enterprises and setting up joint venture. And tried its best to stabilize the risk of freight fluctuations, but the market freight price still shows significant volatility, and the fluctuation of freight rate may still have a greater impact on the Company’s business activities.

3. Risks relating to fluctuation in fuel price

Fuel surcharges is one of the most important cost expenditure items for energy transportation enterprises. Fluctuation in fuel price will directly influence the production cost of the energy transportation enterprises. In recent year, crude oil price fluctuates in international market and there is also great fluctuation in the price of bunker fuel. As the new domestic and international requirements in terms of emission of ships are constantly updated, the price for fuel oil procurement of the Company will rise accordingly. Therefore, future fluctuation in fuel price will have great impact on the cost of Company’s primary business and profitability.

4 The principal business of the Company was changed to oil and LNG transportation after the reorganization in 2016. In order to compare the Company’s business development within the reporting period in a more precise way, the Company has prepared the pro forma consolidated financial statements for the 2015-2017 period with regard to the reorganization. The aggregate gross margin and net earnings of 2016 and 2017 here are based on the pro forma consolidated financial statements. The 2018 financials are not pro forma data.

I-42 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

4. Risks relating to customer concentration

At present, the main customers of the Company are China Petroleum and Chemical Corporation, China National Petroleum Corporation, China National Offshore Oil Group Co., Ltd. and other large oil companies. In 2018, the total revenue from the top five customers accounted for approximately 66.45% of the Company’s total operating income, which demonstrates a relatively high customer concentration level of the Company. On the one hand, this is partly decided by the characteristics of the energy shipping industry. On the other hand, the reason also lies in the way the Company adopted to lock in the operational risks by signing COA with large cargo owners and establishing associates and joint ventures. If the shipping needs of the Company’s major customers change, it will have a greater impact on the Company’s operating conditions.

5. Risks relating to industrial policies

Energy sources such as oil and LNG are the focus of attention when countries around the world formulate energy industry policies. As countries around the world pay more and more attention to resources protection, environmental protection, and national security, if the relevant countries adjust their energy industry policies and thus affect the international trade of these energy sources, the oil transportation industry will be further affected. At the same time, the oil transportation industry belongs to international industries involving all over the world and is subject to multiple supervision by international organizations, flag countries and port countries. Changes in the pattern of international relations, changes in international organizations and shipping policies of various countries may have a major impact on the oil transportation industry.

6. Policy risk for government grants

Income from government grants of the Company in 2016, 2017 and 2018 amounted to RMB238,753,000, RMB472,396,300 and RMB65,042,700, mainly attributable to the subsidies for the demolition of vessels provided in the “Administrative Measures for the Special Subsidies Given by the Central Finance to Encourage Retirement and Replacement of Obsolete and Worn-out Transportation Vessels and Single-hull Oil Tankers” 《老舊運輸船舶和單殼油( 輪報廢更新中央財政補助專項資金管理辦法》) (the “Administrative Measures”) jointly promulgated by four ministries and commissions including MOF. Since the Administrative Measures expired on 31 December 2017, the income from government grants and profitability of the Company may be impacted in case of no further relevant subsidy polices of the state.

7. Overseas operation risk

In view of the sustained development of the national economy, the increasing volume of imported crude oil and LNG, and the vast room for development of foreign trade shipping business, the Company will further expand the foreign trade shipping market. However, the Company will be exposed to greater risks in operation and management due to the high marketization of foreign trade shipping market and fierce competition. As the constant

I-43 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

development of overseas business of the Company, the politic environment for relevant shipping routes becomes complex, the Company’s business will also face politic risk to a certain extent.

8. Risks relating to shipping safety

Ships might face various accidents during voyage, including running aground, fire, collision, shipwreck, piracy, environmental incident and severe weather condition as well as natural disaster, which may cause loss to ships and cargos. As such, the Company will subject to the risk of litigation and compensation, the ships and cargos may also be distrained. Amongst others, environmental pollution caused by oil leakage results in the most server danger. Once the any pollution accidents caused by oil leakage occur, the Company will be subject to substantial compensation risks, and there will be significant impact on the Company’s reputation and normal operation. The Company has controlled risks through active insurance so far as possible, however, the compensation from insurance could not fully cover the losses incurred from the above risks.

In addition, change in international relations, regional disputes, wars and terrorist activities may affect the safety and normal operation of ships. In recent years, piracy is exceptionally rampant. Piracy in waters off Somalia has become a global concern and piracy has become a major threat to shipping safety. Although the Company has controlled the risk as much as possible through active insurance, the insurance compensation still cannot fully cover the possible losses caused by the above risks.

9. Implementation risk for investment projects

The operating results of energy shipping companies are affected by various factors such as market supply and demand, freight rates, vessel leasing fees, ship depreciation expenses, fuel costs and government subsidies. In particular, the international energy transportation market is complex and volatile, and cyclical, seasonal or temporary factors will affect the supply and demand of the market, which will in turn affect the Company’s operating performance.

In the future, if there is a macroeconomic downturn, the relationship between supply and demand in the shipping market deteriorates, or other factors that cause the energy shipping market and the Company’s operating performance to deviate from expectation, the new operating income of the investment projects may not cover the operating costs including newly-added depreciation expenses and fuel costs, which will have an impact on the Company’s operating performance.

10. Connected transaction risk

During the reporting period, the Company had certain connected transactions, mainly for the procurement of marine supplies and services such as fuel and crew services, provision of technical services and sales of marine supplies, mutual lease of properties and vessels, and connected transactions for financial services from COSCO SHIPPING Group and its

I-44 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

subsidiaries. Those transactions were taken place for the needs of conducting principal businesses. In addition, the funds raised for the purchase of tankers for business implementation are expected to result in adding recurring connected transactions such as purchasing supplies and shipping services.

The Company’s connected transactions are necessary, reasonable and fair. The Company set up a connected transaction decision-making system in order to prevent risks, and each of the direct controlling shareholders and indirect controlling shareholders of the Company has issued a letter of commitment on regulating connected transactions. Provided that the internal control of the above connected transactions or the related commitments to regulate the connected transactions cannot be strictly implemented, the interests of the Company and shareholders may be harmed.

(III) Financial Risk

1. Large capital expenditure risk

In order to cope with the growth of energy demand in China and the policy requirements of the “National Oil National Transportation (國油國運)”, the Company has continuously expanded its fleet size. The capital expenditures of the Company have been large in recent years, and there are still large-scale capital expenditure plans in the future. In 2016, 2017 and 2018, the Company added 4 owned oil tankers with capacity of 748,600 DWT, 13 owned oil tankers with capacity of 2,359,300 DWT and 8 owned oil tankers with capacity of 1,543,900 DWT[5] respectively, and the Company participated in the investment of LNG vessels, added 2 LNG vessels with capacity of 345,900 cubic meters, 5 LNG vessels with capacity of 867,000 cubic meters and 10 LNG vessels with capacity of 1,730,000 cubic meters respectively. Due to the long construction period of the vessels, especially the construction period of giant ships such as VLCC is longer, a large amount of capital expenditure will take a long time to produce benefits. Although based on the cyclical professional judgment of the oil transportation industry, the Company tries to choose to build the ship at a lower ship price, but the investment of a large number of new ships may increase the depreciation and financial costs and reduce the profit level within a certain period of time.

2. Risks on rate fluctuation

As of 31 December 2018, the total liabilities of the Company were RMB34.144 billion, mainly including interest-bearing debts. Market interest rate fluctuations will have a certain impact on the debt repayment of the Company, which in turn will affect the net profit of the Company. The Company’s interest-bearing debts are mainly based on RMB debt and US dollar debt. The changes in RMB and US dollar interest rates have a greater impact on the financial costs of the Company.

not considering changes due to changes in the scope of consolidation

I-45 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

3. Risks relating to exchange rate

Some of the operating income and operating cost are received and paid in US dollars, and there are differences between the asset and liabilities balances denominated in US dollars. Although the Company has made appropriate proportion for US dollar income and cost and effectively reduced the risk of exchange rate fluctuation, since the foreign trade business of the Company continues to grow and the higher proportion of the US dollars denominated liabilities, the fluctuation in exchange rates have a certain impact on the Company’s operation.

4. Risks on the Dilution in Earnings per Share and Return on Asset

After the actual receipt of the proceeds to be raised from the Non-public Issuance of A Shares, both total share capitals and net assets of the Company will be increased, which will dilute the earnings per share and return on asset of the Company with profit level held constant. In addition, since it will take some time to reflect the benefit of using the proceeds will take some time, and the expected level of return can only be achieved after vessels are completed and put into operation and begin to generate a stable income. During this period, the growth of the Company’s profit may be lower than that of the net asset, which may result in risks on the dilution in earnings per share and return on asset.

5. Derivative financial instrument risk

In order to control the financial risks brought about by the risk of Libor interest rate changes, LNG single-ship companies has locked the floating interest rate in the construction of LNG vessel loan interest rate into a fixed interest rate. These interest rate swap contracts are cash flow hedging instruments in derivative financial instruments, which are conducive to locking the financial costs of LNG projects construction and thus locking project income.

According to the requirements of accounting standards, the portion of the cash flow hedging instrument gains or losses that are valid hedges is directly recognized as other comprehensive income. Since the LNG single-ship companies have less capital and less operating profit and less retained earnings in the initial construction and operation period, severe fluctuation of interest rate in the spot market and the large difference of the exchanged fixed interest rate will result in a large fluctuation in the amount of owner’s equity of LNG single-ship companies.

6. External guarantee risk

Since some LNG single-ship companies in which the Company has shareholding adopt the “all debt capital model”, the shareholders or actual controllers of the single-ship companies actually enjoy and assume the rights and obligations under the financing contracts, shipbuilding contracts and charter contracts. In line with other shareholders, the Company provides guarantees for the guaranteed parties to fulfill financing contracts, shipbuilding contracts and charter contracts in accordance with the shareholding ratio of the holding subsidiaries, which conforms to business logic and international practices and is a common financing model for LNG single-ship companies.

I-46 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Although the demand for LNG is broad, the guarantor is the main force of LNG transportation in China, the operational risk is extremely small, and the profitability of LNG project vessel model is determined, the default risk of the guarantor is extremely low. However, if these LNG single-ship companies have operational difficulties due to extreme conditions, it may cause the Company to trigger guarantee obligation, which in turn affects the Company’s operating performance.

(IV) Risks of Management

After the actual receipt of the proceeds, the total assets of the Company will be increased significantly and capital structure will be improved. The rapid increase in business and total assets bring forward higher requirements to the management level and decision-making abilities of the Company. In the future, the Company will make systematic adjustments adaptive to the human resources, internal communication, overall collaboration and company operations based on the development of fleets, and further improve and perfect the organization models and management systems. However, if we could not adjust in a timely manner, or managements in relevant aspects could not adapt to the business development needs of the Company, we could be subject to internal management risks.

(V) Risks of approval

As required by the SFC, a new request for consent for the the Whitewash Waiver issued by the SFC is needed with related procedure concerning a special deal due to the change of the basic information of the Original Whitewash Waiver. The above items are subject to consideration and approval of the General Meeting, A shares class meeting and H shares class meeting. Besides, this Non-public Issuance still requires verification and approval by the CSRC. The above-mentioned approval matters constitute prerequisites for this Non-public Issuance. Whether approval can be obtained or not, and the final approval and the time for approval remain uncertain, investors are advised to be aware of the investment risks.

(VI) Risks of Issuance

The Non-Public Issuance of A Shares offers a significant number of shares and amount of proceeds through non-public issuance to not more than 10 specific target subscribers, including COSCO Shipping. The offering results of the Non-public Issuance of A Shares will be affected by various internal and external factors such as the overall conditions of the security markets, the development of the industry where the Company locates, the trend of the Company’s share price and the recognition of the investors on the proposal of the Issuance. As such, the Non-public Issuance of A Shares is subject to risk of issuance such as insufficient proceeds raised and failure of the issuance.

I-47 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

SECTION V PROFIT DISTRIBUTION

I. EXISTING PROFIT DISTRIBUTION POLICY OF THE COMPANY

In order to regulate the distribution of cash dividends by the Company and enhance transparency in cash dividends, the 12th meeting of the Board of Directors of the Company in 2017 and the 3rd Extraordinary General Meeting in 2017 reviewed and approved the Proposal on Amending the Articles of Association according to the Company Law, the Securities Law, the Guidelines for the Articles of Association of Listed Companies (Revised in 2016), the Notice Regarding Further Implementation of Cash Dividends Distribution of Listed Companies, the Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies and other relevant laws and regulations, as well as the actual situation of the Company. In accordance with the revised Articles of Association, the profit distribution policy of the Company is as follows:

“Article 227 After the profit distribution plan has been adopted at the general meeting, the Board shall finish distributing dividends (or shares) within two months after conclusion of the general meeting.

Article 228 Basic principles of profit distribution policy and cash dividend policy:

Basic principles of profit distribution policy:

The profit distribution policy of the Company shall be continuous and stable. Profit distribution shall be in full consideration of reasonable return to investors, the long term interests and sustainable development of the Company, and the interests of all shareholders as a whole.

The profit distribution of the Company shall be based on the distributable profit realized for the year and dividend shall be distributed to shareholders in a sequence in compliance with the statutory requirements and in proportion to their shareholdings. The same shares shall be entitled to the same rights and dividend. Shares of the Company held by the Company are not entitled to distribution.

The Company shall give priority to profit distribution in the form of cash.

Cash dividend policy:

The Board shall take various factors into consideration, including the Company’s industry features, development stages, business model and profitability as well as whether the Company has any substantial capital expenditure arrangements in differentiating the following circumstances and propose a differentiated policy for cash dividend distribution pursuant to the procedures stipulated in the Articles of Association:

Where the Company is in a developed stage with no substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 80% of the profit distribution;
Where the Company is in a developed stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 40% of the profit distribution;
I-48 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Where the Company is in a developing stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 20% of the profit distribution.

In the case that it is difficult to distinguish the Company’s stage of development but the Company has significant capital expenditure arrangements, the profit distribution may be dealt with pursuant to the preceding provisions.

Article 229 Forms of profit distribution

The Company may distribute dividends in the forms of cash, shares or a combination of both cash and shares.

Article 230 Time intervals between profit distributions

Provided that the Company makes a profit for the year, and its operating cash flow and total undistributed profit are positive, the Company shall make profit distribution at least once a year.

The Company may distribute interim profit. The Board of the Company may propose distribution of interim dividends based on the scale of profit, cash flows status, stage of development and capital requirements of the Company.

Article 231 Specific circumstances and proportions of cash dividends

Profit distributions by the Company in cash shall at least meet the following conditions:

(1) The realised distributable profit of the Company for the year (the profit after tax of the Company after recovery of losses and allocation to the common reserve) is positive with sufficient cash flows, and the cash dividend distribution will not affect the subsequent continuing operation of the Company;
(2) The auditors have issued an audit report with standardized unqualified opinions on the annual financial report of the Company.

Upon the fulfillment of the aforesaid conditions, the Company shall distribute dividend in cash. The total profit to be distributed in cash in any consecutive three years shall not be less than 30% of the average annual distributable profit realized in the three years. The actual proposal relating to the proportion of cash dividend per annum shall be recommended by the Board based on the annual profitability and the future plan of capital utilization of the Company.

Article 232 Specific conditions for share dividend distribution

The Company may distribute profit by share dividend according to actual conditions such as the accumulated distributable profit and cash flows of the Company, and on the premise that there is adequate cash dividend and a reasonable share capital structure of the Company. The actual proposal relating to the proportion of share dividends shall be recommended by the Board. In determining the specific amount for

I-49 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

the share dividend distribution, the Board of the Company shall take full account of whether the total share capital after share dividend distribution is suitable for the current operational scale and the development of the Company, as well as its growth, diluted factors per share of net assets, so as to ensure that the profit distribution plan is in the interest of all shareholders as a whole in the long run.

......”

II. SPECIFIC IMPLEMENTATION OF CASH DIVIDEND AND PROFIT DISTRIBUTION BY THE COMPANY FOR THE LAST THREE YEARS

Cash dividend distribution for the last three years of the Company:

Unit: RMB10’000	Unit: RMB10’000	Unit: RMB10’000	Unit: RMB10’000
Year	Amount of cash dividends (tax inclusive)	Net profit attributable to shareholders of the listed company in annual consolidated statements of dividends	Proportion in net profit attributable to shareholders of the listed company in consolidated statements（%）
2016	76,608.62	192,251.27	39.85%
2017	20,160.16	176,633.92	11.41%
2018	8,064.07	10,513.13	76.70%
Average annual net profit attributable to shareholders of the listed company for the last three years			126,466.11
Proportion of accumulated cash dividends in average annual net profit attributable to shareholders of the listed company for the last three years			82.89%

Note: On March 27, 2019, the Company held the second meeting of the Board of 2019, and reviewed and approved the “Proposal on the Profit Distribution of the Company of 2018”. The profit distribution plan is still subject to review and approval at the shareholders meeting.

The Company places an emphasis in creating return to its shareholders, and the accumulated profits be distributed in cash for the last three years accounted more than 30% of the average annual distributable profit for the last three years.

III. SHAREHOLDERS’ RETURN PLAN FOR THE NEXT THREE YEARS (2017-2019)

To perfect and improve the sustainable, stable and scientific decision-making and supervision system of dividend distribution of the Company, increase the transparency and practicality of the decision-making of profit distribution of the Company, generate positive returns on investment for investors and steer investors towards long-term and reasonable investment, the Shareholders’ Return Plan (2017-2019) of

I-50 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

COSCO SHIPPING Energy Transportation Co., Ltd. is formulated by the Board of the Company in accordance with the requirements of the Company Law, Notice Regarding Further Implementation of Cash Dividend Distribution of Listed Companies 《關於進一步落實上市公司現金分紅有關事項的通知》( ) issued by the CSRC, Listed Companies Regulatory Guidance No. 3 – Cash Dividends Distribution of Listed Companies 《上市公司監管指引第( 3號－上市公司現金分紅》) and other laws and regulations and the Articles of Association and based on the actual situation of the Company. Particulars are as follows:

(I) Major factors considered in formulating the plan

With the focus placed on the long-term and sustainable development and on the basis of comprehensive analysis on actual circumstance of its business development, the shareholders’ requirements and wishes, social capital costs and external financing environment, the Company has formulated its Shareholders’ Return Plan and established the sustainable, stable and scientific dividend return plan and mechanism for investors after taking full account of the Company’s strategic development plan and development stage, current and future profitability and size, cash flow, working capital requirement, bank credit and debt financing environment, so as to ensure the continuity and stability of profit distribution policy.

(II) Basic principles for formulation of the plan

The Company shall place an emphasis in creating reasonable return to its investors, and implement a continuous and stable profit distribution policy; the Company’s profit distribution shall neither exceed the amount of accumulated distributable profit nor the ongoing operation of the Company;
The opinions of shareholders (particularly the minority shareholders), independent directors and supervisors shall be fully considered and listened for formulating the Shareholders’ Return Plan of the Company;
Subject to compliance with relevant conditions, the Company shall give priority to dividend distribution in cash in the next three years.

(III) Specific plan on shareholders’ return of the Company for 2017-2019

1. Profit distribution policy of the Company for the next three years

(1) Form of profit distribution

The Company may distribute dividends in the form of cash, shares, a combination of both cash and shares or otherwise as permitted by laws and regulations. The Company shall give priority to dividend distribution in cash over in shares.

I-51 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

(2) Specific conditions, proportions and time intervals of cash dividend

Except for the special circumstances that the Company plans to make material investment or significant cash expenditure within the next twelve months, the Company shall distribute its dividends in the form of cash if the Company makes profits for the current year and the accumulated undistributed profits are positive. The Company’s accumulated profits distributed in form of cash for the last three years are no less than 30% of the annual average net profit attributable to shareholders of the Listed Company for the last three years. Subject to compliance with the conditions for cash dividend distribution, the Company shall in principle distribute dividends in cash each year. When proposed by the Board and approved by the General Meeting, an interim dividend distribution may also be made in the form of cash.

1 Where the Company is in a developed stage with no substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 80% of the profit distribution;
2 Where the Company is in a developed stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 40% of the profit distribution;
3 Where the Company is in a developing stage with substantial capital expenditure arrangements, the dividend distributed in the form of cash shall not be less than 20% of the profit distribution.

(3) Specific conditions for distributing dividends in shares

The Company may distribute dividends in the form of shares based on the annual profits and cash flow and subject to the reasonableness of the cash dividend for the current year and the Company’s share capital scale.

I-52 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

2. Decision-making procedures and mechanism of profit distribution

The profit distribution plan of the Company shall be formulated by the Board pursuant to the provisions of the laws, regulations and the relevant regulatory documents and the Articles of Association, by combining with the Company’s profits, capital needs and shareholders’ return plan. Independent directors shall express clear opinions on it. Upon considered and approved by the Board, such plan shall be submitted to the General Meeting for consideration and approval. When making decisions on and formulating its profit distribution plan, the Board shall record in detail the advice of the management, key points of the speeches of the directors present at the meeting, opinions of independent directors, voting results of the Board, etc. and form written minutes to be properly kept as the Company’s records. When the specific plan on profit distribution is considered at the General Meeting, the Company shall take the initiative to communicate and exchange ideas through multiple channels with shareholders (minority shareholders in particular), effectively protect the rights of the public shareholders to attend the General Meeting, sufficiently listen to the opinions and demands of the minority shareholders, and give timely replies to issues that the minority shareholders concern about. If the Company makes a profit for the year, but the Board does not propose a profit distribution plan in cash, the Company shall explain the reasons and independent directors shall express independent views on the profit distribution plan and timely disclose them. Upon considered and approved by the Board, such plan shall be submitted to the General Meeting for consideration by way of on-site voting and online voting and the Board shall provide explanation on it at the General Meeting.

3. Conditions, decision-making procedures and mechanism regarding the adjustment made to the profit distribution policy

Should the Company need to adjust the profit distribution policy due to the material changes in the external operating environment or its operating status, the Company shall be focus on protection of the interests of the shareholders, and elaborate and explain the reasons in details. The adjusted profit distribution policy shall not be in violation of the relevant provisions of the CSRC, stock exchanges and the Articles of Association. The proposal regarding the adjustment made to the profit distribution policy shall be formulated by the Board. Independent directors shall express their independent opinions regarding the adjustment made to the profit distribution policy. Upon considered and approved by the Board, such proposal shall be submitted to the General Meeting for consideration and approval. The supervisory committee of the Company shall consider such proposal of the adjusted profit distribution policy formulated by the Board and sufficiently listen to the opinions of such external supervisors who do not hold any positions in the Company. Such proposal shall be passed and approved by voting by more than half of all the supervisors of the supervisory committee. When the proposal of the adjusted profit distribution policy is considered at the General Meeting, the Company shall sufficiently listen to the opinions of the public shareholders. In addition to setting up on-site voting at the meeting, online voting system shall be provided to shareholders. The passing and approval of such proposal shall require more than two-thirds of the effective votes made by the shareholders attending the General Meeting.

I-53 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

4. Implementation of the profit distribution policy

The Board must complete the distribution of dividends (in cash or in the form of shares) within two months after the resolution approving the relevant profit distribution plan has been passed at the General Meeting.

The Company shall disclose the formulation and implementation of the cash dividend policy in details in the periodic report. If the Company records a profit for the year, but the Board does not make a cash dividend proposal, the Board shall in detail explain in the annual report for such year the reasons for not distributing cash dividends, the purpose and use plan of the retained fund not being used for cash dividends distribution. Should there be any misappropriation of the Company’s funds by the shareholders, the Company shall deduct the cash dividend distributed to such shareholder for making up such fund being misappropriated.

(IV) Decision-making mechanism of the plan

Based on the Company’s profitability, business development plan, shareholders’ return, social funding cost and external financing environment, the Board proposes the shareholders’ return plan of the Company at the General Meeting pursuant to the provisions of Articles of Association. When the proposal for the shareholders’ return plan is considered at the General Meeting, the Company shall take the initiative to communicate and exchange ideas through multiple channels with shareholders (minority shareholders in particular), sufficiently listen to the opinions and demands of the minority shareholders. Such proposal shall be passed by more than two-thirds of the effective votes holding by the shareholders (including authorized proxies) attending the General Meeting.

(V) Adjustment cycle and decision-making mechanism of the plan

1. Adjustment to the plan

The Company shall review the shareholders’ return plan of the Company for the next three years based on a three-year cycle. The Company shall, on the basis of summarizing the implementation of the shareholders’ return plan of the Company over the past three years, take full account of the factors set out in Article I of the plan as well as the opinions of shareholders (minority shareholders in particular), independent directors and supervisors, to determine whether the profit distribution policy and the shareholders’ return plan for the next three years of the Company need to be adjusted or not.

If the shareholders’ return plan shall be adjusted due to the material changes in the external operating environment of the Company or the influence of the current specific plan on the shareholders’ return on the sustainable operation of the Company, the Company may reestablish the shareholders’ return plan for the next three years according to the basic principles set out in Article II of the plan.

I-54 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

2. Decision-making mechanism regarding the adjustment to the plan

The adjustment made by the Company to the shareholders ’return plan shall be submitted by the Board to the General Meeting, and shall go through relevant procedures as required by the provisions of article IV of the plan.

I-55 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

SECTION VI ANALYSIS ON DILUTION OF CURRENT RETURNS ARISING FROM THE NON-PUBLIC ISSUANCE AND REMEDIAL MEASURES

Pursuant to the relevant requirements of the Opinions of the General Office of the State Council on Further Strengthening the Protection of Small and Medium Investors’ Legitimate Interests in Capital Market (Guo Ban Fa [2013] No. 110) 《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的( 意見》), the Several Opinions of the State Council on Further Promoting the Healthy Development of Capital Market (Guo Fa [2014] No. 17) 《國務院關於進一步促進資本市場健康發展的若干意見》( ) and Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring (CSRC Announcement [2015] No. 31) 《關於首發及再融資、( 重大資產重組攤薄即期回報有關事項的指導意見》), in order to protect the interests of the small and medium investors, the Company has conducted an analysis on the impact of the Non-Public Issuance on dilution of current returns and introduced detailed remedial measures, and relevant entities have also made commitments to fulfill the remedial measures of the Company. The particulars are as follows:

I. IMPACT OF DILUTION OF CURRENT RETURNS ARISING FROM THE NON-PUBLIC ISSUANCE ON THE KEY FINANCIAL INDICATORS OF THE COMPANY

(I) Assumptions made in estimating the impact of dilution of current returns arising from the Issuance on the key financial indicators of the Company
Assuming that the Non-public Issuance will be completed by the end of September 2019, which is an estimate only, and the actual time of completion of the Issuance will be subject to the approval by the CSRC;
Assuming that the number of shares to be issued under the Non-public Issuance is not more than 792,951,541 (including 792,951,541), the total proceeds raised from the Issuance is RMB5.4 billion, meanwhile, this calculation excludes the issuance expenses; the number of shares and the completion time of the Non-public Issuance is only an estimate, and the final shares to be issued and the actual time of the completion of the Issuance is subject to the number of shares approved by the CSRC;
Assuming that there is no material changes in the macro-economic environment, the industry policy and the industry development, etc.;
Assuming that the impacts of using the proceeds from the Issuance on production and operation and financial positions (such as finance costs and investment income) of the Company are not to be taken into consideration;
Assuming that when predicting the Company’s total share capital, on the basis that the total share capital prior to the Non-public Issuance is 4,032,032,861 shares, only the impacts of the Non-public Issuance of A Shares will be taken into consideration, regardless of other factors causing changes in share capital;
I-56 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

Assuming that the Company’s net profit attributable to shareholders of the parent in 2019 increased by 10% over the previous year, the Company will realize a net profit attributable to shareholders of the parent of RMB115,644,470.40 (RMB73,406,654.27 after deduction of non-recurring gains or losses) in 2019; assuming that the Company’s net profit attributable to shareholders of the parent in 2019 decreased by 10% over the previous year, the Company will realize a net profit attributable to shareholders of the parent of RMB94,618,203.06 (RMB60,059,989.85 after deduction of non-recurring gains or losses) in 2019; assuming that the Company’s net profit attributable to shareholders of the parent in 2019 is almost equal to that in 2018, the Company will realize a net profit attributable to shareholders of the parent of RMB105,131,336.73 (RMB66,733,322.06 after deduction of non-recurring gains or losses) in 2019; this assumption is only used as a measurement. It does not represent the Company’s profit forecast for 2019 or the Company’s judgment on the business situation and trends in 2019. Investors should not make investment decisions accordingly;
The second meeting of the Board of Directors of the Company in 2019 reviewed and approved the Company’s 2018 annual profit distribution plan. Based on the total share capital of 4,032,032,861 shares as of 31 December 2018, the Company will distribute a cash dividend of RMB0.20 (tax inclusive) for every 10 shares to all shareholders with the profit for cash dividend distribution of RMB80,640,657.22 (tax inclusive);

Assuming that the above 2018 annual profit distribution plan will be implemented in June 2019, that is, to distribute dividend of 2018 to shareholders based on RMB0.02 (tax inclusive) for each ordinary share, the cash dividend to be distributed is RMB80,640,657.22 (tax inclusive). This assumption is only for prediction use. The actual profit distribution shall be subject to the announcement of the Company.

The above is just the assumption for the purpose of making calculation, which does not constitute a commitment, profit forecast or performance commitment. Investors should not make investment decisions based on this assumption, and the Company does not bear any liability for investors’ losses caused by making investment decisions based on the assumption.

The following analysis is the regulatory requirement of the CSRC that a listed company in the PRC, whose current returns will be diluted as a result of its financing exercise, shall undertake and fulfill specific remedial measures against the diluted returns, and the directors of the listed company shall conduct a sensitivity analysis on how such financing exercise will dilute its current returns and make relevant disclosures in the issuance proposal. Therefore, in accordance with such regulatory requirement, the Company conducted a sensitivity analysis on the impact of the dilution on current returns by the non-public issuance of shares on the major financial indicators of the Company.

Investors should be aware that the following analysis should not be read as profit forecasts of the Company.

Warning Statement: Investors and shareholders of the Company are not advised to make investment decisions according to the following analysis.

I-57 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

(II) Analysis on the impact of dilution of current returns arising from the Issuance on the key financial indicators of the Company

Based on the foregoing assumptions, the impact of dilution of current returns arising from the Issuance on the key financial indicators of the Company is analyzed as follows:

Item	Item		2019-12-31/Year 2019	2019-12-31/Year 2019
	Item	2018-12-31/ Year 2018	2019-12-31/Year 2019
			Prior to the Issuance	After the Issuance
	Scenario 1: the net profit attributable to owners of the parent (net of non-recurring gains or losses) in 2019 decreased by 10% year-on year.
	Net profit attributable to the parent (RMB10,000)	10,513.13	9,461.82	9,461.82
	Net profit attributable to the parent, net of non-recurring gains or losses (RMB10,000)	6,673.33	6,006.00	6,006.00
	Equity attributable to owners of the parent at end of the period (RMB10,000)	2,819,162.00	2,820,559.76	3,360,559.76
	Basic earnings per share (RMB per share)	0.0261	0.0235	0.0224
	Diluted earnings per share (RMB per share)	0.0261	0.0235	0.0224
	Weighted average return on net assets	0.37%	0.34%	0.32%
	Basic earnings per share, net of non-recurring gains or losses (RMB per share)	0.0166	0.0149	0.0142
	Diluted earnings per share, net of non-recurring gains or losses (RMB per share)	0.0166	0.0149	0.0142
	Weighted average return on net assets, net of non-recurring gains or losses	0.24%	0.21%	0.20%
Net assets per share for the current period (RMB per share)	Net assets per share for the current period (RMB per share)	6.9919	6.9954	6.9649

I-58 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Item	Item		2019-12-31/Year 2019	2019-12-31/Year 2019
	Item	2018-12-31/ Year 2018	2019-12-31/Year 2019
			Prior to the Issuance	After the Issuance
	Scenario 2: the net profit attributable to owners of the parent (net of non-recurring gains or losses) in 2019 is almost equal to that in 2018.
	Net profit attributable to the parent (RMB10,000)	10,513.13	10,513.13	10,513.13
	Net profit attributable to the parent, net of non-recurring gains or losses (RMB10,000)	6,673.33	6,673.33	6,673.33
	Equity attributable to owners of the parent at end of the period (RMB10,000)	2,819,162.00	2,821,611.07	3,361,611.07
	Basic earnings per share (RMB per share)	0.0261	0.0261	0.0249
	Diluted earnings per share (RMB per share)	0.0261	0.0261	0.0249
	Weighted average return on net assets	0.37%	0.37%	0.36%
	Basic earnings per share, net of non-recurring gains or losses (RMB per share)	0.0166	0.0166	0.0158
	Diluted earnings per share, net of non-recurring gains or losses (RMB per share)	0.0166	0.0166	0.0158
	Weighted average return on net assets, net of non-recurring gains or losses	0.24%	0.24%	0.23%
Net assets per share for the current period (RMB per share)	Net assets per share for the current period (RMB per share)	6.9919	6.9980	6.9671

I-59 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Item	Item		2019-12-31/Year 2019	2019-12-31/Year 2019
	Item	2018-12-31/ Year 2018	2019-12-31/Year 2019
			Prior to the Issuance	After the Issuance
	Scenario 3: the net profit attributable to owners of the parent (net of non-recurring gains or losses) in 2019 increased by 10% year-on year.
	Net profit attributable to the parent (RMB10,000)	10,513.13	11,564.45	11,564.45
	Net profit attributable to the parent, net of non-recurring gains or losses (RMB10,000)	6,673.33	7,340.67	7,340.67
	Equity attributable to owners of the parent at end of the period (RMB10,000)	2,819,162.00	2,822,662.39	3,362,662.39
	Basic earnings per share (RMB per share)	0.0261	0.0287	0.0273
	Diluted earnings per share (RMB per share)	0.0261	0.0287	0.0273
	Weighted average return on net assets	0.37%	0.41%	0.39%
	Basic earnings per share, net of non-recurring gains or losses (RMB per share)	0.0166	0.0182	0.0174
	Diluted earnings per share, net of non-recurring gains or losses (RMB per share)	0.0166	0.0182	0.0174
	Weighted average return on net assets, net of non-recurring gains or losses	0.24%	0.26%	0.25%
Net assets per share for the current period (RMB per share)	Net assets per share for the current period (RMB per share)	6.9919	7.0006	6.9693

Note:

Basic earnings per share prior to the Issuance = net profit attributable to the holders of the ordinary shares of the Company for the current period ÷ total share capital prior to the Issuance;
Basic earnings per share after the Issuance = net profit attributable to the holders of the ordinary shares of the Company for the current period ÷ (total share capital prior to the Issuance + number of new shares to be issued under the Issuance x number of months from the month following the issuance month to the end of the year ÷ 12);
I-60 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

Weighted average return on net assets prior to the Issuance = net profit attributable to holders of the ordinary shares of the Company for the current period ÷ (opening net assets attributable to the holders of the ordinary shares of the Company + net profit attributable to the holders of the ordinary shares of the Company for the current period ÷ 2 – cash dividend for the current period x number of months from the month following the dividend distribution month to the end of the year ÷ 12);
Weighted average return on net assets after the Issuance = net profit attributable to holders of the ordinary shares of the Company for the current period ÷ (opening net assets attributable to the holders of the ordinary shares of the Company + net profit attributable to the holders of the ordinary shares of the Company for the current period ÷ 2 – cash dividend for the current period x number of months from the month following the dividend distribution month to the end of the year ÷ 12 + total proceeds raised from the Issuance x number of months from the month following the issuance month to the end of the year ÷ 12).
According to the “Listing Rules of the Shanghai Stock Exchange”, net assets refer to the net assets attributable to the Company’s ordinary shareholders, excluding the minority shareholders’ equity; net assets per share = net assets attributable to the Company’s common shareholders ÷ the total share capital at the end of the period.

The above calculation does not represent the Company’s profit forecast for 2019, nor does it represent the Company’s judgment on the business situation and trends in 2019. Investors should not make investment decisions accordingly.

According to the above calculation, after the completion of the Non-public Issuance, the Company’s basic earnings per share, diluted earnings per share, weighted average return of net assets and net assets per share for the current period will have a certain degree of dilution.

II. SPECIAL RISK WARNING FOR DILUTED IMMEDIATE RETURN ON THE ISSUANCE

After the proceeds from the Non-public Issuance is in place, the Company’s total equity and net assets will increase accordingly. Within a short term after the proceeds from the issuance is in place, the growth rate of the Company’s net profits may be lower than the growth rate of the net assets and the total equity; the earnings per share and weighted average return of net assets and other financial indicators may decline to a certain extent; the immediate return of shareholders has the risk of being diluted.

Investors are hereby reminded of the risk of diluted immediate return from the Non-public Issuance.

III. DESCRIPTION BY THE BOARD ON NECESSITY AND RATIONALITY OF THE NONPUBLIC ISSUANCE

(I) To help to expand the shipping capacity at low cost and build the world’s leading oil tanker fleet

At present, the regional structure of energy consumption changes while the global energy consumption increases, which drive the increase in demand for energy transportation market, especially the long-distance transportation market. In addition, the construction of “Maritime Power” has been upgraded to a national strategy, which has accelerated the development of energy

I-61 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

transportation industry in China. New requirements for business development of the Company have been put forward due to various factors such as economic environment and national will, which also create new opportunities.

With the increasingly fierce competition between ship owners and increasingly frequent merger, acquisition and reorganization activities, the vessels of each ship owner are gradually becoming large-scale, and the shipping capacity advantage of COSCO SHIP ENGY in large oil tanker is not obvious. It is predicted that the current international cost of oil tanker is historically relatively low as affected by factors such as market supply and demand. Through the investment project, COSCO SHIP ENGY is expected to build the world’s leading oil tanker fleet at low cost and widen the distance of shipping capacity and average age with competitors, to achieve the diversification of ship type and enhance the competitiveness and profitability of the Company’s market segment.

(II) To improve the cash flow situation and enhance shareholder return of investment

After the completion of the Non-public Issuance, it is expected that the use of newly built and acquired vessels by proceeds will gradually exert good benefit, promote the Company’s steady growth in operating income and improve the profitability level. After the completion of this investment project, the Company’s scale of shipping capacity will be further enhanced and the benefits will be further improved. At the same time, the investment project has good prospects for development and economic assessment. In the long run, the investment project is expected to increase the Company’s operating income, help improve the Company’s cash flow, provide support to the Company’s performance, whereby profitability and returns to the shareholder are expected to be further strengthened.

(III) To reduce asset-liability ratio and optimize asset structure

The proceeds from the Non-public Issuance of Shares can solve the problem of project funding requirements, by which the Company can also reduce asset-liability ratio, increase net assets and decrease financial expenses, to lay a sound foundation for future capital operation.

IV. RELATIONSHIP BETWEEN THE INVESTMENT PROJECTS THROUGH NON-PUBLIC ISSUANCE AND THE COMPANY’S EXISTING BUSINESSES AND RESERVES ON TALENT, TECHNOLOGY AND MARKET RESOURCES FOR THE INVESTMENT PROJECTS

(I) Relationship between the investment projects and the Company’s existing business

The Company’s business are mainly oil transportation business and LNG transportation business. As of 31 December 2018, the Company owned and rented 151 oil tankers with a total capacity of 21,880,000 tons. The Company has invested 26 LNG tankers that have been put into operation with a total capacity of 4,350,000 cubic metres. The Company intends to acquire 14 oil tankers of various types and two Panamanian oil tankers (72,000-tonne class) using the proceeds. The implementation of investment projects will further expand the scale of shipping capacity of the

I-62 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

Company, consolidate the leading position of the Company, optimize the ship structure and age structure of the Company and enhance the market competitiveness and operating efficiency of the Company.

(II) Reserves on the Company’s talent, technology and market resources for the investment projects

1. Human resources reserve

The Company attaches importance to the development of talent, and actively promotes the talent strategy. It currently has a crew team with appropriate number of staff, reliable quality, excellent work style and high reputation in the industry which can satisfy the fleet needs of the Company, as well as a talent team on land with high comprehensive quality, reasonable personnel structure and great development potential that adapts to the development requirements of the Company. The Company will continue to strengthen the construction of talent team, and strive to form a sound talent development environment of “talents coming forward in succession, giving full scope to the talents and making the best use of talent”.

2. Technical reserve

The Company has the world’s leading oil tanker fleet. It reasonably selects the type, number and time for construction of new vessels by formulating the development plan of shipping capacity scientifically. The ship type and age structure of the Company’s fleet continue to optimize, with the oil tanker fleet covering the world’s major oil tanker types. After years of exploration and practice and under the baptism of competition, the Company also occupies the leading position in the world on route planning and safety management, which greatly enhances the market competitiveness.

3. Market reserve

The major customers of the Company’s oil transportation business are large domestic and foreign enterprises, such as the domestic three major oil companies including Sinopec, CNOOC and CNPC, and the well-known global oil companies including Exxon Mobil, BP, Vitol Group, Glencore International and Trafigura. The Company has established a solid business partnership with customers by providing them with high-quality transportation services. The high-quality and stable customer resources are the cornerstone for the Company’s steady development in the future.

V. MAKE-UP MEASURES FOR THE DILUTED IMMEDIATE RETURNS OF THE NONPUBLIC ISSUANCE FROM THE COMPANY

In order to ensure the effective use of the proceeds from the issuance, prevent the risk of diluted immediate returns and improve the ability to gain returns in the future, the Company has proposed to enhance asset quality, increase operating income, increase future profits, achieve sustainable development and make up the shareholders return through strictly implementing the proceeds management system,

I-63 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

actively improving the using efficiency of proceeds, accelerating the Company’s main business development, improving the Company’s profitability, constantly improving the profit distribution policy, and enhancing the investor return mechanism. The measures are as follow:

1. To orderly promote the existing business, capture development trend of the industry, and actively respond to risk factors

The Company’s existing business are operating normally and it will continue to enhance its own advantages in the oil and LNG transportation market. Due to shipowners feel reluctant to place orders in 2017-2018, the delivery of new vessels is expected to slow down significantly after 2019. At the same time, the implementation of the Ballast Water Treatment Convention and the IMO Sulfur Cap Convention will result in the old vessels being accelerated to withdraw from the market and it will also lead to the temporary withdrawal of some of the transportation capacity from the market due to renovation. To a further extent, this may lead to the result that the U.S. shale oil and gas revolution will promote the formation of the new pattern of oil and gas resources from the East and the West. The international crude oil market will form the two major export centres of North America and the Middle East. Asian countries such as China and India will experience rapid growth in energy consumption. Asia will become the focus of global energy trade. The adjustment of the global oil and gas trade and transport pattern has provided an opportunity for the Company to optimize the cargo source structure, the route structure and the customer mix.

In the face of a complex market environment, the Company will adhere to the “strategic leadership and innovation drive” and “maintenance of global leading position in fleet size, industrial leading position in business structure, global leading position in safety marketing and business model” strategies, strengthen the integration of thought, work and emotion between each segment and department, support and cooperate with each other, complement on each other, create a new situation of deep integration, give full play to the effect of scale and synergy, so as to enhance the risk resistant ability, sustainable development ability and core competitiveness of the Company.

2. To strengthen the management of proceeds and ensure the efficient use of proceeds

The Company has formulated Proceeds Management System to standardize the use the proceeds in accordance with the provisions of the Company Law, Securities Law, Administrative Measures on the Proceeds of the Listed Companies of Shanghai Stock Exchange, normative documents, as well as the Articles of Association. According to the Proceeds Management System and the Resolution of the Company’s Board, the proceeds from the issuance will be deposited in a special account for proceeds from the issuance designated by the Board; a three-party supervision system shall be established to make the sponsor institutions, depository banks, and the Company jointly supervise the proceeds. The proceeds shall be used according to the committed purpose and amount. After the capital raised by the Non-public Issuance is in place, the Company will actively cooperate with the sponsor to inspect and supervise the use of proceeds, so as to ensure the reasonable and standardized use of proceeds, and reasonably prevent the risks.

I-64 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

3. To accelerate the implementation of investment projects of the Company to realise the expected return as soon as possible

The investment project funded by the proceeds raised from the Non-public Issuance is in line with national policy relevant to the industry and industry development trends, has good economic benefits and is of great significance in enhancing the Company’s core competitiveness and reducing the financial risk. After receiving the proceeds from the Non-public Issuance, the Company will speed up the implementation of business development strategy and enhance the utilization rate of proceeds to realise the expected return as soon as possible

4. To strictly implement the cash dividend policy and give investors a reasonable return

The Company has revised the Articles of Association and the profit distribution policy for the next three years, clarified the conditions of the Company’s profit distribution, improved the decisionmaking procedures and mechanisms of the Company’s profit distribution as well as the adjustment principle of the profit distribution policy, and strengthened the protection mechanism of the minority investors’ rights and interests in accordance with the requirements of Notice on Further Implementing Relevant Matters Concerning Cash Dividends of Listed Companies, Regulatory Guidelines for Listed Companies No. 3 – Cash dividends of listed Companies and other relevant laws, regulations and regulatory documents. After the completion of the Non-public Issuance, the Company will strictly implement the current dividend policy, and strive to improve the returns of the shareholders.

5. To improve corporate governance continuously to provide systematic protection for the development of the Company

The Company will strictly comply with the requirements of laws, regulations and normative documents including the Company Law, the Securities Law and the Governance Standards of Listed Companies to improve the corporate governance structure continuously, to ensure that the shareholders will be able to exercise their rights sufficiently, to ensure that the Board will exercise its powers and make decisions scientifically, reasonably and prudently in accordance with the requirements of laws, regulations and Articles of Association, to ensure that independent directors will perform their duties conscientiously to safeguard the overall interest of the Company, in particular the lawful interests of minority shareholders, to ensure that the supervisory committee will be able to exercise independently and effectively the rights of supervision and inspection over the directors, senior management and financial conditions of the Company to provide systematic protection for the development of the Company.

VI. UNDERTAKINGS WITH REGARDS TO THE REMEDIAL MEASURES FOR DILUTION ON CURRENT RETURNS BY THE NON-PUBLIC ISSUANCE OF THE COMPANY

To ensure that the remedial measures for dilution of current returns by the Proposed Non-public Issuance of A Shares of the Company are implemented, and to protect the legitimate interests of the Company and all its shareholders, each of the directors, senior management of the Company, China Shipping and COSCO shipping Group have issued their respective Letters of Undertaking Regarding Effective Implementation of Measures aiming at Remedying Diluted Current Returns Through the Nonpublic Issuance of Shares of COSCO SHIPPING Energy Transportation Co., Ltd. in accordance with the

I-65 -

APPENDIX I

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

requirements of the applicable laws, regulations and regulatory documents including the Several Opinions of the State Council on Further Promoting the Healthy Development of the Capital Market (Guo Fa [2014] No. 17) 《國務院關於進一步促進資本市場健康發展的若干意見》( ) and the Opinions of the General Office of the State Council on Further Strengthening the Protection of Small and Medium Investors’ Legitimate Interests in the Capital Markets (Guo Ban Fa [2013] No. 110) 《國務院辦公廳關於進一步加強資本市場中( 小投資者合法權益保護工作的意見》) and the Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring (CSRC Announcement [2015] No. 31) 《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》( ). Details of such undertakings are set out as follows:

(I) Undertakings by the Directors and Senior Management of the Company

According to the Letter of Undertakings Regarding Directors and Senior Management’s Commitment to Ensure the Implementation of the Non-public Issuance of Shares by COSCO SHIPPING Energy Transportation Co., Ltd. to Cover the Dilution of Current Returns issued by the Directors and senior management of the Company, the Directors and senior management of the Company have made the following undertakings:

“1. I hereby undertake not to transfer benefits to other entities or individuals with no consideration or under unfair terms, and shall not damage the Company’s interests in any other ways.
I hereby undertake to constrain the consumption behavior in relation to my work duty.
I hereby undertake not to use the Company’s assets for investments or consumption activities that are unrelated to the engagement and performance of my work duties.
I hereby undertake that the remuneration system formulated by the board of directors or the remuneration committee will be linked with the implementation of the Company’s remedial measures in relation to the returns of the Company.
I hereby undertake that the vesting conditions for the proposed share incentive scheme (if any) of the Company will be linked with the implementation of the Company’s remedial measures in relation to returns of the Company.
From the date of making these undertakings until completion of the Proposed Nonpublic Issuance of A Shares, I undertake to make supplemental undertakings in accordance with the latest regulations imposed by the CSRC, which renders the aforementioned undertakings that are inadequate to satisfy such regulatory requirements.
I hereby undertake to perform these undertakings. If I violate these undertakings and cause losses to the Company or the investors, I shall be liable to indemnify the Company or the investors for their losses in accordance with the law.”
I-66 -

PROPOSAL FOR NON-PUBLIC ISSUANCE OF A SHARES (SECOND REVISED VERSION)

APPENDIX I

(II) Undertakings by China Shipping

As the controlling shareholder of COSCO SHIP ENGY, China Shipping has issued the Letter of Undertakings Regarding China Shipping (Group) Company’s Commitment to Ensure the Implementation of the Non-public Issuance of Shares by COSCO SHIPPING Energy Transportation Co., Ltd. to Cover the Dilution of Current Returns and has made the following undertakings:

“The Company shall continue to ensure the independence of the Listed Company, and shall not go beyond its power to interfere with the operation management activities of the Listed Company and shall not encroach upon the interests of the Listed Company.

The Company hereby undertakes to perform these undertakings. If the Company violates such undertakings and causes losses to the Listed Company or to the investors, the Company shall be liable to indemnify the Listed Company or the investors for their losses in accordance with the law.”

(III) Undertakings by COSCO Shipping

As the controlling shareholder of COSCO SHIP ENGY and the sole shareholder of China Shipping, COSCO Shipping has issued the Letter of Undertakings Regarding China COSCO Shipping Corporation Limited’s Commitment to Ensure the Implementation of the Non-public Issuance of Shares by COSCO SHIPPING Energy Transportation Co., Ltd. to Cover the Dilution of Current Returns and has made the following undertakings:

(There is no text in this page which requires to be redacted for the Proposal for the Non-public Issuance of A Shares of COSCO SHIPPING Energy Transportation Co., Ltd. (Second Revised Version))

COSCO SHIPPING Energy Transportation Co., Ltd.

Board of Directors May 29, 2019

I-67 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

I. FINANCIAL INFORMATION

The (i) audited consolidated financial statements of the Group for the years ended 31 December 2016, 31 December 2017 and 31 December 2018, including the independent auditors’ report thereon and the notes thereto, and (ii) unaudited first quarterly financial statements of the Group for the three months ended 31 March 2019, have respectively been published in the annual reports of the Company and the Company’s announcement dated 29 April 2019 referred to as follows, and are incorporated by reference into this circular:

(i) for the year ended 31 December 2016 (from pages 78 to 233) (http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0428/LTN20170428109.pdf)
(ii) for the year ended 31 December 2017 (from pages 85 to 222) (http://www3.hkexnews.hk/listedco/listconews/SEHK/2018/0430/LTN20180430606.pdf)
(iii) for the year ended 31 December 2018 (from pages 93 to 234) (http://www3.hkexnews.hk/listedco/listconews/SEHK/2019/0429/LTN20190429541.pdf)
(iv) for the three months ended 31 March 2019 (from pages 11-19) (https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0429/ltn201904293332.pdf)

The above publications are also available at the Company’s website below:–

http://energy.coscoshipping.com/

Baker Tilly Hong Kong Limited and PricewaterhouseCoopers, the auditor of the Company for the years ended 31 December 2016 and 2017 and the auditor of the Company for the year ended 31 December 2018 respectively, have not issued any qualified opinion on the Group’s audited financial statements referred to above.

II. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE THREE YEARS ENDED 31 DECEMBER 2018

The following is a summary of certain consolidated financial information of the Group for the three years ended 31 December 2018, as extracted from the relevant annual reports of the Company and which are prepared on the basis of HKFRS.

II-1 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Note
Continuing operations
Revenue
5
Operating costs
Gross profit
Other income and net gains
6
Marketing expenses
Administrative expenses
Other expenses
Share of profits of associates
Share of profits of joint ventures
Finance costs
7
Profit before tax
8
Income tax (expense)/credit
9
Profit for the year from continue
operations
Discontinued operation
Profit/(loss) for the year from
discontinued operation, net of tax
Profit for the year

For the year ended 31 December
2018
2017
2016
(Restated)
RMB’000
RMB’000
RMB’000
12,099,685
9,504,935
9,808,889
(10,304,074)
(7,251,227)
(7,059,385)
1,795,611
2,253,708
2,749,504
221,919
878,734
14,727
(22,805)
(29,206)
(14,697)
(770,338)
(633,986)
(707,835)
(31,761)
(53,781)
(65,858)
276,245
266,902
268,099
231,906
151,591
163,807
(1,287,714)
(778,949)
(874,374)
413,063
2,055,013
1,533,373
(119,657)
(161,644)
(323,047)
293,406
1,893,369
1,210,326
–
–
760,501
293,406
1,893,369
1,970,827

II-2 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

		For the year ended 31 December	For the year ended 31 December
		2018	2017	2016
			(Restated,
			Note 41)
	Note	RMB’000	RMB’000	RMB’000
Other comprehensive income/(loss)	12
Item that will not be reclassified
subsequently to profit or loss, net
of tax:
Changes in the fair value of equity
investments at fair value through
other comprehensive income, net
of tax		(30,622)	–	–
Remeasurement of defined benefit
plan payable		(11,630)	5,670	(160)
Items that may be reclassified
subsequently to profit or loss, net
of tax:
Exchange differences from
retranslation of financial
statements of subsidiaries, joint
ventures and associates		343,201	(455,439)	443,949
Fair value gain on available-for-sale
financial assets, net of tax		–	87,051	(4,488)
Gain/(loss) on cash flow hedges		33,929	(16,600)	(30,641)
Hedging gain reclassified to profit or
loss	7	56,139	44,553	–
Release upon disposal of
discontinued operation		–	–	362,032
Share of other comprehensive loss of
associates		(2,553)	(8,476)	(23,590)
Share of other comprehensive
income/(loss) of joint ventures		76,449	(91,988)	71,113
Other comprehensive income/(loss)
for the year		464,913	(435,229)	818,215
Total comprehensive income for
the year		758,319	1,458,140	2,789,042

II-3 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		For the	year ended 31 December
		2018	2017	2016
			(Restated,
			Note 41)
	Note	RMB’000	RMB’000	RMB’000
Profit for the year attributable to:
Equity holders of the Company		74,679	1,774,648	1,932,524
Non-controlling interests		218,727	118,721	38,303
Profit for the year		293,406	1,893,369	1,970,827
Total comprehensive income for
the year attributable to:
Equity holders of the Company		505,429	1,272,515	2,785,502
Non-controlling interests		252,890	185,625	3,540
		758,319	1,458,140	2,789,042
			(Restated)
		RMB cents	RMB cents	RMB cents
Earnings per share	14
– Basic and diluted		1.85	44.01	47.93

UNAUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2019

Below is a summary of certain consolidated financial information of the Group for the three months ended 31 March 2019, as extracted from the Company’s announcement dated 29 April 2019, which is prepared on the basis of PRC GAAP.

	For the three months	For the three months
	ended 31 March
	2019	2018
	RMB	RMB
Gross revenue from operations	3,847,709,571.87	2,406,430,889.04
Profit before taxation	541,747,678.63	(40,625,577.35)
Income tax	39,809,885.31	9,756,346.16
Net profit attributable to owners of parent company	428,082,373.67	(86,481,727.93)
Net profit attributable to minority shareholders	73,855,419.65	36,099,804.42
Earnings per share (in RMB) – basic and diluted	0.1062	(0.0214)

II-4 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. REVENUE AND SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s business segments are categorised as follows:

(i) oil shipment

– oil shipment – vessel chartering

(ii) others

– Others mainly include liquefied natural gas (“LNG”) shipping and liquefied petroleum gas (“LPG”) shipping.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the services they provide. Each of the Group’s business segments represents a strategic business unit that offers services which are subject to risks and returns that are different from those of other business segments.

II-5 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Business segments

There is seasonality for the Group’s revenue but the effect is small. An analysis of the Group’s revenues and contribution to profit from operating activities by principal activity and geographical area of operations for the year is set out as follows:

		For the year ended 31 December	For the year ended 31 December
	2018		2017
	Revenues	Contribution	Revenues	Contribution
			(Restated)	(Restated)
	RMB’000	RMB’000	RMB’000	RMB’000
By principal activity:
Oil shipment
– Oil shipment	9,999,527	1,016,539	7,257,758	1,416,349
– Vessel chartering	788,766	77,164	1,486,470	491,844
	10,788,293	1,093,703	8,744,228	1,908,193
Others	1,311,392	701,908	760,707	345,515
	12,099,685	1,795,611	9,504,935	2,253,708
Other income and net
gains		221,919		878,734
Marketing expenses		(22,805)		(29,206)
Administrative
expenses		(770,338)		(633,986)
Other expenses		(31,761)		(53,781)
Share of profits of
associates		276,245		266,902
Share of profits of
joint ventures		231,906		151,591
Finance costs		(1,287,714)		(778,949)
Profit before tax		413,063		2,055,013

The Group’s revenues for the reporting period are recognised over-time.

II-6 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The Group’s revenues are mainly with contract period of less than one year. So, the Group takes the expedient not to disclose the unsatisfied performance obligation under HKFRS 15.

Total segment assets Oil shipment Others Total segment liabilities Oil shipment Others	31 December 2018 RMB’000 53,509,797 9,906,470 63,416,267 23,784,623 10,359,446 34,144,069	31 December 2017 (Restated) RMB’000 42,609,650 17,779,222
		60,388,872
		17,605,966 14,517,414
		32,123,380

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2 to the consolidated financial statements. Segment contribution represents the gross profit incurred by each segment without allocation of central administration costs (including emoluments of directors, supervisors and senior management), marketing expenses, other expenses, share of profits of associates, share of profits of joint ventures, other income and net gains and finance costs. This is the measure reported to the Group’s chief operating decision makers for the purposes of resource allocation and performance assessment.

Segment assets are those operating assets that are employed by a segment in its operating activities. Segment liabilities are these operating liabilities that result from the operating activities of a segment.

As at 31 December 2018, the total net carrying amount of the Group’s oil tankers, LNG vessels and LPG vessels were RMB37,816,410,000 (31 December 2017: RMB34,189,840,000), RMB9,326,902,000 (31 December 2017: RMB6,007,601,000) and RMB111,933,000 (31 December 2017: RMB119,179,000) respectively.

II-7 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Geographical segments

		For the year ended 31 December	For the year ended 31 December
	2018		2017
	Revenues	Contribution	Revenues	Contribution
			(Restated)	(Restated)
	RMB’000	RMB’000	RMB’000	RMB’000
By geographical area:
Domestic	4,201,183	1,131,956	2,889,790	1,024,133
International	7,898,502	663,655	6,615,145	1,229,575
	12,099,685	1,795,611	9,504,935	2,253,708
Other income and net
gains		221,919		878,734
Marketing expenses		(22,805)		(29,206)
Administrative
expenses		(770,338)		(633,986)
Other expenses		(31,761)		(53,781)
Share of profits of
associates		276,245		266,902
Share of profits of
joint ventures		231,906		151,591
Finance costs		(1,287,714)		(778,949)
Profit before tax		413,063		2,055,013

During the years ended 31 December 2018 and 2017, total segment revenue represents total consolidated revenue as there were no inter-segment transactions between the business segments.

Other information

	Oil shipment	Others	Total
	RMB’000	RMB’000	RMB’000
Year ended 31 December 2018
Additions to non-current assets	3,530,996	29,780	3,560,776
Depreciation and amortisation	2,132,062	51,051	2,183,113
Losses on disposal of property, plant and
equipment, net	–	(73)	(73)
Interest income	42,372	66,532	108,904
Year ended 31 December 2017
(restated)
Additions to non-current assets	4,996,828	1,077,408	6,074,236
Depreciation and amortisation	1,759,632	150,431	1,910,063
Provision for onerous contracts	98,809	60,794	159,603
Gains/(losses) on disposal of property,
plant and equipment, net	156	(13)	143
Interest income	28,686	124,012	152,698

II-8 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The principal assets employed by the Group are located in the PRC and, accordingly, no geographical segment analysis of assets and expenditures has been prepared for the years ended 31 December 2018 and 2017.

Major customers

During the reporting period, management recognised the following 2 (for the year ended 31 December 2017: 2) customers as the Group’s major customers. Revenue arising from the provision of oil transportation services to the major customers were set out as follows:

		the year ended 31 December	the year ended 31 December
		2018	2017
		RMB’000	RMB’000
Customer	A	2,417,033	2,167,284
Customer	B	2,021,214	1,437,019

6. OTHER INCOME AND NET GAINS

Other income Government subsidies (note) Interest income from loan receivables Bank interest income Dividends received from available-for-sale investments Dividends received from financial assets at FVPL Rental income from investment properties Others Other (losses)/gains Gains on revaluation of investment properties, net Exchange (losses)/gains, net Fair value gains on equity investments (Losses)/gains on disposal of property, plant and equipment, net	For the year ended 31 December 2018 2017 (Restated) RMB’000 RMB’000 65,043 472,396 28,579 58,688 80,325 94,010 – 7,599 8,701 – 14,300 19,971 32,421 117,067 229,369 769,731 632 33,219 (8,670) 75,641 661 – (73) 143 (7,450) 109,003 221,919 878,734	For the year ended 31 December 2018 2017 (Restated) RMB’000 RMB’000 65,043 472,396 28,579 58,688 80,325 94,010 – 7,599 8,701 – 14,300 19,971 32,421 117,067 229,369 769,731 632 33,219 (8,670) 75,641 661 – (73) 143 (7,450) 109,003 221,919 878,734
		769,731
		33,219 75,641 – 143
		109,003
		878,734

Note: The government subsidies mainly represent the subsidies granted for business development purpose and refund of tax. There were no unfulfilled conditions or contingencies relating to these subsidies.

II-9 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

7. FINANCE COSTS

	For the year ended 31 December	For the year ended 31 December
	2018	2017
		(Restated)
	RMB’000	RMB’000
Total finance costs
Interest expenses on:
– bank loans and other loans and borrowings	1,042,093	653,053
– corporate bonds	206,464	206,282
– interest rate swaps: cash flow hedges, reclassified from
other comprehensive income	56,139	44,553
– Exchange loss, net	22,799	33,082
	1,327,495	936,970
Less: interest capitalised	(39,781)	(158,021)
	1,287,714	778,949

During the reporting period, the capitalisation rate for the vessels under construction was at a rate of 3.23% to 4.27% (for the year ended 31 December 2017: 2% to 4.78%) per annum.

II-10 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

8. PROFIT BEFORE TAX

Cost of shipping services rendered:
Bunker oil inventories consumed and port fees
Others (including vessels depreciation and crew expenses, which
amount is also included in respective total amounts disclosed
separately below)
Staff costs (including emoluments of directors, supervisors and
management (note 10)):
Wages, salaries, crew expenses and related expenses
Costs for defined benefit plan (note 35)
Pension scheme contributions
Total staff costs
Operating lease rentals: minimum lease payments
Auditor’s remuneration
Depreciation of property, plant and equipment
Amortisation of prepaid land lease payments
Dry-docking and repairs
Provision for onerous contracts
Provision for/(reversal of) impairment losses on trade receivables and
contract assets
Provision for/(reversal of) impairment losses on other receivables

For the year ended 31 December
2018
2017
(Restated)
RMB’000
RMB’000
4,092,838
2,838,957
6,211,236
4,412,270
10,304,074
7,251,227
2,086,548
1,787,670
12,560
8,200
54,098
77,765
2,153,206
1,873,635
1,608,602
607,941
7,761
4,634
2,180,734
1,907,685
2,379
2,378
305,787
245,921
–
159,603
19,293
(7,483)
2,508
(3,459)

II-11 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. INCOME TAX

(a) Income tax in the consolidated statement of profit or loss and other comprehensive income

Note Current income tax PRC (i) – provision for the year – (over)/under provision in respect of prior years Hong Kong (ii) – provision for the year – under/(over) provision in respect of prior years Other countries (iii) – provision for the year Deferred tax Total income tax expense	For the year ended 31 December 2018 2017 (Restated) RMB’000 RMB’000 102,201 102,365 (221) 27,778 782 753 28 (34) 296 215 103,086 131,077 16,571 30,567 119,657 161,644

Note:

(i) PRC Corporate Income Tax

Under the Law of the PRC on Corporate Income Tax Law (the “CIT Law”) and Implementation Regulation of the CIT Law, the tax rate of the entities within the Group established in the PRC is 25% (for the year ended 31 December 2017: 25%) except for those entities with tax concession.

(ii) Hong Kong Profits Tax

The provision for Hong Kong Profits Tax was provided at 16.5% (for the year ended 31 December 2017: 16.5%) on the estimated assessable profits for the year from the entities within the Group operating in Hong Kong.

(iii) Taxes or profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries or jurisdictions in which the entities within the Group operate.
II-12 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) The taxation on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:

Profit before tax
Calculated at a tax rate of 25%
(for the year ended 31 December 2017: 25%)
(Over)/under provision in respect of prior years, net
Tax effect of share of profits of associates
Tax effect of share of profits of joint ventures
Tax effect of income not subject to tax
Tax effect of expenses not deductible for tax
Tax effect of unused tax losses not recognised
Tax effect of temporary differences not recognised
Tax effect of utilisation of tax losses previously not
recognised
Different tax rates of subsidiaries operating in other
jurisdictions
Income tax expense

For the year ended 31 December
2018
2017
(Restated)
RMB’000
RMB’000
413,063
2,055,013
103,266
513,753
(193)
27,744
(66,239)
(63,751)
(57,976)
(37,787)
(10,749)
(84,819)
10,623
8,373
144,580
27,753
(14,914)
(108,411)
–
(80,460)
11,259
(40,751)
119,657
161,644

II-13 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

12. OTHER COMPREHENSIVE INCOME/(LOSS)

Tax effects relating to each component of other comprehensive income/(loss) are as follows:

	Before-tax		Net-of-tax
	amount	Tax effect	amount
	RMB’000	RMB’000	RMB’000
For the year ended 31 December 2018
Changes in the fair value of equity investments at
FVOCI	(40,829)	10,207	(30,622)
Currency translation differences	343,201	–	343,201
Remeasurement of defined benefit plan payable	(11,630)	–	(11,630)
Net gain on cash flow hedges	33,929	–	33,929
Hedging gain reclassified to profit or loss	56,139	–	56,139
Share of other comprehensive loss of associates	(2,553)	–	(2,553)
Share of other comprehensive income of joint
ventures	76,449	–	76,449
	454,706	10,207	464,913
For the year ended 31 December 2017
(restated)
Remeasurement of defined benefit plan payable	5,670	–	5,670
Currency translation differences	(455,439)	–	(455,439)
Fair value gain/(loss) on available-for-sale
investments	116,068	(29,017)	87,051
Net loss on cash flow hedges	(16,600)	–	(16,600)
Hedging gain reclassified to profit or loss	44,553	–	44,553
Share of other comprehensive loss of associates	(8,476)	–	(8,476)
Share of other comprehensive loss of joint
ventures	(91,988)	–	(91,988)
	(406,212)	(29,017)	(435,229)

14. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the profit for the year attributable to owners of the Company of RMB74,679,000 (for the year ended 31 December 2017 (restated): Profit of RMB1,774,648,000) and the weighted average number of ordinary shares of 4,032,033,000 (for the year ended 31 December 2017: 4,032,033,000) shares in issue during the year.

The outstanding share options granted by the Company did not have any dilutive effect on the earnings per share for the year ended 31 December 2018, and the diluted earnings per share is equal to the basic earnings per share for the year ended 31 December 2018.

II-14 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

41. BUSINESS COMBINATIONS INVOLVING ENTITY UNDER COMMON CONTROL

The Group adopts merger accounting for common control combination in respect of the acquisition of LNG Shipping Management (“Acquired Entity”) in 2018 as mentioned in note 1. Statements of adjustments for business combinations under common control on the Group’s financial position as at 31 December 2018 and 2017 and 1 January 2017 and the results for the period ended 31 December 2017 are summarised as follows:

	The Group
	before the
	Acquired	Acquired
	Entity	Entity	Adjustments	Total
	RMB’000	RMB’000	RMB’000	RMB’000
At 31 December 2018
Non-current assets
Other non-current assets	56,471,527	88	–	56,471,615
	56,471,527	88	–	56,471,615
Current assets
Other current assets	3,474,035	2,693	–	3,476,728
Cash and cash equivalents	3,467,883	41	–	3,467,924
	6,941,918	2,734	–	6,944,652
Current liabilities
Other current liabilities	10,879,452	2,124	–	10,881,576
Net current (liabilities)/assets	(3,937,534)	610	–	(3,936,924)
Total assets less current liabilities	52,533,993	698	–	52,534,691
Equity
Equity attributable to owners of the
Company
Share capital	4,032,033	5,000	(5,000)	4,032,033
Reserves	24,158,889	(4,302)	5,000	24,159,587
	28,190,922	698	–	28,191,620
Non-controlling interests	1,080,578	–	–	1,080,578
Total equity	29,271,500	698	–	29,272,198
Non-current liabilities
Other non-current liabilities	23,262,493	–	–	23,262,493
Total equity and non-current
liabilities	52,533,993	698	–	52,534,691

II-15 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2017 Non-current assets Other non-current assets Current assets Other current assets Cash and cash equivalents Current liabilities Other current liabilities Net current (liabilities)/assets Total assets less current liabilities Equity Equity attributable to owners of the Company Share capital Reserves Non-controlling interests Total equity Non-current liabilities Other non-current liabilities Total equity and non-current liabilities For the year ended 31 December 2017 Revenues Profit before income tax Income tax expense Profit for the year	The Group before the Acquired Entity RMB’000 53,135,242 53,135,242 2,241,835 5,007,654 7,249,489 8,874,643 (1,625,154) 51,510,088 4,032,033 23,887,607 27,919,640 342,249 28,261,889 23,248,199 51,510,088 9,504,935 2,055,012 (161,644) 1,893,368	Acquired Entity RMB’000 512 512 27 3,602 3,629 538 3,091 3,603 5,000 (1,397) 3,603 – 3,603 – 3,603 – 1 – 1	Adjustments RMB’000 – – – – – – – – (5,000) 5,000 – – – – – – – – –	Total RMB’000 53,135,754 53,135,754 2,241,862 5,011,256 7,253,118 8,875,181 (1,622,063) 51,513,691 4,032,033 23,891,210 27,923,243 342,249 28,265,492 23,248,199 51,513,691 9,504,935 2,055,013 (161,644) 1,893,369

II-16 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

	The Group
	before the
	Acquired	Acquired
	Entity	Entity	Adjustments	Total
	RMB’000	RMB’000	RMB’000	RMB’000
At 1 January 2017
Non-current assets
Other non-current assets	49,288,991	761	–	49,289,752
Current assets
Other current assets	2,635,416	80	–	2,635,496
Cash and cash equivalents	6,385,069	7,864	–	6,392,933
	9,020,485	7,944	–	9,028,429
Current liabilities
Other current liabilities	7,616,490	5,103	–	7,621,593
Net current assets	1,403,995	2,841	–	1,406,836
Total assets less current liabilities	50,692,986	3,602	–	50,696,588
Equity
Equity attributable to owners of the
Company
Share capital	4,032,033	5,000	(5,000)	4,032,033
Reserves	23,381,056	(1,398)	5,000	23,384,658
	27,413,089	3,602	–	27,416,691
Non-controlling interests	174,960	–	–	174,960
Total equity	27,588,049	3,602	–	27,591,651
Non-current liabilities
Other non-current liabilities	23,104,937	–	–	23,104,937
Total equity and non-current
liabilities	50,692,986	3,602	–	50,696,588

Final dividend of RMB0.10 per share in respect of the year ended 31 December 2015 was approved by shareholders at the annual general meeting of the Company held on 20 May 2016 and a total amount of RMB403,203,000 was paid during the year ended 31 December 2016.

Final dividend of RMB0.19 per share in respect of the year ended 31 December 2016 was approved by shareholders at the annual general meeting held on 8 June 2017 and a total amount of RMB766,086,000 was paid during the year ended 31 December 2017.

Final dividend of RMB0.05 per share in respect of the year ended 31 December 2017 was approved by shareholders at the annual general meeting held on 28 June 2018 and a total amount of RMB201,602,000 was paid during the year ended 31 December 2018.

II-17 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Final dividend of RMB0.02 per share in respect of the year ended 31 December 2018 was approved by shareholders at the annual general meeting held on 10 June 2019. The final dividend has not been recognised as a liability at the end of the year ended 31 December 2018.

The net asset value per share as set out in the audited consolidated financial statement of the Company for the year ended 31 December 2018 is RMB6.992. Following the distribution of the final dividend in respect of the year ended 31 December 2018, the net asset value per share shall be adjusted to RMB6.972, which is higher than the Benchmark Price by approximately 2.38%.

III. INDEBTEDNESS STATEMENT

As at the close of business on 30 April 2019, being the latest practicable date for the purpose of indebtedness statement prior to printing of this circular, the total outstanding interest-bearing bank and other borrowings, other loans, lease liabilities and corporate bonds of the Group are as follows:

	Total	Secured	Unsecured
	RMB’000	RMB’000	RMB’000
Interest-bearing bank and other
borrowings	25,135,753	16,484,813*	8,650,940
Other loans	1,139,658	–	1,139,658
Lease liabilities	3,003,538	–	3,003,538**
Corporate bonds	3,990,696	–	3,990,696

Secured by pledges of the Group’s certain vessels and certain vessels under construction.
** This represents the lease arrangements on vessels and buildings between the Group and the lessors.

At the close of business on 30 April 2019, the Group has the following significant contingent liabilities and guarantees:

(i) East China LNG Shipping Investment Co., Limited, a non-wholly-owned subsidiary of the Company, holds 30% equity interest in each of Aquarius LNG Shipping Limited (“ Aquarius LNG ”) and Gemini LNG Shipping Limited (“ Gemini LNG ”), and North China LNG Shipping Investment Co., Limited, a non-wholly-owned subsidiary of the Company, holds 30% equity interest in each of Capricorn LNG Shipping Limited (“ Capricorn LNG ”) and Aries LNG Shipping Limited (“ Aries LNG ”). Each of Aquarius LNG, Gemini LNG, Aries LNG and Capricorn LNG entered into ship building contracts for one LNG vessel. After the completion of each of the LNG vessels, the four companies would, in accordance with the time charters agreements to be signed, lease the LNG vessels to the following charterers respectively:

Company name

Charterer

Aquarius LNG Papua New Guinea Liquefied Natural Gas Global Company LDC Gemini LNG Papua New Guinea Liquefied Natural Gas Global Company LDC Aries LNG Mobil Australia Resources Company Pty Ltd. Capricorn LNG Mobil Australia Resources Company Pty Ltd.

II-18 -

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

On 15 July 2011, the Company entered into four guaranteed leases (the “Lease Guarantees”). According to the Lease Guarantees, the Company irrevocably and unconditionally provided the charterers, successors and transferees of the four companies listed above with guarantee (1) for the four companies to fulfil their respective obligations under the lease, and (2) to secure 30% of such amount payable to the charterers under the lease.

According to the term of the Lease Guarantees and taking into account the possible increase in the value of the lease commitments and the percentage of shareholdings by the Company in the above four companies, the amount of lease guaranteed by the Company is limited to USD8,200,000 (equivalent to approximately RMB55,175,000).

The guarantee period is limited to lease period of each LNG vessel leased by the four associates.

(ii) At the 2014 seventh Board meeting held on 30 June 2014, the Board approved the ship building contracts, time charter agreements and supplemental construction contracts signed by three joint ventures of the Group (the “Three Joint Ventures”) for the Yamal LNG project. To secure the obligation of the ship building contracts, time charter agreements and supplemental construction contracts, the Company provides corporate guarantees to the shipbuilders, Daewoo Shipbuilding & Marine Engineering Co., Ltd. and DY Maritime Limited. The total aggregate liability of the Group under the corporate guarantees is limited to USD167,000,000 (equivalent to approximately RMB1,123,676,000). In addition, the Company provides owner’s guarantees to the charterer, YAMAL Trade Pte. Ltd. which the total aggregate liability of the Group under these guarantees is limited to USD6,400,000 (equivalent to approximately RMB43,063,000).
(iii) Subsequent to the approval by Shareholders at the annual general meeting held on 8 June 2017, the Company entered into three financing guarantees with two banks (the “Banks”), to the extent of amount of USD377.5 million (equivalent to RMB2,540,047,000), in respect of 50% of the bank borrowings provided by the Banks to each of the Three Joint Ventures and was determined on a pro rata basis of the Company’s indirect ownership interest in each of the Three Joint Ventures. The guarantee period provided by the Company for each of the Three Joint Ventures is limited to twelve years after the vessel construction project of each of the Three Joint Ventures is completed.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables in the ordinary course of business, as at the close of business on 30 April 2019, the Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors confirmed that no material changes in the indebtedness and contingent liabilities of the Group since 30 April 2019 up to and including the Latest Practicable Date.

II-19 -

GENERAL INFORMATION

APPENDIX III

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 Company. 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.

The circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. All the Directors jointly and severally accept full responsibility for the accuracy of the information in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any of the statements in this circular misleading.

2. MARKET PRICE

The table below shows the closing prices of the H Shares on the Hong Kong Stock Exchange and the A Shares on the Shanghai Stock Exchange (i) on the last trading day of each of the six calendar months immediately preceding the date of the Announcement and up to the Latest Practicable Date; (ii) on the last trading day immediately preceding the date of the Announcement; (iii) on the date of the Announcement; and (iv) on the Latest Practicable Date.

	Closing price	Closing price
Date	per H Share	per A Share
	HK$	RMB
30 November 2018	4.23	5.11
31 December 2018	3.91	4.44
31 January 2019	4.44	5.00
28 February 2019	4.62	5.90
29 March 2019	4.50	6.47
30 April 2019	5.07	6.89
28 May 2019 (being the last trading day of the A Shares
immediately preceding the date of the Announcement)	4.15	6.18
28 May 2019 (being the last trading day of the H Shares
immediately preceding the date of the Announcement)	4.15	6.18
29 May 2019 (being the date of the Announcement)	4.10	6.17
2 July 2019 (being the Latest Practicable Date)	4.48	6.38

III-1 -

GENERAL INFORMATION

APPENDIX III

3. SHARE CAPITAL

The registered and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately after completion of the Proposed Non-public Issuance of A Shares (assuming that (i) the entire Cap is issued and (ii) there is no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the A Shares pursuant to the Proposed Non-public Issuance of A Shares):

As at the Latest Practicable Date:

A Shares H Shares Total	Number of Shares 2,736,032,861 1,296,000,000
	4,032,032,861

Immediately after completion of the Proposed Non-public Issuance of A Shares (assuming that (i) the entire Cap is issued and (ii) there is no change in the total issued share capital of the Company since the Latest Practicable Date save for the issue of the A Shares pursuant to the Proposed Non-public Issuance of A Shares):

A Shares H Shares Total	Number of Shares 3,542,439,433 1,296,000,000
	4,838,439,433

The A Shares to be issued under the Proposed Non-public Issuance of A Shares when issued and fully paid, shall rank pari passu in all aspects amongst themselves with the A Shares in issue at the time of the issuance of such A Shares.

Since 31 December 2018 (being the end of the last financial year of the Company) and up to the Latest Practicable Date, no new Shares have been issued by the Company.

As at the Latest Practicable Date, save for the 35,460,000 Share Options granted to 133 Participants on 27 December 2018 under the Share Option Incentive Scheme, the Company has no outstanding warrants, options or securities convertible into Shares.

III-2 -

GENERAL INFORMATION

APPENDIX III

4. DISCLOSURE OF INTERESTS

Interests and short positions of Directors, supervisors and chief executives

As at the Latest Practicable Date, each of Mr. Liu Hanbo and Mr. Zhu Maijin (both being executive Directors), was interested in 475,000 A Shares and 416,000 A Shares respectively through the share options granted to them on 27 December 2018 pursuant to the share option scheme adopted by the Company on 17 December 2018.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, supervisors or chief executive(s) of the Company had any interests or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors, supervisors or chief executive(s) is taken or deemed to have under such provisions of the SFO) or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was otherwise required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of List Issuers adopted by the Company.

Positions held by Directors and supervisors of the Company in substantial Shareholder(s)

As at the Latest Practicable Date, (i) Mr. Feng Boming, a non-executive Director, was the general manager of the strategic and corporate management division of COSCO Shipping; (ii) Mr. Zhang Wei, a non-executive Director, was the general manager of the operating management division of COSCO Shipping; (iii) Ms. Lin Honghua, a non-executive Director, was the chief auditor of the finance and accounting division of COSCO Shipping; (iv) Mr. Weng Yi, a supervisor of the Company, was the safety director and general manager of the safety management department of COSCO Shipping; and (v) Mr. Yang Lei, a supervisor of the Company, was the deputy general manager of the legal and risk management department of COSCO Shipping.

Save as disclosed above, none of the Directors or supervisors of the Company was, as at the Latest Practicable Date, a director or employee of a company which had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Substantial shareholders’ and other persons’ interests in shares and underlying shares

As at the Latest Practicable Date, so far as was known to the Directors, supervisors or chief executive(s) of the Company, the interests or short positions of the Shareholders who are entitled to exercise or control 5% or more of the voting power at any general meeting or other persons (other than a Director, supervisor or chief executive(s) of the Company) in the Shares or underlying shares of the Company which were required to be notified to the Company pursuant to Divisions 2 and 3 of

III-3 -

GENERAL INFORMATION

APPENDIX III

Part XV of the SFO, or which were required to be recorded in the register kept by the Company pursuant to Section 336 of the SFO or which have been notified to the Company and the Hong Kong Stock Exchange were as follow:

			Percentage of the
			total number	Percentage of the
Name of substantial	Class of	Number of	shares of the	total number of
shareholders	shares	shares held	relevant class	issued shares
China Shipping(3)	A	1,554,631,593 (L)	56.82%	38.56%
COSCO Shipping(4)	A	1,554,631,593 (L)	56.82%	38.56%
Prudential plc(5)	H	172,479,600 (L)	13.30%	4.28%
GIC Private Limited(6)	H	129,710,000 (L)	10.01%	3.22%
BlackRock, Inc.(7)	H	79,212,844 (L)	6.11%	1.96%
		1,458,000 (S)	0.11%	0.04%
Eastspring Investments	H	77,394,000 (L)	5.97%	1.92%
JPMorgan Chase & Co.(8)	H	73,936,764 (L)	5.70%	1.83%
		2,726,507(S)	0.21%	0.07%
		62,947,195(P)	4.85%	1.56%

Note 1 : A – A Share H – H Share

L – represents long position

S – represents short position
P – represents lending pool
Note 2 : As at the Latest Practicable Date, the total issued share capital of the Company was 4,032,032,861 shares of which 1,296,000,000 were H Shares and 2,736,032,861 were A Shares.
Note 3 : As at the Latest Practicable Date, such shareholding included 1,536,924,595 A Shares directly held by China Shipping. China Shipping also held (i) 7,000,000 A Shares through CICC-CCB-Zhongjin Ruihe collective asset management schemes (中金公司－建設銀行－中金瑞和集合資產管理計劃), (ii) 2,065,494 A Shares through Guotai Junan securities asset management-Industrial Bank –Guotai Junan Junxiang Xinli No.6 collective asset management schemes (國泰君安證券資管－興業銀行－國泰君安君享新利六號集合資產管理計劃), and (iii) 8,641,504 A Shares through AEGON-INDUSTRIAL Fund Management Co., Ltd – China Shipping (Group) Company collective asset management schemes* (興業全球基金－上海銀行－中國海運（集團）總公司). Therefore, China Shipping and its subsidiaries aggregately are interested in 1,554,631,593 A Shares of the Company as at the Latest Practicable Date, representing 38.56% of the total number of shares of the Company.
Note 4 : China Shipping is wholly-owned by COSCO Shipping. As such, COSCO Shipping was deemed to be interested in the shares which China Shipping was interested in.
Note 5 : Eastspring Investments was a controlled corporation of Prudential plc. Accordingly, Prudential plc was deemed to be interested in the shares which Eastspring Investments was interested in.
Note 6 : As at the Latest Practicable Date, according to the information disclosed to the Company under Division 2 and Division 3 of Part XV of the SFO, GIC Private Limited held the above shares of the Company as an investment manager.
III-4 -

GENERAL INFORMATION

APPENDIX III

Note 7 : As at the Latest Practicable Date, BlackRock, Inc., through various subsidiaries, had an interest in the H Shares, of which 79,212,844 H Shares (long position) and 1,458,000 H Shares (short position) were held in its capacity as interest of corporation controlled by it.
Note 8 : As at the Latest Practicable Date, JPMorgan Chase & Co., through various subsidiaries, had an interest in the H Shares, of which 9,325,569 H Shares (long position) and 2,726,507 H Shares (short position) were held in its capacity as interest of corporation controlled by it; 1,664,000 H Shares (long position) were held in its capacity as investment manager, and 62,947,195 H Shares (long position) were held in its capacity as approved lending agent.

Save as disclosed above, as at the Latest Practicable Date, no other person (other than Directors, supervisors or chief executive(s) of the Company) had any interests or short positions in any Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or any interests or short positions recorded in the register kept by the Company pursuant to Section 336 of the SFO or any interests or short positions which have been notified to the Company and the Hong Kong Stock Exchange.

5. SERVICE CONTRACTS

As at the Latest Practicable Date, (a) none of the Directors or supervisors of the Company had entered or proposed to enter into a service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation) and (b) none of the Directors or supervisors of the Company had entered into a service contract with the Company or any of its subsidiaries or associated companies (as defined under the Takeovers Code), which (i) have been entered into or amended within 6 months before the date of the Announcement; (ii) are continuous contracts with a notice period of 12 months or more; or (iii) are fixed term contracts with more than 12 months to run irrespective of the notice period.

6. MATERIAL CHANGE

Save and except as disclosed below, the Directors confirm that there is no material change in the financial or trading position or outlook of the Group since 31 December 2018, being the date to which the latest audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date:

(i) as disclosed in the section headed “3. SIGNIFICANT EVENTS – 3.1 Significant changes in the principal items and highlights in the financial statements of the Company during the Report Period and the reasons” in the unaudited consolidated first quarterly report of the Group for the three months ended 31 March 2019, which have been prepared in accordance with the Generally Accepted Accounting Principles of the PRC, the Group recorded a net profit of approximately RMB428 million for the three months ended 31 March 2019 as compared to the net loss of approximately RMB86 million for the corresponding period of 2018, representing an increase of approximately 595%. This is primarily due to the combination of the reasons that (a) during the three months ended 31 March 2019, global oil tanker demand experienced a gradual increase following the peak season in the fourth quarter of 2018; (b) aging of existing tankers and environmental conventions such as the International Maritime Organization 2020
III-5 -

APPENDIX III

GENERAL INFORMATION

sulfur cap have exerted further pressure on the profitability of older tankers, which is likely to encourage demolition; (c) the Group strengthened research analysis on the international tanker market and optimally strategized for rising opportunities in the market recovery; and (d) the Group realized a pre-tax income of RMB138 million in the LNG transportation segment and thus a year-on-year growth of 89.7%.

7. DIRECTORS AND SUPERVISORS’ INTERESTS IN THE GROUP ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date:

(i) none of the Directors or supervisors of the Company had any direct or indirect interest in any assets which had been, since 31 December 2018 (being the date to which the latest audited consolidated financial statements of the Group were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and
(ii) none of the Directors or supervisors of the Company was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

8. ARRANGEMENTS IN CONNECTION WITH THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

As at the Latest Practicable Date:

(i) save for the Proposed Non-public Issuance of A Shares, no agreement, arrangement or understanding (including any compensation arrangement) exists between COSCO Shipping or parties acting concert with it and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Proposed Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal;
(ii) there was no benefit to be given to any Directors as compensation for loss of office or otherwise in connection with the Proposed Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal;
(iii) there was no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of, or otherwise connected with, the Propose Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal;
(iv) there was no material contract entered into by COSCO Shipping in which any Director has a material personal interest; and
III-6 -

APPENDIX III

GENERAL INFORMATION

(v) there was no agreement, arrangement or understanding pursuant to which the A Shares to be issued to COSCO Shipping under the Subscription Agreement and the Supplemental Agreement and the Proposed Non-public Issuance of A Shares would be transferred, charged or pledged to any other persons.
(vi) save for the Proposed Non-public Issuance of A Shares, there was no understanding, arrangement or agreement or special deal as contemplated under Rule 25 of the Takeovers Code between (1) any shareholder of the Company; and (2)(a) COSCO Shipping and any party acting in concert with it, or (b) the Company, its subsidiaries or associated companies.

9. SHAREHOLDINGS OF AND DEALINGS IN THE SECURITIES OF THE COMPANY AND COSCO SHIPPING CONCERT GROUP

As at the Latest Practicable Date:

(i) the Company did not hold, control or have direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in COSCO Shipping and parties acting in concert with it and it has not dealt for value in any such securities of COSCO Shipping and parties acting in concert with it during the Relevant Period;
(ii) none of the Directors held, controlled or had direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in COSCO Shipping and parties acting in concert with it and it has not dealt for value in any such securities of COSCO Shipping and parties acting in concert with it during the Relevant Period;
(iii) no Shares, convertible securities, warrants, options, derivatives in respect of securities in the Company and any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company were owned or controlled by a subsidiary of the Company or by a pension fund of any member of the Group or by any person who is presumed to be acting in concert with the Company by virtue of class (5) of the definition of “acting in concert” or who is an associate of the Company by virtue of class (2) of the definition of “associate” under the Takeovers Code but excluding exempt principal traders and exempt fund managers), and none of them has dealt for value in any such securities of the Company during the Relevant Period;
(iv) save for the Subscription Agreement and the Supplemental Agreement, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and the Company, or any person who is presumed to be acting in concert with the Company by virtue of classes (1), (2), (3) and (5) of the definition of “acting in concert”, or any person who is an associate of the Company by virtue of classes (2), (3) and (4) of the definition of “associate” under the Takeovers Code and save for the Subscription, and none of them had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;
(v) no Shares, warrants, options, derivatives in respect of securities in the Company and any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company was managed on a discretionary basis by any fund manager (other than exempt fund managers
III-7 -

GENERAL INFORMATION

APPENDIX III

as defined in the Takeovers Code) connected with the Company and none of them had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;

(vi) save for the Share Options granted under the Share Option Incentive Scheme, none of the Directors of the Company owns or controls any Shares, warrants, options, derivatives or convertible securities of the Company and accordingly, they will not vote on any of the Proposed Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal.
(vii) neither the Company nor any of the Directors has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; and
(viii) none of the members of the COSCO Shipping Concert Group has had any dealings in any securities of the Company during the Relevant Period.

As at the Latest Practicable Date, other than the 38.56% interest in the total issued share capital of the Company controlled by the COSCO Shipping Concert Group and the transactions contemplated under the Subscription Agreement and the Supplemental Agreement and as disclosed in this circular:

(i) COSCO Shipping and parties acting in concert with it did not hold, control or have direction over any outstanding options, warrants, or any securities that are convertible into Shares or any derivatives in respect of securities in the Company, or hold, control or have direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company and none of them have dealt for value in any such securities of the Company during the Relevant Period;
(ii) COSCO Shipping and parties acting in concert with it has not borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company;
(iii) save for the Subscription Agreement and the Supplemental Agreement, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and COSCO Shipping and parties acting in concert with it during the Relevant Period;
(iv) neither COSCO Shipping nor parties acting in concert with it has received any irrevocable commitment to vote in favour of or against the Proposed Non-public Issuance of A Shares, the Amendment Resolution, the Supplemental Agreement, the Specific Mandate, the New Whitewash Waiver and/or the Special Deal; and
(v) none of the directors or investment committee of the manager (where applicable) of COSCO Shipping and parties acting in concert with it owned or controlled any Shares, warrants, options, derivatives or convertible securities, of the Company, and none of them has dealt for value in any such securities of the Company during the Relevant Period.
III-8 -

GENERAL INFORMATION

APPENDIX III

10. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor any of their respective close associates had any interest in other business which competes or may compete, either directly or indirectly, with the business of the Group.

11. LITIGATION

As at the Latest Practicable Date, no litigation or claims of material importance was known to the Directors to be pending or threatened against any member of the Group.

12. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the date of the Announcement (i.e. 29 May 2019) and up to and including the Latest Practicable Date:

(a) the Supplemental Agreement;
(b) the capital injection agreement dated 6 March 2018 entered into among the Company, PetroChina Company Limited (中國石油天然氣股份有公司), and Dalian PetroChina Shipping Limited (大連中石油海運有限公司) (“ PetroChina Dalian* ”) and a supplemental agreement dated 6 March 2018 supplemental to the capital injection agreement in relation to the injection of a sum of RMB396,550,896 by the Company into PetroChina Dalian and the capital contribution of no less than RMB122.4 million by the Company to PetroChina Dalian, further details of which are set out in the Company’s announcement dated 6 March 2018;
(c) the shareholders’ agreement dated 13 November 2017 entered into by the Company, COSCO SHIPPING, COSCO SHIPPING Development Co., Ltd. (中遠海運發展股份有限公司), Dalian Tanker, COSCO SHIPPING Lines Co., Ltd. (中遠海運集裝箱運輸有限公司), COSCO International Freight Co., Ltd (中遠海運國際貨運有限公司), COSCO SHIPPING Specialized Carriers Co., Ltd (中遠海運特種運輸股份有限公司), Guangzhou Ocean Shipping Co., Ltd (廣州遠洋運輸有限公司), COSCO Bulk Carrier Co., Ltd. (中遠散貨運輸有限公司), China Ocean Shipping Agency Co., Ltd. (中國外輪代理有限公司), Qingdao Ocean Shipping Co., Ltd. (青島遠洋運輸有限公司), COSCO Shipbuilding Industry Company (中遠造船工業公司), COSCO Shipyard Group Co., Ltd. (中遠船務工程集團有限公司), China Marine Bunker (Petro China) Co., Ltd. (中國船舶燃料有限責任公司), COSCO (Xiamen) Co., Ltd. (中遠海運（廈門）有限公司) and China Ocean Shipping Tally Co., Ltd. (中國外輪理貨有限公司) in relation to their respective rights and obligations in COSCO SHIPPING Finance Company Limited* (中遠海運集團財務有限責任公司);
(d) the announcement of the Company dated 29 April 2019 containing the Company’s 2019 first quarterly report; and
III-9 -

GENERAL INFORMATION

APPENDIX III

(e) the subscription agreement dated 30 October 2017 entered into between the Company and COSCO SHIPPING, pursuant to which COSCO SHIPPING has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, such number of A Shares for an amount of not more than RMB4.2 billion;

13. EXPERTS

The following is the qualification of the experts who have given their opinions or advices which are contained in this circular:

Name	Qualification
Messis Capital	A corporation licensed to carry out type 1 (dealing in securities) and type
Limited	6 (advising on corporate finance) regulated activities under the SFO
Grandall Law Firm	PRC legal advisers to the Company
(Shanghai)

As at the Latest Practicable Date, each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or opinion and reference to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, each of the above experts did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, each of the above experts did not have any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2018 (being the date to which the latest published audited consolidated financial statements of the Group were made up).

14. MISCELLANEOUS

(a) The registered office of the Company is at Room A-105, No. 188 Ye Sheng Road, China (Shanghai) Pilot Free Trade Zone, the PRC.
(b) The head office and principal place of business of the Company in the PRC is 670 Dongdaming Road, Hongkou District, Shanghai, the PRC.
(c) The principal place of business of the Company in Hong Kong is Rooms 3601-3602, 36/F West Tower, Shun Tak Center, 169-200 Connaught Road Central, Hong Kong.
(d) COSCO Shipping is a state-owned enterprise which is the indirect controlling shareholder of the Company through CSG. COSCO Shipping is principally engaged in international shipping, ancillary business in international maritime transportation, import and export of goods and
III-10 -

GENERAL INFORMATION

APPENDIX III

technologies, international freight agency business, leasing of self-owned vessels, sales of vessels, containers and steel and maritime engineering. Its registered address is at No. 628 Minsheng Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC.

(e) The Company’s H Share registrar and transfer office in Hong Kong is at Hong Kong Registrars Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(f) The secretary of the Company is Ms. Yao Qiaohong, being an affiliated person of The Hong Kong Institute of Chartered Secretaries.
(g) In respect of Appendix I to this circular, in the event of any discrepancy between the English translation and the Chinese version, the Chinese version shall prevail. Save for Appendix I to this circular, in the event of inconsistency, the English version of this circular shall prevail over the Chinese version.

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents (i) will be available for inspection at the principal place of business of the Company in Hong Kong at RMS 3601-3602, 36/F West Tower, Shun Tak CTR, 168-200 Connaught RD Central, Hong Kong during normal business hours (from 9:00 a.m. to 5:30 p.m.) from the date of this circular up to and including the date of the EGM and the Class Meetings and (ii) will also be available for inspection on the website of the SFC at www.sfc.hk and the website of the Company at http://energy.coscoshipping.com/from the date of this circular up to and including the date of the EGM and the Class Meetings:

(a) the Articles of Association of the Company;
(b) the articles of association of COSCO Shipping;
(c) the Subscription Agreement;
(d) the Supplemental Agreement;
(e) the annual reports of the Company containing the audited consolidated financial statements of the Group for the three financial years ended 31 December 2016, 31 December 2017 and 31 December 2018;
(f) the letter from the Board, the text of which is set out in the section headed “Letter from the Board” in this circular;
(g) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Board Committee” in this circular;
III-11 -

GENERAL INFORMATION

APPENDIX III

(h) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Financial Adviser” in this circular;
(i) the written consents referred to in the paragraph headed “Experts” in this Appendix;
(j) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix; and
(k) this circular.
III-12 -

REVISED NOTICE OF EGM

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

==> picture [106 x 71] intentionally omitted <==

**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)

REVISED NOTICE OF EXTRAORDINARY GENERAL MEETING

Reference is made to the notice of extraordinary general meeting (“ EGM ”) of COSCO SHIPPING Energy Transportation Co., Ltd. (the “ Company ”) dated 31 May 2019 and the announcement of the Company dated 5 July 2019 in relation to, among other things, the postponement of the EGM.

NOTICE IS HEREBY GIVEN that the EGM of the Company will be postponed to be held at 10:00 a.m. on Friday, 26 July 2019 at 3rd Floor, Ocean Hotel, No. 1171 Dong Da Ming Road, Hongkou District, Shanghai, the People’s Republic of China to consider and, if thought fit, approve the following resolutions. References are made to (i) the circular of the Company dated 4 December 2017 (the “ Circular ”) and (ii) the announcement of the Company dated 29 May 2019 (the “ Announcement ”) containing details of the transactions referred to in the resolutions below. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as those defined in the Announcement.

SPECIAL RESOLUTIONS

To consider and approve the resolution in relation to the supplement to the “Price Determination Date, Issue Price and pricing principles” in respect of the Proposed Nonpublic Issuance of A Shares (the “ Price Floor Mechanism Amendment ”), details of which are set out in the Announcement.
To consider and approve the resolution in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)”, details of which are set out in the overseas regulatory announcement of the Company dated 29 May 2019.
To consider and approve the resolution in relation to the Supplemental Agreement dated 29 May 2019 entered into between the Company and COSCO Shipping, details of which are set out in the Announcement:
for identification purpose only
EGM-1 -

REVISED NOTICE OF EGM

“THAT:

(a) the Supplemental Agreement dated 29 May 2019 entered into between the Company and COSCO Shipping, pursuant to which COSCO Shipping and the Company have agreed to incorporate the Price Floor Mechanism Amendment to the Proposed Non-public Issuance of A Shares, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one Director be and is hereby authorised to do all acts and matters and sign such documents (including the affixation of the common seal of the Company thereon) and take all such steps as the Director in his/her opinion deem necessary, desirable or expedient to implement or give effect to the Supplemental Agreement and the transactions contemplated thereunder.”

ORDINARY RESOLUTIONS

To consider and approve the resolution in relation to the remedial measures regarding dilution on current returns by the Proposed Non-public Issuance of A Shares, details of which are set out in the overseas regulatory announcement of the Company dated 29 May 2019.
To consider and if thought fit, approve, with or without amendments, the following resolution as ordinary resolution of the Company and to be approved by at least 75% of the vote cast on a poll by the independent shareholders of the Company:

“THAT:

(a) subject to (i) the resolution no. 2 set out in this notice being passed; and (ii) the granting of the Whitewash Waiver by the Executive pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code in respect of the obligation of COSCO Shipping to make a mandatory general offer for all the issued Shares not already owned or agreed to be acquired by which may otherwise arise as a result of the Subscription, such Whitewash Waiver be and is hereby approved, confirmed and ratified; and
(b) any one Director be and is hereby authorised to do all acts and matters and sign such documents (including the affixation of the common seal of the Company thereon) and take all such steps as the Director in his/her opinion deem necessary, desirable or expedient to carry out or to give effect to the Whitewash Waiver.”

SPECIAL RESOLUTIONS

To consider and approve the resolution in relation to the Specific Mandate, details of which are set out in the Circular and the Announcement:
EGM-2 -

REVISED NOTICE OF EGM

“THAT:

(a) the Board be and is hereby granted a specific mandate to issue not more than 806,406,572 A Shares at an issue price of not lower than the higher of (i) 90% of the Average Trading Price and (ii) the net asset value per share as set out at the latest audited consolidated financial statement of the Company (taking into account the Price Floor Mechanism Amendment) to not more than 10 specific target subscribers, including COSCO Shipping, under the Proposed Non-public Issuance of A Shares (including the issue of such number of A Shares to COSCO Shipping pursuant to the Subscription Agreement); and
(b) any one Director be and is hereby authorised to do all acts and matters and sign such documents (including the affixation of the common seal of the Company thereon) and take all such steps as the Director in his/her opinion deem necessary, desirable or expedient to implement or give effect to the Specific Mandate.”
To consider and approve the resolution in relation to the Special Deal, the details of which are more particularly set out in the Announcement:

“THAT:

(a) subject to the consent of the Executive pursuant to Rule 25 of the Takeovers Code and the satisfaction of any condition(s) attached thereon imposed by the Executive, all transactions contemplated under the Proposed Non-public Issuance of A Shares which constitute a special deal under Rule 25 of the Takeovers Code be and are hereby approved, confirmed and ratified; and
(b) any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments (including affixing the seal of the Company thereon) and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Special Deal.”

By order of the Board

COSCO SHIPPING Energy Transportation Co., Ltd. Yao Qiaohong

Company Secretary

5 July 2019 Shanghai, The People’s Republic of China

Notes:

(A) The H share register of the Company is closed from Saturday, 15 June 2019 to Friday, 26 July 2019 (both days inclusive), during which no transfer of H shares will be effected. Any holders of H shares of the Company, whose names appear on the Company’s register of members on Friday, 26 July 2019 are entitled to attend and vote at the EGM after completing the registration procedures for attending the meeting.

EGM-3 -

REVISED NOTICE OF EGM

(B) The address of the share registrar (for share transfer) for the Company’s H shares is as follows:

Hong Kong Registrars Limited Shops 1712-1716 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

7th Floor, 670 Dongdaming Road Hongkou District, Shanghai the People’s Republic of China Postal Code: 200080 Tel: 86 (21) 6596 6666 Fax: 86 (21) 6596 6160

(D) Each holder of H shares who has the right to attend and vote at the EGM is entitled to appoint in writing one or more proxies, whether that proxy is a shareholder or not, to attend and vote on his behalf at the EGM.
(E) The instrument appointing a proxy must be in writing under the hand of the appointor or his proxy duly authorised in writing or, if the principal is a legal person, under seal or under the hand of the director or proxy duly authorised. Where such instrument is signed by a person authorised by the appointor, the power of attorney authorising signature or other authorisation documents shall be notarised.
(F) For holders of H shares, the form of proxy, and if the form of proxy is signed by a person under a power of attorney or other authority on behalf of the appointor, a notarially certified copy of that power of attorney or other authority, must be delivered to the Company’s H share registrar, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time appointed for holding the EGM (or any adjournment thereof) in order for such documents to be valid.
(G) Each holder of A shares is entitled to appoint in writing one or more proxies, whether a shareholder or not, to attend and vote on its behalf at the EGM. Notes (D) to (E) also apply to holders of A shares, except that the proxy form or other documents of authority must be delivered to the Office of the Board of Directors, the address of which is set out in Note (C) above, not less than 24 hours before the time appointed for holding the EGM (or any adjournment thereof) in order for such documents to be valid.
(H) If a proxy attends the EGM on behalf of a shareholder, he should produce his identity card and the instrument signed by the proxy or his legal representative, which specifies the date of its issuance. If the legal representative of a shareholder which shareholder is a legal person attends the EGM, such legal representative should produce his identity card and valid documents evidencing his capacity as such legal representative. If a shareholder which is a legal person appoints a company representative other than its legal representative to attend the EGM, such representative should produce his identity card and an authorisation instrument affixed with the seal of that shareholder (which is a legal person) and duly signed by its legal representative.
(I) The EGM is expected to last for an hour. Shareholders attending the EGM are responsible for their own transportation and accommodation expenses.
(J) As at the date of this notice, the board of directors of the Company comprises Mr. Liu Hanbo and Mr. Zhu Maijin as executive directors, Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua as non-executive directors, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng as independent non-executive directors.
EGM-4 -

REVISED NOTICE OF H SHARES CLASS MEETING

==> picture [106 x 71] intentionally omitted <==

**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)

REVISED NOTICE OF H SHARES CLASS MEETING

Reference is made to the notice of class meeting for holders of H Shares (“ H Shares Class Meeting ”) of COSCO SHIPPING Energy Transportation Co., Ltd. (the “ Company ”) dated 31 May 2019 and the announcement of the Company dated 5 July 2019 in relation to, among other things, the postponement of the H Shares Class Meeting.

NOTICE IS HEREBY GIVEN that the H Shares Class Meeting of the Company will be postponed to be held at 10:00 a.m. on Friday, 26 July 2019 at 3rd Floor, Ocean Hotel, No. 1171 Dong Da Ming Road, Hongkou District, Shanghai, the People’s Republic of China (to be convened in the order of the postponed extraordinary general meeting, class meeting for holders of A shares and H Shares Class Meeting) to consider and, if thought fit, approve the following resolutions. References are made to (i) the circular of the Company dated 4 December 2017 (the “ Circular ”) and (ii) the announcement of the Company dated 29 May 2019 (the “ Announcement ”) containing details of the transactions referred to in the resolutions below. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as those defined in the Announcement.

SPECIAL RESOLUTIONS

To consider and approve the resolution in relation to the supplement to the “Price Determination Date, Issue Price and pricing principles” in respect of the Proposed Nonpublic Issuance of A Shares (the “ Price Floor Mechanism Amendment ”), details of which are set out in the Announcement.
To consider and approve the resolution in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)”, details of which are set out in the overseas regulatory announcement of the Company dated 29 May 2019.

* for identification purpose only

HCM-1 -

REVISED NOTICE OF H SHARES CLASS MEETING

To consider and approve the resolution in relation to the Supplemental Agreement dated 29 May 2019 entered into between the Company and COSCO Shipping, details of which are set out in the Announcement:

“THAT:

(a) the Supplemental Agreement dated 29 May 2019 entered into between the Company and COSCO Shipping, pursuant to which COSCO Shipping and the Company have agreed to incorporate the Price Floor Mechanism Amendment to the Proposed Non-public Issuance of A Shares, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one Director be and is hereby authorised to do all acts and matters and sign such documents (including the affixation of the common seal of the Company thereon) and take all such steps as the Director in his/her opinion deem necessary, desirable or expedient to implement or give effect to the Supplemental Agreement and the transactions contemplated thereunder.”
To consider and approve the resolution in relation to the Specific Mandate, details of which are set out in the Circular and the Announcement:

“THAT:

(a) the Board be and is hereby granted a specific mandate to issue not more than 806,406,572 A Shares at an issue price of not lower than the higher of (i) 90% of the Average Trading Price and (ii) the net asset value per share as set out at the latest audited consolidated financial statement of the Company (taking into account the Price Floor Mechanism Amendment) to not more than 10 specific target subscribers, including COSCO Shipping, under the Proposed Non-public Issuance of A Shares (including the issue of such number of A Shares to COSCO Shipping pursuant to the Subscription Agreement); and
(b) any one Director be and is hereby authorised to do all acts and matters and sign such documents (including the affixation of the common seal of the Company thereon) and take all such steps as the Director in his/her opinion deem necessary, desirable or expedient to implement or give effect to the Specific Mandate.”
To consider and approve the resolution in relation to the Special Deal, the details of which are more particularly set out in the Announcement:
HCM-2 -

REVISED NOTICE OF H SHARES CLASS MEETING

“THAT:

(a) subject to the consent of the Executive pursuant to Rule 25 of the Takeovers Code and the satisfaction of any condition(s) attached thereon imposed by the Executive, all transactions contemplated under the Proposed Non-public Issuance of A Shares which constitute a special deal under Rule 25 of the Takeovers Code be and are hereby approved, confirmed and ratified; and
(b) any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments (including affixing the seal of the Company thereon) and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Special Deal.”

By order of the Board COSCO SHIPPING Energy Transportation Co., Ltd. Yao Qiaohong Company Secretary

5 July 2019

Shanghai, The People’s Republic of China

Notes:

(A) The H share register of the Company is closed from Saturday, 15 June 2019 to Friday, 26 July 2019 (both days inclusive), during which no transfer of H shares will be effected. Any holders of H shares of the Company, whose names appear on the Company’s register of members on Friday, 26 July 2019 are entitled to attend and vote at the H Shares Class Meeting after completing the registration procedures for attending the meeting.
(B) The address of the share registrar (for share transfer) for the Company’s H shares is as follows:

Hong Kong Registrars Limited Shops 1712-1716 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

7th Floor, 670 Dongdaming Road Hongkou District, Shanghai the People’s Republic of China Postal Code: 200080 Tel: 86 (21) 6596 6666 Fax: 86 (21) 6596 6160

HCM-3 -

REVISED NOTICE OF H SHARES CLASS MEETING

(D) Each holder of H shares who has the right to attend and vote at the H Shares Class Meeting is entitled to appoint in writing one or more proxies, whether that proxy is a shareholder or not, to attend and vote on his behalf at the H Shares Class Meeting.
(E) The instrument appointing a proxy must be in writing under the hand of the appointor or his proxy duly authorised in writing or, if the principal is a legal person, under seal or under the hand of the director or proxy duly authorised. Where such instrument is signed by a person authorised by the appointor, the power of attorney authorising signature or other authorisation documents shall be notarised.
(F) For holders of H shares, the form of proxy, and if the form of proxy is signed by a person under a power of attorney or other authority on behalf of the appointor, a notarially certified copy of that power of attorney or other authority, must be delivered to the Company’s H share registrar, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time appointed for holding the H Share Class Meeting (or any adjournment thereof) in order for such documents to be valid.
(G) If a proxy attends the H Shares Class Meeting on behalf of a shareholder, he should produce his identity card and the instrument signed by the proxy or his legal representative, which specifies the date of its issuance. If the legal representative of a shareholder which shareholder is a legal person attends the H Shares Class Meeting, such legal representative should produce his identity card and valid documents evidencing his capacity as such legal representative. If a shareholder which is a legal person appoints a company representative other than its legal representative to attend the H Shares Class Meeting, such representative should produce his identity card and an authorisation instrument affixed with the seal of that shareholder (which is a legal person) and duly signed by its legal representative.
(H) The H Shares Class Meeting is expected to last for an hour. Shareholders attending the H Shares Class Meeting are responsible for their own transportation and accommodation expenses.
(I) As at the date of this notice, the board of directors of the Company comprises Mr. Liu Hanbo and Mr. Zhu Maijin as executive directors, Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua as non-executive directors, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng as independent non-executive directors.
HCM-4 -

AI assistant

Dida Inc. — Proxy Solicitation & Information Statement 2019

50671_rns_2019-07-04_b306f545-dd4b-4731-bde7-cdf300529944.pdf

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

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES (2) CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEME\NT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND

(4) SPECIAL DEAL

CONTENT

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES (2) CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEMENT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND (4) SPECIAL DEAL

I. INTRODUCTION

LETTER FROM THE BOARD

II. AMENDMENT TO THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

LETTER FROM THE BOARD

(2) Supplement to the Price Floor Mechanism

(3) Possible fluctuations in public subscription level and resultant shareholding interest in the Company held by the COSCO Shipping Concert Group

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(4) Proposal in relation to the supplement to the “Price Determination Date, Issue Price and pricing principles” in respect of the Proposed Non-public Issuance of A Shares

(5) Proposal in relation to the “Proposal in respect of the Proposed Non-public Issuance of A Shares (2nd Amendment)”

(6) Proposal in relation to the “Remedial Measures Regarding Dilution on Current Returns by the Proposed Non-public Issuance of A Shares”

(7) Proposal in relation to the Specific Mandate

III. CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT

(1) Summary of principal terms of the Subscription Agreement

LETTER FROM THE BOARD

(2) The Supplemental Agreement and Implications under the Listing Rules

(3) Information on the parties to the Supplemental Agreement

The Company

COSCO Shipping

(4) Proposal in relation to the Supplemental Agreement and the transactions contemplated thereunder

IV. FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

V. REASONS FOR AND BENEFITS OF THE AMENDMENT RESOLUTION, THE SUPPLEMENTAL AGREEMENT AND THE NEW WHITEWASH WAIVER

LETTER FROM THE BOARD

VI. IMPLICATIONS UNDER THE TAKEOVERS CODE

(1) Application for the Whitewash Waiver

(2) Special Deal in relation to the Proposed Non-public Issuance of A Shares

LETTER FROM THE BOARD

(3) Adoption of the Share Option Incentive Scheme and the grant of Share Options

VII. EGM AND CLASS MEETINGS

LETTER FROM THE BOARD

VIII. RECOMMENDATION

LETTER FROM THE BOARD

IX. FURTHER INFORMATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION IN RELATION TO THE SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEMENT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND

(4) SPECIAL DEAL

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(1) AMENDMENT TO THE TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

(2) CONNECTED TRANSACTION IN RELATION TO SUPPLEMENTAL AGREEMENT TO THE SUBSCRIPTION AGREEMENT (3) WHITEWASH WAIVER UNDER THE TAKEOVERS CODE AND

(4) SPECIAL DEAL

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. REASONS FOR AND BENEFITS OF PROPOSED NON-PUBLIC ISSUANCE OF A SHARES

Financing alternatives

3. BACKGROUND OF AND THE TERMS OF AMENDMENT RESOLUTION AND THE SUPPLEMENTAL AGREEMENT

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of the Amendment Resolution and the Supplemental Agreement

Fairness and reasonableness on the terms of the Amendment Resolution and the Supplemental Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. POSSIBLE FLUCTUATIONS IN PUBLIC SUBSCRIPTION LEVEL AND RESULTANT SHAREHOLDING INTEREST IN THE COMPANY HELD BY THE COSCO SHIPPING CONCERT GROUP

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. POSSIBLE FINANCIAL EFFECTS TO THE GROUP OF THE PROPOSED NONPUBLIC ISSUANCE OF A SHARES

(i) Net assets value and net assets value per Share

(ii) Gearing

6. THE NEW WHITEWASH WAIVER

7. THE SPECIAL DEAL

Dida Inc. Proxy Solicitation & Information Statement 2019

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

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

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