Annual Report 2019

Report of the Directors 90 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED (d) On 28 March 2019, Khor Ambado FZCO (the “ Djibouti Asset Company ”) entered into a land lease agreement (the “ Land Lease Agreement ”) with China Merchants Holdings (Djibouti) FZE (“ CM Djibouti ”), a subsidiary of the Company, pursuant to which the Djibouti Asset Company as lessor would sub-lease a parcel of land with an area of 137,801.63 square metres within the Djibouti International Free Trade Zone (the “ Djibouti Lease Land ”) to CM Djibouti as lessee, for a term commencing on the date of the Land Lease Agreement and ending on 14 August 2116. The Lease Land shall be used for the purposes of carrying out logistics, commerce and trade activities within the Djibouti International Free Trade Zone. CM Djibouti shall pay to the Djibouti Asset Company (i) an aggregate amount of US$27,756,004.31 (equivalent to approximately HK$216,497,000) for the full term of the Lease, (ii) a deposit of US$200,000 (equivalent to approximately HK$1,560,000) in addition to the rent and (iii) property management fees at an annual rate of US$1.00 (equivalent to approximately HK$7.80) per square metre of the surface area of the Djibouti Lease Land. The Djibouti Asset Company is an associate of CMG, the ultimate holding company of the Company, and therefore a connected person of the Company. Accordingly, the transaction contemplated under the Land Lease Agreement constitutes a connected transaction of the Company under the Listing Rules. (e) On 29 April 2019, the Company, CMI, Cheer Signal and Asset Joint Venture entered into a supplemental shareholders agreement (the “ Second Supplemental Shareholders Agreement ”) to set out the terms of a capital increase in relation to the Asset Joint Venture (the “ Second Capital Increase ”). The reason for the Second Capital Increase is to partially fund a shareholder loan provided by the Asset Joint Venture to the Djibouti Asset Company for the repayment of a loan facility of up to US$150 million (equivalent to approximately HK$1,170 million) provided by the Company to the Djibouti Asset Company expiring on 8 May 2019. The parties agreed that the share capital of the Asset Joint Venture shall be increased to US$144,810,000 (equivalent to approximately HK$1,129,518,000) by issuing and allotting 84,750,000 shares of the Asset Joint Venture to the parties in accordance with their respective shareholdings in the Asset Joint Venture. Accordingly, the Company, CMI and Cheer Signal agreed to contribute US$33,900,000 (equivalent to approximately HK$264,420,000), US$33,900,000 (equivalent to approximately HK$264,420,000) and US$16,950,000 (equivalent to approximately HK$132,210,000), respectively into the Asset Joint Venture. Upon the completion of the Second Capital Increase, the share capital of the Asset Joint Venture shall comprise 144,810,000 shares of which, the Company, CMI and Cheer Signal shall hold 57,924,000, 57,924,000 and 28,962,000 shares, respectively. Each of CMI, Cheer Signal and the Asset Joint Venture is an associate of CMG, the ultimate holding company of the Company, and therefore connected persons of the Company. Accordingly, the Second Supplemental Shareholders Agreement constitutes a connected transaction of the Company under the Listing Rules. (f) On 28 June 2019, China Merchants Zhangzhou Economic Development Zone Co., Ltd. ( 招商局漳州開 發區有限公司 ) (“ China Merchants Zhangzhou ”) and Zhangzhou Investment Promotion Bureau Xiamenwan Port Affairs Co., Ltd ( 漳州招商局廈門灣港務有限公 司 ) (“ Zhangzhou Xiamen Bay ”), a subsidiary of the Company entered into a supplemental agreement (the “ Zhangzhou Supplemental Agreement ”) to amend the land use rights transfer agreement (the “ Land Use Rights Transfer Agreement ”) dated 25 March 2013 entered into between China Merchants Zhangzhou and Zhangzhou Xiamen Bay, pursuant to which China Merchants Zhangzhou agreed to sell and Zhangzhou Xiamen Bay agreed to purchase the land use rights in respect of a parcel of land situated at the Fourth District of the Zhangzhou Economic Development Zone located in Fujian, the PRC, with a total site area of 299,232.859 square meters (including the sea use rights with a site area of 172,831.724 square meters). When the Land Use Rights Transfer Agreement was signed in 2013, the area corresponding with the sea use rights with a site area of 172,831.724 square meters was undergoing but had not yet completed a land reclamation process. In January 2019, such land reclamation process was completed and the final land area has been confirmed