China Merchants Port : CONNECTED TRANSACTION - LAND LEASE AGREEMENT BETWEEN CM DJIBOUTI AND THE DJIBOUTI ASSET COMPANY

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(Incorporated in Hong Kong with limited liability under the Companies Ordinance)

(Stock Code: 00144)

CONNECTED TRANSACTION

LAND LEASE AGREEMENT

BETWEEN CM DJIBOUTI AND THE DJIBOUTI ASSET COMPANY

SUMMARY

On 28 March 2019, the Djibouti Asset Company entered into the Land Lease Agreement with CM Djibouti, pursuant to which the Djibouti Asset Company as lessor would sub-lease the Lease Land in the Djibouti International Free Trade Zone 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 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.

Since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the Land Lease Agreement exceed 0.1% but are below 5%, the transaction contemplated under the Land Lease Agreement is therefore exempt from the circular (including independent financial advice) and shareholders' approval requirements under Chapter 14A of the Listing Rules.

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1.BACKGROUND

Reference is made to the announcement of the Company dated 16 January 2017 in relation to the establishment of the Djibouti Asset Company by the Asset Joint Venture, Great Horn and PDA for the purpose of investing in and financing the development rights to develop commercial and infrastructure projects within the Djibouti International Free Trade Zone.

On 28 March 2019, the Djibouti Asset Company entered into the Land Lease Agreement with CM Djibouti, a wholly-owned subsidiary of the Company, pursuant to which the Djibouti Asset Company as lessor would sub-lease the Lease Land in the Djibouti International Free Trade Zone 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.

2.LAND LEASE AGREEMENT

The key terms of the Land Lease Agreement are set out below:

Date:	28 March 2019
Parties:	(1)	the Djibouti Asset Company, as the lessor
	(2)	CM Djibouti, as the lessee
Lease Land:	A parcel of land with an area of 137,801.63 square metres
	within the Djibouti International Free Trade Zone. The
	Lease Land shall be made available to CM Djibouti on
	the date of the Land Lease Agreement.
Term:	The term of the Land Lease Agreement commenced on
	the date of the Land Lease Agreement and expire on 14

August 2116. Any outstanding land use rights shall automatically terminate upon expiry of the Lease.

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Purposes:	CM	Djibouti shall use the Lease Land to carry out
	logistics, commerce and trade activities within the
	Djibouti International Free Trade Zone.
Consideration:	CM Djibouti shall pay to the Djibouti Asset Company (i)
	rent; (ii) deposit; and (iii) property management fees. All
	the payments payable by CM Djibouti will be in cash and
	funded by internal resources. The consideration was
	calculated based on the surface area of the Lease Land
	and determined after arm's length negotiation with
	reference to market prices of land in nearby areas.
	(i)	Rent:
		CM Djibouti shall pay to the Djibouti Asset
		Company an aggregate amount of US$27,756,004.31
		(equivalent to approximately HK$216,497,000) for
		the full term of the Lease. CM Djibouti shall pay the
		rent in full within 10 business days after the delivery
		of the Lease Land.
	(ii)	Deposit:
		In addition to the rent, CM Djibouti shall pay to the
		Djibouti Asset Company a deposit of US$200,000
		(equivalent to approximately HK$1,560,000) as a
		guarantee by CM Djibouti of its obligations under
		the Land Lease Agreement within 10 days of the date
		of the Land Lease Agreement. The Djibouti Asset
		Company shall refund the deposit (or any remaining
		amount) without any interest to CM Djibouti within

30 days after the term of the Land Lease Agreement expires or the Land Lease Agreement is terminated early.

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	(iii) Property management fees:
	In consideration of the property management
	services to be provided by the Djibouti Asset
	Company (such as security, street cleaning, street
	lighting as well as repair and maintenance of the
	certain utilities services), CM Djibouti shall pay to
	the Djibouti Asset Company 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 Lease Land. The first property
	management fees, proportioned for the period from
	and including the date of the Land Lease Agreement
	until 31 December 2019, shall be paid within 10 days
	from the date of the Land Lease Agreement.
	Thereafter, CM Djibouti shall pay the property
	management fees quarterly in advance to the
	Djibouti Asset Company on or before the first day of
	each calendar quarter.
Termination	Each party shall be entitled to terminate the Land Lease
	Agreement by notice to the other party in case of a
	material breach by the other party which remains
	unremedied after a cure period of no less than three
	months following the date on which the defaulting party
	receives notice of material breach from the
	non-defaulting party.
	In the event that the Land Lease Agreement is terminated
	by CM Djibouti for breach by the Djibouti Asset
	Company, any outstanding land use rights of CM Djibouti
	shall terminate and all its rights over the buildings and
	other real assets on the Lease Land shall be transferred to
	the Djibouti Asset Company, upon and subject to full
	payment by the Djibouti Asset Company to CM Djibouti
	of a termination amount calculated as follows:
	Termination amount = A + B + C D,

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where,

"A" is the fair market value of the buildings and real assets as assessed by an internationally recognised auditing firm agreed by the parties within 30 business days of the termination or, failing agreement, by a body appointed by the chairman for the time being of the Singapore International Arbitration Centre;

"B" is the pro-rated value of rent not used until the end of the term;

"C" is any amount owed by the Djibouti Asset Company to CM Djibouti accrued prior to the termination of the term of the Land Lease Agreement; and

"D" is any amount owed by CM Djibouti to the Djibouti Asset Company accrued prior to the termination of the term of the Land Lease Agreement.

In the event that the Land Lease Agreement is terminated by the Djibouti Asset Company for breach by CM Djibouti, any outstanding land use rights of CM Djibouti to the Lease Land shall terminate and all its rights over the buildings and real assets on the Lease Land shall be transferred to the Djibouti Asset Company and the Djibouti Asset Company shall pay to CM Djibouti the termination amount calculated as follows:

Termination amount = A + B + C D,

where,

"A" is the book value of the buildings and real assets as assessed by an internationally recognised auditing firm agreed by the parties within 30 business days of the termination or, failing agreement, by a body appointed by the chairman for the time being of the Singapore International Arbitration Centre;

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