IMPORTANT NOTICE
(THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE NON-U.S. PERSONS OUTSIDE OF THE UNITED STATES)
IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the offering circular (“Offering Circular”) attached to this e-mail. You are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached Offering Circular. In accessing the attached Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access. You acknowledge that the access to the attached Offering Circular is intended for use by you only and you agree you will not forward or otherwise provide access to any other person.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF, U.S. PERSONS, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.
THIS OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
Confirmation of Your Representation: You have accessed the attached document on the basis that you have confirmed to HPHT Finance (21) Limited (the “Issuer”), HPHT Limited (the “Hong Kong Guarantor”), Hutchison Port Holdings Trust (“HPH Trust”) acting through its trustee-manager, initially being Hutchison Port Holdings Management Pte. Limited (the “Trustee-Manager” and as guarantor, the “Singapore Guarantor” and together with the Hong Kong Guarantor, the “Guarantors”) and Bank of China (Hong Kong) Limited, BOCI Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Mizuho Securities Asia Limited (the “Lead Managers”) that: (1) you are not in the United States nor a U.S. person, as defined in Regulation S under the Securities Act, (2) the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States and (3) you consent to delivery of this document by electronic transmission. To the extent you purchase the securities described in the attached document, you will be doing so in an offshore transaction as defined in regulations under the Securities Act in compliance with Regulation S.
This document has been made available to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of transmission and consequently neither the Issuer, the Guarantors, the Lead Managers, nor any of their respective affiliates accept any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version.
Restrictions: Nothing in this electronic transmission constitutes an offer or an invitation by or on behalf of any of the Issuer, the Guarantors and the Lead Managers to subscribe or purchase any of the securities described therein. Any securities to be issued will not be registered under the Securities Act and may not be offered or sold in the United States or to, or for the account of, U.S. persons (as defined in Regulation S under the Securities Act) unless registered under the Securities Act or pursuant to an exemption from such registration. Access has been limited so that it shall not constitute a general solicitation in the United States or elsewhere. If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the securities described therein.
You are reminded that you have accessed the attached Offering Circular on the basis that you are a person into whose possession the attached Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located.
The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by laws.
You are responsible for the protection against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. HPHT FINANCE (21) LIMITED (incorporated in the Cayman Islands with limited liability) US$500,000,000 2.00 per cent. Guaranteed Notes due 2026 unconditionally and irrevocably guaranteed by HUTCHISON PORT HOLDINGS TRUST (a business trust constituted on 25 February 2011 under the laws of the Republic of Singapore)
acting through its trustee-manager, initially being Hutchison Port Holdings Management Pte. Limited (incorporated in the Republic of Singapore with limited liability)
and by HPHT LIMITED (incorporated in Hong Kong with limited liability)
Issue price: 99.863 per cent.
HPHT Finance (21) Limited (the “Issuer”) will issue US$500,000,000 principal amount of 2.00 per cent. guaranteed notes due 2026 (the “Notes”). The obligations of the Issuer will be unconditionally and irrevocably guaranteed by Hutchison Port Holdings Trust (“HPH Trust”) acting through its trustee-manager from time to time, initially being Hutchison Port Holdings Management Pte. Limited (the “Trustee-Manager” and as guarantor, the “Singapore Guarantor”, which terms shall include, where the context so permits, all other persons from time to time acting as trustee-manager of HPH Trust) and HPHT Limited (the “Hong Kong Guarantor”, and together with the Singapore Guarantor, the “Guarantors” and each a “Guarantor”). The Notes will bear interest from and including 19 March 2021 to but excluding 19 March 2026 at a rate of 2.00 per cent. per annum. The interest will be payable semi-annually in arrear on each Interest Payment Date, as further described and except as mentioned under “Terms and Conditions of the Notes”. The Issuer may redeem the Notes at any time at par plus accrued interest in the event of certain tax changes. The Notes may, at the option of the Issuer or a Guarantor, be redeemed in whole but not in part, on any date falling on or after 19 February 2026, at a redemption price equal to the principal amount thereof plus accrued interest to, but excluding, the date fixed for redemption. See “Terms and Conditions of the Notes — Redemption and Purchase”. Application will be made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the Official List of the SGX-ST. See “General Information”. The SGX-ST assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission to the Official List of the SGX-ST and quotation of the Notes on the SGX-ST is not to be taken as an indication of the merits of the Issuer, the Guarantors, their respective subsidiaries, associated companies or the Notes. The Notes are expected to be rated “Baa1” by Moody’s Investors Services Limited and “A-” by S&P Global Ratings. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. Investing in the Notes involves risks that are described in the “Risk Factors” section beginning on page 14 of this Offering Circular. The Notes will be in bearer form and will initially be represented by a temporary global note (the “Temporary Global Note”), without interest coupons, which will be deposited on or about 19 March 2021 (the “Closing Date”) with a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”). Interests in the Temporary Global Note will be exchangeable for interests in a permanent global note (the “Permanent Global Note” and, together with the Temporary Global Note, the “Global Notes”), without interest coupons, on or after 28 April 2021, upon certification as to non-U.S. beneficial ownership. Interests in the Permanent Global Note will be exchangeable for definitive Notes only in certain limited circumstances—see “Summary of Provisions relating to the Notes while in Global Form”.
Joint Bookrunners and Joint Lead Managers
Bank of China BOC International HSBC Mizuho Securities (Hong Kong)
The date of this Offering Circular is 16 March 2021. NOTICE TO INVESTORS
Except as provided below, the Issuer and the Guarantors accept responsibility for the information contained in this Offering Circular which is material in the context of the offering of the Notes. To the best of the knowledge and belief of the Issuer and the Guarantors (each having taken reasonable care to ensure that such is the case) the information contained in this Offering Circular (subject as set out below in respect of information contained herein provided by other sources referred to herein) is in accordance with the material facts and does not omit anything likely to materially affect the import of such information. The Issuer and the Guarantors, having made all reasonable enquiries, confirm that this Offering Circular contains or incorporates all information with respect to the Issuer, the Guarantors and the Notes which is material in the context of the issue and offering of the Notes, that such information contained or incorporated in this Offering Circular is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed in this Offering Circular are honestly held and that the Issuer and the Guarantors are not aware of any facts the omission of which would make this Offering Circular or any of such information or the expression of any such opinions or intentions misleading in any material respect.
No person has been authorised to give any information or to make any representation other than those contained in this Offering Circular in connection with the offering of the Notes and, if given or made, such information or representations must not be relied upon as having been authorised by the Issuer, the Guarantors or the Lead Managers (as defined in “Subscription and Sale”). Neither the delivery of this Offering Circular nor any sale made hereunder shall, under any circumstances, constitute a representation or create any implication that there has been no change in the affairs of the Issuer or the Guarantors since the date hereof. This Offering Circular does not constitute an offer of, or an invitation by, or on behalf of, the Issuer, the Guarantors or the Lead Managers to subscribe for, or purchase, any of the Notes. This Offering Circular does not constitute an offer, and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such an offer or solicitation is not authorised or is unlawful.
The Lead Managers or any of their respective affiliates and advisors have not separately verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Lead Managers and their respective affiliates and advisors as to the accuracy or completeness of the information contained in this Offering Circular or any other information provided by the Issuer or the Guarantors in connection with the Notes or their distribution.
This Offering Circular is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer, the Guarantors or the Lead Managers that any recipient of this Offering Circular should purchase any of the Notes. Each investor contemplating purchasing Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and/or the Guarantors.
The distribution of this Offering Circular and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Each person into whose possession this Offering Circular comes is required by the Issuer, the Guarantors and the Lead Managers to inform itself about and to observe any such restrictions.
Neither the Notes nor the Guarantees have been nor will be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and are in bearer form subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons.
This Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore (the “MAS”). Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
i Any reference to the SFA is a reference to the Securities and Futures Act, Chapter 289 of Singapore and a reference to any term as defined in the SFA or any provision in the SFA is a reference to that term or provision as modified or amended from time to time including by such of its subsidiary legislation as may be applicable at the relevant time.
Notification under Section 309B of the SFA: The Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
For a further description of certain restrictions on the offering and sale of the Notes and on distribution of this Offering Circular, see “Subscription and Sale”.
This Offering Circular is based on information provided by the Issuer and the Guarantors and by other sources referred to herein that they believe are reliable. The Issuer and the Guarantors accept responsibility for accurately reproducing such information provided by such other sources. The Issuer and the Guarantors accept no further or other responsibility in respect of such information. No assurance can be given that this information is accurate or complete. This Offering Circular summarises certain documents and other information and investors should refer to them for a more complete understanding of what is discussed in this Offering Circular. In making an investment decision, each investor must rely on its own examination of the Issuer and the Guarantors and the terms of the offering and the Notes, including the merits and risks involved.
Certain figures included in this Offering Circular have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
All statements other than statements of historical facts included in this Offering Circular, including, without limitation, those regarding the financial position of HPH Trust, business strategy, plans and objectives of management for future operations, are forward-looking statements. Investors can identify some of these forward-looking statements by terms such as “expect,” “believe,” “plan,” “intend,” “estimate,” “anticipate,” “may,” “will,” “would” and “could” or similar words.
However, investors should note that these words are not the exclusive means of identifying forward-looking statements. All statements regarding HPH Trust’s expected financial position, business strategy, plans and prospects are forward-looking statements. These forward-looking statements are only expectations and involve known and unknown risks, uncertainties and other factors that may cause HPH Trust’s actual results, performance or achievements to be materially different from any historical results, future results, performance or achievements expected, expressed or implied by these forward-looking statements.
These forward-looking statements speak only as at the date of the Offering Circular. Given the risks and uncertainties that may cause HPH Trust’s actual future results, performance or achievements to be materially different than expected, expressed or implied by the forward-looking statements in this Offering Circular, investors are advised not to place undue reliance on those statements. None of the Guarantors, HPH Trust nor the Issuer represents or warrants to investors that HPH Trust’s actual future results, performance or achievements will be as discussed in those statements. Each of the Issuer, HPH Trust and the Guarantors expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Issuer’s or the Guarantors’ expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based.
ii TABLE OF CONTENTS
Page CURRENCY OF PRESENTATION AND CERTAIN DEFINITIONS ...... 1 INTRODUCTION TO HPH TRUST...... 2 SUMMARY OF THE OFFERING ...... 3 SELECTED CONSOLIDATED FINANCIAL INFORMATION OF HPH TRUST ...... 8 DOCUMENTS INCORPORATED BY REFERENCE...... 13 RISK FACTORS...... 14 TERMS AND CONDITIONS OF THE NOTES ...... 36 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM...... 51 USE OF PROCEEDS...... 54 THE ISSUER ...... 55 CAYMAN ISLANDS DATA PROTECTION ...... 56 PRIVACY NOTICE ...... 57 THE TRUSTEE-MANAGER ...... 59 THE HONG KONG GUARANTOR ...... 65 CAPITALISATION OF HPH TRUST ...... 66 THE BUSINESS OF HPH TRUST ...... 67 STRUCTURE OF HPH TRUST ...... 75 TAXATION ...... 100 SUBSCRIPTION AND SALE ...... 104 GENERAL INFORMATION...... 109 GLOSSARY OF CERTAIN TERMS ...... 111
IN CONNECTION WITH THE ISSUE OF THE NOTES, THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED (THROUGH ITS AFFILIATES) AS STABILISATION MANAGER (THE “STABILISATION MANAGER”) (OR ANY PERSON ACTING ON BEHALF OF THE STABILISATION MANAGER) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, STABILISATION MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE STABILISATION MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISATION MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
iii CURRENCY OF PRESENTATION AND CERTAIN DEFINITIONS
“HPH Trust” means Hutchison Port Holdings Trust, a business trust registered under the Business Trusts Act, Chapter 31A of the laws of Singapore (the “BTA”), whose units (“Units”) are listed on the SGX-ST. References in HPH Trust’s consolidated financial statements to the “Group” are to HPH Trust and all of its direct and indirect subsidiaries and also include HPH Trust’s interest in its associated companies and joint ventures on the basis set forth in notes 2(b), 2(c) and 2(d), respectively, to the consolidated financial statements of HPH Trust for the year ended 31 December 2020.
For purposes of this Offering Circular only, “PRC” and “China” mean the People’s Republic of China, “Mainland” means the PRC excluding Hong Kong, Macau and Taiwan and “Hong Kong” means the Hong Kong Special Administrative Region of the PRC.
HPH Trust publishes its financial statements in Hong Kong dollars (“HK$”). For the convenience of the reader, this Offering Circular presents translations into U.S. dollars (“US$”) of certain Hong Kong dollar amounts at the rate of HK$7.80 = US$1.00. No representation is made that Hong Kong dollars have been, could have been, or could be, converted into U.S. dollars at the rate indicated or at any other rate. On 5 March 2021, the noon buying rate in New York City for cable transfers in foreign currencies, as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”), was HK$7.7642 = US$1.00.
1 INTRODUCTION TO HPH TRUST
HPH Trust is the first publicly traded container port business trust that provides its unitholders (“Unitholders”) with an opportunity to invest in the market leader of the world’s largest trading hub by throughput, Guangdong Province, Hong Kong and Macau of the PRC (collectively, the “Pearl River Delta”), which includes two of the world’s busiest container port cities by throughput – Hong Kong and Shenzhen, the PRC. HPH Trust’s initial public offering was sponsored by Hutchison Port Holdings Limited (“HPH”), a global leader in the container port sector by throughput and a subsidiary of CK Hutchison Holdings Limited (“CKHH”). Listed on the Main Board of the SGX-ST in March 2011, it was also the first entity to launch dual currency trading of its Units in early 2012.
HPH Trust’s investment mandate is principally to invest in, develop, operate and manage deep-water container ports(1) in the Pearl River Delta.
Currently, HPH Trust holds interests in deep-water container ports strategically located in Hong Kong and Shenzhen, the PRC. It operates Hongkong International Terminals (“HIT”), COSCO-HIT Terminals (“COSCO-HIT”), Asia Container Terminals (“ACT”), Yantian International Container Terminals (“YICT”) and Huizhou International Container Terminals (“HICT”) (collectively, the “Portfolio Container Terminals”). In aggregate, the Portfolio Container Terminals has 38 container berths across 647 hectares of land, which delivered a combined throughput of approximately 23.3 million twenty-foot equivalent unit (“TEU”) and 23.7 million TEU in 2019 and 2020, respectively.
HPH Trust’s core port operations are complemented by river ports and ancillary services, which aim to provide customers with seamless logistics supply chain solutions for both imports and exports. HPH Trust holds economic benefits(2) in two river ports in the PRC (collectively, the “River Ports Economic Benefits”), namely Jiangmen International Container Terminals Limited (“Jiangmen Terminal”) and Nanhai International Container Terminals Limited (“Nanhai Terminal”) (collectively, the “River Ports”). It also operates ancillary services via Asia Port Services Limited (“APS”), including container depots, trucking, feeder and shipping agency, HPH E.Commerce Limited (“Hutchison Logistics”), which offers supply chain solutions across rail, sea and land networks, and Shenzhen Hutchison Inland Container Depots Co., Limited (“SHICD”), operator of an inland container depot and warehouse in Shenzhen.
HPH Trust is managed by the Trustee-Manager, which is an indirect wholly-owned subsidiary of CKHH.
Notes: (1) For the purposes of the investment mandate of HPH Trust, a “deep-water container port” means any port that has the ability to accommodate a fully laden vessel with a capacity in excess of 8,000 TEU. (2) The River Ports Economic Benefits represent the economic interest and benefits of the River Ports, including all dividends and any other distributions or other monies payable to HPH or any of its subsidiaries in its capacity as a shareholder of the relevant holding company of the River Ports arising from the profits attributable to the business of the River Ports and all sale or disposal proceeds derived from such businesses, assets, rights and/or liabilities constituting any part of the business of the River Ports as agreed with HPH and any of its subsidiaries.
2 SUMMARY OF THE OFFERING
The Offering
The following is a brief summary of certain terms of this offering. For a more complete description of the terms of the Notes, see the section entitled “Terms and Conditions of the Notes”.
Issuer ...... HPHT Finance (21) Limited
Guarantors...... Hutchison Port Holdings Trust (“HPH Trust”) acting through its trustee-manager from time to time, initially being Hutchison Port Holdings Management Pte. Limited (the “Trustee-Manager” and as guarantor, the “Singapore Guarantor”, which expression shall, where the context so permits, include any Replacement Guarantor (as defined in the terms and conditions of the Notes (the “Conditions”)) and HPHT Limited (the “Hong Kong Guarantor” and, together with the Singapore Guarantor, the “Guarantors” and each a “Guarantor”).
Notes Offered ...... US$500,000,000 2.00 per cent. notes due 2026 unconditionally and irrevocably guaranteed by the Guarantors.
The Notes are being offered to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act (“Regulation S”). See “Subscription and Sale”.
Status of the Notes, Coupons The Notes and the Coupons are direct, unconditional, and Guarantees...... unsubordinated and (subject to provisions of Condition 4 of the Conditions) unsecured obligations of the Issuer and (subject as aforesaid) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.
The payment of the principal and interest in respect of the Notes will be unconditionally and irrevocably guaranteed by the Singapore Guarantor in its capacity as the trustee-manager of the HPH Trust pursuant to a deed of guarantee executed by the Singapore Guarantor (the “Singapore Deed of Guarantee”) and by the Hong Kong Guarantor pursuant to a deed of guarantee executed by the Hong Kong Guarantor (the “Hong Kong Deed of Guarantee”, and together with the Singapore Deed of Guarantee, the “Deeds of Guarantee”). The payment obligations of each Guarantor under its Guarantee (as defined in the Conditions) will constitute direct, unconditional, unsubordinated and (subject to provisions of Condition 4 of the Conditions) unsecured obligations of such Guarantor and (subject as aforesaid) rank, and will rank pari passu with all other outstanding unsecured and unsubordinated obligations of such Guarantor, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.
3 In the event that the Singapore Guarantor resigns or is removed as trustee-manager of HPH Trust subject to and in accordance with the provisions of the trust deed dated 25 February 2011 constituting HPH Trust as amended and supplemented from time to time (the “Trust Deed”) and the BTA (the “Resigning Trustee-Manager”), the rights and obligations of the Resigning Trustee-Manager with respect to the Notes and under the Singapore Guarantee shall be automatically transferred to the trustee-manager replacing the Resigning Trustee-Manager (the “Replacement Trustee-Manager” and the “Replacement Guarantor”) and the Resigning Trustee- Manager shall be automatically released from its obligations with respect to the Notes and under the Singapore Guarantee subject to and in accordance with the BTA and subject to all other applicable laws, without the execution or filing of any papers or any further act on the part of any party, including the Issuer, the Resigning Trustee-Manager, the Replacement Trustee-Manager, the Fiscal Agent and the Paying Agents and without the consent of the Noteholders or the Couponholders.
Issue Price...... 99.863 per cent.
Maturity Date ...... 19 March 2026.
Interest and Interest Payment The Notes will bear interest from and including 19 March 2021 (the Dates...... “Interest Commencement Date”) at the rate of 2.00 per cent. payable semi-annually in arrear on 19 March and 19 September of each year (each an “Interest Payment Date”). The first Interest Payment Date will be 19 September 2021, in respect of the period from and including the Interest Commencement Date to but excluding 19 September 2021. Interest shall be calculated on the basis of a 360 day year and twelve 30 day months.
Limitation of the Singapore The Singapore Guarantor will enter into the Agency Agreement and Guarantor’s Liabilities...... the Singapore Deed of Guarantee only in its capacity as trustee-manager of HPH Trust and not in its personal capacity and all references to the Singapore Guarantor in the Conditions, the Notes, the Coupons, the Agency Agreement and the Deeds of Guarantee (collectively, the “Transaction Documents” and each, a “Transaction Document”) shall be construed accordingly. Accordingly, notwithstanding any provision to the contrary in any Transaction Document, the Singapore Guarantor will assume all obligations under the relevant Transaction Documents only in its capacity as trustee-manager of HPH Trust and not in its personal capacity. Any liability of or indemnity, covenant, guarantee, undertaking, representation and/or warranty given or to be given by the Singapore Guarantor under any relevant Transaction Document is given by the Singapore Guarantor in its capacity as trustee- manager of HPH Trust and not in its personal capacity and any power and right conferred on any receiver, attorney, agent and/or delegate under any relevant Transaction Document shall be limited to the assets of or held on trust for HPH Trust over which the Singapore Guarantor in its capacity as trustee-manager of HPH Trust has recourse and shall not extend to any personal assets of the Singapore Guarantor or to any assets held by the Singapore Guarantor in any other capacity and accordingly the Singapore Guarantor’s liabilities under any relevant Transaction Document shall not be construed as indebtedness on its personal account. Any obligation, matter, act, action or thing required to be done, performed or undertaken or any covenant, representation, warranty or undertaking given by the Singapore Guarantor under any relevant Transaction Document shall only be in connection with matters relating to HPH Trust or the relevant Transaction Documents.
4 Notwithstanding any provision to the contrary in any Transaction Document, the Singapore Guarantor’s obligations under the relevant Transaction Documents will be solely the corporate obligations of the Singapore Guarantor in its capacity as the trustee-manager of HPH Trust and there shall be no recourse against the shareholders, directors, officers or employees of the Singapore Guarantor for any claims, losses, damages, liabilities or other obligations whatsoever with any of the transactions contemplated by the provisions of any Transaction Document.
Notwithstanding any provision to the contrary in any Transaction Document, any legal action or proceedings commenced against the Singapore Guarantor whether in Singapore or elsewhere pursuant to the relevant Transaction Documents shall be brought against the Singapore Guarantor in its capacity as the trustee-manager of HPH Trust and not in its personal capacity.
Covenants...... The Issuer and the Guarantors have agreed to observe certain covenants. See the section entitled “Terms and Conditions of the Notes — Covenants”.
Additional Amounts ...... In the event that certain taxes, duties, assessments or governmental charges of whatever nature are imposed, levied, collected, withheld or assessed by or within the Republic of Singapore (in the case of payments by the Singapore Guarantor), Hong Kong (in the case of payments by the Hong Kong Guarantor), the Cayman Islands (in the case of payments by the Issuer) or the jurisdiction of incorporation of any Replacement Guarantor (as defined in the Conditions) (or, in each case, any political subdivision or taxing authority thereof or therein having power to tax), as the case may be, in respect of payments pursuant to the Notes, the Coupons or the Guarantees, the Issuer or the relevant Guarantor, as the case may be, will, subject to certain exceptions, pay such additional amounts under the Notes, the Coupons or the Guarantees, as the case may be, as will result, after deduction or withholding of such taxes, in the receipt by the Noteholders or Couponholders (each as defined in the Conditions) of such amounts as would have been received in respect of the Notes, the Coupons or the relevant Guarantee, as the case may be, had no such deduction or withholding been required.
Any amounts to be paid on the Notes and the Coupons or under the Guarantees by or on behalf of the Issuer or a Guarantor will be paid net of any deduction or withholding imposed or required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement) (any such withholding or deduction, a “FATCA withholding”). Neither the Issuer, any Guarantor nor any other person will be required to pay any additional amounts in respect of any FATCA withholding.
See the section entitled “Terms and Conditions of the Notes — Taxation”.
5 Early Redemption...... The Notes may be redeemed at the option of the Issuer in whole but not in part with respect to the Notes, at the principal amount thereof plus interest accrued to but excluding the date of redemption, in the event the Issuer or any Guarantor would become obligated to pay certain Singapore, Hong Kong or Cayman Islands taxes in respect of the Notes.
The Notes may, at the option of the Issuer or a Guarantor, be redeemed in whole but not in part, on any date falling after 19 February 2026, at a redemption price equal to the principal amount thereof plus accrued interest to, but excluding, the date fixed for redemption.
See the section entitled “Terms and Conditions of the Notes — Redemption and Purchase”.
Denomination and Form...... The Notes are in bearer form, and in the case of definitive Notes, serially numbered, in minimum denominations of US$200,000 and integral multiples of US$1,000 in excess thereof with Coupons attached on issue.
The Notes will initially be represented by a Temporary Global Note, without interest coupons, which will be deposited on or about the Closing Date with a common depositary for Euroclear and Clearstream. Interests in the Temporary Global Note will be exchangeable for interests in a Permanent Global Note, without interest coupons, on or after 28 April 2021, upon certification as to non-U.S. beneficial ownership. Interests in the Permanent Global Note will be exchangeable for definitive Notes only in certain limited circumstances — see “Summary of Provisions relating to the Notes while in Global Form”.
Governing Law ...... The Agency Agreement, the Notes, the Hong Kong Deed of Guarantee and any non-contractual obligations arising out of or in connection with such documents will be governed by, and will be construed in accordance with, English law. The Singapore Deed of Guarantee will be governed by, and will be construed in accordance with, Singapore law.
Ratings...... The Notes are expected to be rated “Baa1” by Moody’s Investors Services Limited and “A-” by S&P Global Ratings. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation.
Transfer Restrictions ...... No action has been taken by the Issuer or any Guarantor that would, or is intended to, permit a public offer of the Notes in any country or jurisdiction where any such action for that purpose is required. See the section entitled “Subscription and Sale”.
Listing ...... Application will be made to the SGX-ST for the listing and quotation of the Notes on the Official List of the SGX-ST but an application may instead be made to another stock exchange which is: (a) a member of the World Federation of Exchanges; or (b) located in a state that is a member of the Organisation for Economic Co- operation and Development, for permission to deal in and the listing of the Notes. There is no assurance that the application to the SGX-ST for the listing and quotation of the Notes will be approved. For so long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, such Notes will be traded on the SGX-ST in a minimum board lot size of US$200,000.
6 For so long as any of the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer will appoint and maintain a paying agent in Singapore where the Notes may be presented or surrendered for payment or redemption, in the event that any of the Global Notes is exchanged for definitive Notes. In addition, in the event that any Global Notes is exchanged for definitive Notes, an announcement of such exchange will be made by the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying agent in Singapore. See the section entitled “General Information”.
Use of Proceeds...... The net proceeds from the issue of the Notes after deducting fee, commissions and expense will be approximately US$497 million. HPH Trust intends to use the net proceeds of the offering to refinance certain indebtedness owed by subsidiaries of HPH Trust, indebtedness falling due in the near term and indebtedness which would provide an economic benefit to HPH Trust upon early repayment. In the event that HPH Trust determines not to use certain of the proceeds for this purpose, such proceeds will be used for general corporate purposes, including the funding of capital expenditures. See “Use of Proceeds”.
Identification numbers of the ISIN: XS2318334120/Common Code: 231833412. Notes......
Legal Entity Identifier (LEI) of 549300F5U2UH77I50R70. the Issuer: ......
7 SELECTED CONSOLIDATED FINANCIAL INFORMATION OF HPH TRUST
The following tables present summary consolidated financial information of HPH Trust. This information should be read in conjunction with the audited consolidated financial statements for the years ended 31 December 2018, 2019 and 2020 of HPH Trust and related notes thereto, and other historical financial information that appear elsewhere herein.
HPH Trust’s consolidated financial information is prepared and presented in accordance with Hong Kong Financial Reporting Standards (“HKFRS”), issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
The consolidated information for the years ended 31 December 2018, 31 December 2019 and 31 December 2020 has been extracted from HPH Trust’s audited consolidated financial statements for the years ended 31 December 2018, 31 December 2019 and 31 December 2020, previously published in the respective annual reports or announcement of HPH Trust and incorporated by reference in this Offering Circular. Such financial statements have been audited by PricewaterhouseCoopers LLP, Public Accountants and Chartered Accountants, Singapore (“PwC”), as stated in their audit reports dated 12 February 2019, 10 February 2020 and 8 February 2021, respectively.
HPH Trust has adopted Amendments to HKFRS 7, HKFRS 9 and HKAS 39 “Interest Rate Benchmark Reform” which are effective from 1 January 2020 and the amendments provide temporarily relief from applying hedge accounting requirements to hedging relationships directly affected by inter-bank offered rate (IBOR) reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness continued to be recorded in the income statement. The reliefs will cease to apply when the uncertainties arising from interest rate benchmark reform are no longer present. For details, please refer to note 2 of the HPH Trust’s consolidated financial statements for the year ended 31 December 2020.
HPH Trust has early adopted Amendments to HKFRS 16 Leases on COVID-19-related rent concessions for the annual period beginning 1 January 2020. The amendment exempts lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-related rent concessions that reduce lease payments due on or before 30 June 2021. The amendment does not affect lessors. The effect of the early adoption of this amendment was not material to the HPH Trust’s results of financial position.
Financial statements of the Issuer have not been presented since the Issuer’s primary business relates to the financing of HPH Trust’s operations.
The translations of Hong Kong dollar amounts into U.S. dollars were made at the rate of HK$7.80 = US$1.00. No representation is made that Hong Kong dollars have been, could have been, or could be converted into U.S. dollars at the rate indicated or at any other rate.
8 Consolidated Income Statement:
Year ended 31 December Audited Audited Audited 2018 2019 2020 2020 (HK$ in (HK$ in (HK$ in (US$ in millions) millions) millions) millions) Revenue and other income ...... 11,482.6 11,120.9 10,705.8 1,372.5 ------Cost of services rendered ...... (4,143.5) (3,881.6) (3,568.4) (457.5) Staff costs ...... (286.5) (288.0) (256.4) (32.9) Depreciation and amortisation ...... (3,076.0) (3,079.7) (3,054.0) (391.5) Other operating income ...... 129.1 96.4 193.2 24.8 Other operating expenses ...... (553.9) (537.1) (513.3) (65.8) Total operating expenses...... (7,930.8) (7,690.0) (7,198.9) (922.9) Operating profit ...... 3,551.8 3,430.9 3,506.9 449.6 Interest and other finance costs ...... (1,021.8) (1,075.2) (766.3) (98.2) Share of profits less losses after tax of associated companies ...... (106.9) (92.3) (83.5) (10.7) Share of profits less losses after tax of joint ventures ...... 54.3 38.3 73.4 9.4 Impairment of goodwill...... (11,359.0)(1) ——— Impairment of investment in a joint venture .... (930.0)(1) ——— (Loss)/profit before tax ...... (9,811.6) 2,301.7 2,730.5 350.1 Tax...... (434.4) (480.0) (718.0) (92.1) (Loss)/profit for the year...... (10,246.0) 1,821.7 2,012.5 258.0 Allocated as: Profit attributable to non-controlling interests . . . (1,305.3) (1,293.5) (1,181.1) (151.4) (Loss)/profit attributable to unitholders of HPH Trust...... (11,551.3) 528.2 831.4 106.6 (Loss)/earnings per unit attributable to HK cents HK cents HK cents US cents unitholders of HPH Trust ...... (132.60) 6.06 9.54 1.22 HK cents HK cents HK cents US cents Distribution per unit ...... 17.00 11.00 12.00 1.54
Note: (1) Following the asset impairment assessment performed during the year ended 31 December 2018 and in view of the mounting global trade uncertainties, the behavioural changes in multinational corporations caused by the current trade tensions, including accelerating the diversification of production bases outside of the PRC and the effects stemming from the structural changes within the shipping line industry, the Group has recognised non-cash impairment losses of HK$12,289 million for the year ended 31 December 2018.
9 Ratios and Other Information:
Year ended 31 December 2018 2019 2020 Operating Profit before Depreciation and Amortisation (HK$ in millions)...... 6,627.8 6,510.6 6,560.9 Net Debt/Operating Profit before Depreciation and Amortisation...... 3.8 3.6 3.3 Operating Profit before Depreciation and Amortisation/Fixed Costs ...... 6.5 6.1 8.6 Net Debt/Net Total Capital (%) ...... 34.9 34.0 32.1
Operating Profit before — Operating Profit before Depreciation and Amortisation represents Depreciation and operating profit before deducting depreciation and amortisation. Amortisation
Net Debt — Net Debt is defined as total principal amount of bank and other debts, excluding loans from non-controlling interests which are viewed as quasi equity, net of bank balances and cash equivalents and listed equity securities.
Fixed Costs — Fixed Costs consist of interest expenses and other finance costs on all borrowings.
Net Total Capital — Net Total Capital is defined as Net Debt plus total equity and loans from non-controlling interests.
10 Consolidated Statement of Financial Position:
As at 31 December Audited Audited Audited 2018 2019 2020 2020 (HK$ in (HK$ in (HK$ in (US$ in millions) millions) millions) millions) ASSETS Non-current assets Fixed assets ...... 24,629.6 23,789.5 22,839.0 2,928.1 Projects under development...... 996.4 648.1 478.2 61.3 Leasehold land and land use rights ...... 38,373.3 37,047.0 35,843.7 4,595.3 Railway usage rights ...... 11.6 10.8 11.1 1.4 Customer relationships...... 5,836.0 5,501.8 5,167.6 662.5 Goodwill ...... 11,270.0 11,270.0 11,270.0 1,444.9 Associated companies ...... 945.3 952.5 1,032.6 132.4 Joint ventures...... 2,683.8 2,656.7 2,593.1 332.4 Other non-current assets ...... 560.9 560.7 428.1 54.9 Pension assets ...... — — 85.7 11.0 Deferred tax assets ...... 18.5 25.0 19.3 2.5 Total non-current assets ...... 85,325.4 82,462.1 79,768.4 10,226.7 ------Current assets Cash and bank balances(1)...... 6,566.4 7,040.2 7,766.6 995.7 Trade and other receivables...... 3,060.9 3,056.0 3,033.6 388.9 Inventories ...... 103.1 102.4 99.3 12.8 Total current assets...... 9,730.4 10,198.6 10,899.5 1,397.4 ------Current liabilities Trade and other payables ...... 5,928.2 5,783.1 5,517.5 707.4 Bank and other debts ...... 2,517.5 4,097.3 3,990.6 511.6 Current tax liabilities...... 358.2 473.9 278.6 35.7 Total current liabilities ...... 8,803.9 10,354.3 9,786.7 1,254.7 Net current assets/(liabilities)...... 926.5 (155.7) 1,112.8 142.7 Total assets less current liabilities ...... 86,251.9 82,306.4 80,881.2 10,369.4 ------Non-current liabilities Bank and other debts ...... 28,974.2 26,459.1 25,328.2 3,247.2 Pension obligations ...... 56.6 41.7 — — Deferred tax liabilities...... 10,290.9 9,918.2 9,536.0 1,222.5 Other non-current liabilities ...... 262.1 324.1 413.1 53.0 Total non-current liabilities...... 39,583.8 36,743.1 35,277.3 4,522.7 Net assets...... 46,668.1 45,563.3 45,603.9 5,846.7 EQUITY Units in issue ...... 68,553.8 68,553.8 68,553.8 8,788.9 Reserves ...... (41,786.1) (42,702.9) (42,551.8) (5,455.3) Net assets attributable to unitholders of HPH Trust ...... 26,767.7 25,850.9 26,002.0 3,333.6 Non-controlling interests ...... 19,900.4 19,712.4 19,601.9 2,513.1 Total equity...... 46,668.1 45,563.3 45,603.9 5,846.7
Note: (1) Cash and bank balances consisted of HK$42.0 million restricted deposit as at 31 December 2018 and 2019 and the restricted deposit was released after the full repayment of a bank loan during the year ended 31 December 2020.
11 Consolidated Statement of Cash Flows:
Year ended 31 December Audited Audited Audited 2018 2019 2020 2020 (HK$ in (HK$ in (HK$ in (US$ in millions) millions) millions) millions) Operating activities Cash generated from operations ...... 6,055.3 6,369.3 6,608.8 847.3 Interest and other finance costs paid...... (984.7) (999.5) (738.4) (94.7) Tax paid ...... (825.5) (735.2) (1,285.7) (164.8) Net cash from operating activities...... 4,245.1 4,634.6 4,584.7 587.8 ------Investing activities Loan to an associated company...... (40.1) (133.2) (99.9) (12.8) Purchase of fixed assets and projects under development ...... (743.6) (581.4) (463.7) (59.5) Proceeds on disposal of fixed assets...... 22.1 15.8 24.9 3.2 Dividends received from investments...... 48.8 25.7 33.5 4.3 Dividends received from associated companies and joint ventures ...... 78.5 102.5 142.8 18.3 Interest received...... 100.0 147.8 84.9 10.9 Repayment of loans by joint ventures ...... 181.7 1.6 1.6 0.2 Restricted deposit released ...... — — 42.0 5.4 Net cash used in investing activities...... (352.6) (421.2) (233.9) (30.0) Financing activities New borrowings ...... 5,040.8 6,210.0 3,870.8 496.3 Repayment of borrowings...... (6,077.0) (7,219.0) (5,159.3) (661.5) Upfront debt transaction costs and facilities fees of borrowings ...... (8.8) (40.8) — — Principal elements of lease payments ...... — (4.4) (12.7) (1.6) Payment to acquire additional interest in a subsidiary company ...... — — (9.8)(1) (1.3)(1) Distributions to unitholders of HPH Trust ..... (1,709.1) (1,261.4) (810.1) (103.9) Dividends to non-controlling interests ...... (1,340.1) (1,424.0) (1,461.3) (187.3) Net cash used in financing activities...... (4,094.2) (3,739.6) (3,582.4) (459.3) Net changes in cash and cash equivalents. . . (201.7) 473.8 768.4 98.5 Cash and cash equivalents at beginning of the year ...... 6,726.1 6,524.4 6,998.2 897.2 Cash and cash equivalents at end of the year . . 6,524.4 6,998.2 7,766.6 995.7
Note: (1) It represented the cash consideration to acquire 5.27% equity interest in Hutchison Inland Container Depots Limited, a subsidiary of HPH Trust, in July 2020.
12 DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this Offering Circular:
1. Consolidated financial information of HPH Trust for the year ended 31 December 2020, which are extracted from the audited consolidated financial statements of HPH Trust for the year ended 31 December 2020 and included in the financial statement announcement of HPH Trust for the year ended 31 December 2020;
2. Audited consolidated financial statements of HPH Trust for the year ended 31 December 2019, which are contained in the annual report of HPH Trust for the year ended 31 December 2019; and
3. Audited consolidated financial statements of HPH Trust for the year ended 31 December 2018, which are contained in the annual report of HPH Trust for the year ended 31 December 2018.
Copies of these documents may be inspected during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the registered office of the trustee-manager of HPH Trust (initially being the Singapore Guarantor) and the Fiscal Agent. See “General Information”.
In addition, copies of these documents deemed to be incorporated by reference in this Offering Circular may be obtained without charge from the website of the SGX-ST (https://www.sgx.com/).
HPH Trust is not required to, and has not, published any accounts other than those published up to 31 December 2020.
13 RISK FACTORS
Investors should consider, among other things, the factors set forth below, as well as other considerations with respect to investment in a business trust registered under the Business Trusts Act, Chapter 31A of the laws of Singapore and in Singapore/Cayman Islands/Hong Kong corporations not normally associated with investments in the securities of issuers in European countries, the U.S. and other jurisdictions. This Offering Circular includes “forward-looking statements”. Although HPH Trust believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from HPH Trust’s historical results and forward-looking statements are set forth in this Offering Circular, but particularly include those set forth below. All forward-looking statements attributable to HPH Trust or persons acting on its behalf are expressly qualified in their entirety by the investment considerations set forth below.
RISKS RELATING TO THE BUSINESS
HPH Trust’s business is highly dependent on global trading volumes and regional and global economic, financial and political conditions.
HPH Trust may be unfavourably impacted by adverse economic conditions, including uncertainties and instability in global market conditions. For example, as stated in HPH Trust’s financial statement announcement for the year ended 31 December 2018, in view of the mounting global trade uncertainties, the behavioural changes in multinational corporations caused by the current trade tensions, including accelerating the diversification of production bases outside of the PRC and the effects stemming from the structural changes within the shipping line industry, the Group has recognised non-cash impairment losses of HK$12,289 million.
The volume of containers handled by HPH Trust and the use of other port-related services by customers are influenced by the performance and growth of regional and international trading economies. HPH Trust’s core business consists of the management, operations and development of container terminals and the provision of cargo handling and other port-related services. Such services are required by shipping line customers for the transportation of containerised cargo by sea between overseas and regional economies. If key export markets for local exporters experience an economic downturn or recession, export volumes may decrease.
In addition, adverse conditions and volatility in the U.S. and worldwide credit and financial markets, fluctuations in oil and commodity prices, the rising geopolitical and policies risks from rising populist and nationalist tendencies, the political turbulence, particularly in Europe, the Middle East and the Korean peninsula and more recently, the trade dispute between the U.S. and the PRC, the U.S. and European sovereign debt concerns and the general weakness of the global economy have all contributed to the increased uncertainty of global economic prospects.
Furthermore, the last global credit crunch affected not only the banking and financial sectors, but has also adversely affected the global shipping industry, as liquidity problems in the international banking sector have reduced the availability of credit, making the financing of shipments more difficult.
The 2008 global economic crisis and the resultant economic and financial uncertainty continues to have an adverse effect to varying degrees on the global shipping industry. European trade growth remains soft from a combination of government austerity measures, weak consumer sentiment and refugee issues. The 2016 referendum in the UK approving the leaving of the European Union (“Brexit”) posed downside risk to the global economic recovery and may have a potential negative impact on the UK economy. The depreciation of the Pound Sterling may also reduce Britain’s imports from Asia, including the PRC. The UK ceased to be a member state of the European Union on 31 January 2020 and entered into a transition period until 31 December 2020. In December 2020, the UK, the EU and the European Atomic Energy Community concluded the EU-UK Trade and Cooperation Agreement, which is provisionally applicable since 1 January 2021 and awaits ratification by the European Parliament and the Council of the European Union and legal revision before it formally comes into effect. Given the lack of precedent, the effect of Brexit remains uncertain, and Brexit has and may continue to create negative
14 economic impact and increase volatility in the global markets. Decreases in imports and exports or reduced trading patterns caused by these or other circumstances may reduce the number of vessels calling at the ports that HPH Trust operates and may adversely affect the business, financial condition, results of operations and prospects of HPH Trust. These events could adversely affect HPH Trust insofar as they result in:
• decreased throughput and use of ancillary services;
• a negative impact on the ability of the customers of HPH Trust to pay HPH Trust, thus reducing HPH Trust’s cash flows; and
• increased rates of trade credit default by customers.
Other factors impacting the performance and growth of regional and international trading economies may also affect the business of HPH Trust, including but not limited to, unfavourable political conditions, trade restrictions, sanctions, embargoes, boycotts, trade measures, exchange controls, currency fluctuations, labour strikes, trade disputes, weather patterns, crop yields, epidemics, terrorism, changes in seaborne and other transportation patterns and natural disasters.
Adverse developments in global trade issues.
HPH Trust, which holds interests in container ports, is generally exposed to issues affecting the global trade activities. HPH Trust is impacted by actual and threatened trade protectionism borne out of the current global economic environment and issues between individual countries. Any potential cessation, fluctuation or disturbance of world trade may adversely affect HPH Trust’s business and financial condition, results of operations and prospects. The U.S. and China have been involved in disputes over trade barriers that heighten the trade tensions between the two countries. Both countries have implemented tariffs on certain imported products from the other, casting uncertainty over tariffs and creating a barrier to entry for products on both sides. There can be no assurance that the continued trade tension between the U.S. and China will stop escalating and will not have an adverse impact on the business, financial condition, results of operations and prospects of HPH Trust.
The global outbreak of COVID-19 could adversely affect business of HPH Trust.
The outbreak of COVID-19 was recognised as a pandemic by the World Health Organisation on 11 March 2020. In response to the outbreak, governmental authorities in various jurisdictions imposed lockdowns and other restrictions to contain the virus, and various businesses suspended or reduced operations. COVID-19 and policies implemented by governments to deter the spread of the pandemic have had, and will continue to have, an adverse effect on trading and export/import activities and the global economic conditions that HPH Trust’s business is subject to. While the final impact on the global economy and financial markets is still uncertain, the pandemic has resulted in severe global macroeconomic disruptions and financial market volatility.
Risks arising on account of COVID-19 can also threaten the safe operation of the facilities of HPH Trust and cargo shipments, cause disruption in operational activities, loss of lives and injuries and adversely impact the wellbeing of the employees of HPH Trust. These risks could have an adverse effect on the business, cash flows, financial condition, results of operations and prospects of HPH Trust.
Any financial difficulties of the customers could also impact the revenue of HPH Trust. In addition to operational disruptions related to public health measures, the global macroeconomic effects of the COVID-19 pandemic and related impacts on the customers’ business operations may persist for an indefinite period, even after the COVID-19 pandemic has subsided. There may be potential adverse effects of this pandemic on the short- and medium-term business operations and HPH Trust may see the impact of COVID-19 on its financial statements for subsequent periods. The pandemic may also adversely impact the ability to raise additional capital or require additional reductions in capital expenditures that are otherwise needed to implement its strategies. HPH Trust has executed and intend to continue to execute its strategic plans and operational initiatives during the COVID-19 outbreak;
15 however, the aforementioned uncertainties may result in delays or modifications to these plans and initiatives, which could have a material and adverse impact on its business, financial condition, results of operations, cash flows and prospects.
Due to the continuing uncertainty around the duration, breadth and severity of the COVID-19 pandemic, the actions taken to contain the virus or treat its impact, and the impact of economic stimulus measures, the complete impact of the pandemic on HPH Trust’s business, results of operations, financial condition and prospects cannot be reasonably estimated at this time.
HPH Trust’s results of operations may fluctuate significantly as a result of the seasonality of the shipping industry.
The container port industry has historically experienced seasonal variations. This seasonality may result in quarter-to-quarter volatility in the operating results of HPH Trust. Trade volumes in the jurisdictions in which HPH Trust operates tend to be higher in the third and fourth quarters and lower in the first quarter. As a result, the results of operations of HPH Trust may fluctuate significantly and comparisons of its operating results between different periods within a single financial year, or between different periods in different financial years, may not necessarily be meaningful and may not be relied upon as indications of its overall performance.
HPH Trust is dependent on a small number of customers for a significant portion of its business.
Consistent with their high degree of dominance in the shipping industry, major shipping lines contribute and will contribute significantly to the business and revenue of HPH Trust. For the year ended 31 December 2020, the Portfolio Container Terminals’ five and 10 largest customers accounted for 61% and 87%, respectively, of the gross throughput of the Portfolio Container Terminals although none of these customers individually accounted for more than 15% of the gross throughput for all the Portfolio Container Terminals.
The major customers of the Portfolio Container Terminals are global and regional shipping companies with whom the operators of the Portfolio Container Terminals enter into contracts for a duration typically ranging from one to three years that usually contain provisions granting the shipping company an early termination right in certain circumstances. Early termination rights are a common feature in contracts of this nature and afford customers of the Portfolio Container Terminals a degree of leverage with which to negotiate on prices and bulk discounts with HPH Trust. The container shipping industry has undergone significant consolidation over the past years, both internally and with the container terminal industry. In addition, shipping lines, which are major customers of the Portfolio Container Terminals, are increasingly investing in seaports and in their own dedicated terminal facilities and to the extent that these customers make such investments in the Pearl River Delta, they may prefer to use these facilities over the Portfolio Container Terminals. There can be no assurance that, if HPH Trust were to lose all or a significant portion of the business from one or more of these major customers, it would be able to obtain business from other customers in an amount sufficient to replace any such lost revenue or, if HPH Trust were able to obtain business from other customers, that it would be on commercially reasonable terms.
Growth in YICT’s throughput is heavily reliant on continuing growth in international trade between the PRC and the rest of the world.
The PRC economy has grown significantly in the past decade. The container port business in the PRC is heavily dependent on the levels of international trade between the PRC and the rest of the world, which ultimately depends on global economic prosperity and the continued flow of trade between the PRC and the rest of the world. Economic downturns, recession, trade protectionist measures or fears of any of these could significantly reduce international trading volumes, which, in turn, is likely to reduce port throughput and may have an adverse effect on the business, financial condition, results of operations and prospects of HPH Trust. Furthermore, although the government of the PRC (“PRC Government”) has implemented various measures to encourage economic growth and international trade, there is no assurance that the government will not change its current market-based macroeconomic policies, which could adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
16 HPH Trust may face risks associated with debt financing and the debt facilities and the debt covenants could limit or affect HPH Trust’s operations.
HPH Trust is subject to risks associated with debt financing, including the risk that its cash flows will be insufficient to meet the required payments of principal and interest under such financing.
Distributions from HPH Trust to its Unitholders will be computed based on 100% of HPH Trust’s distributable income. As a result of this distribution policy, HPH Trust may not be able to meet all of its obligations to repay any future borrowings through its cash flow from operations. HPH Trust may be required to repay maturing debt with funds from additional debt or equity financing or both. There is no assurance that such financing will be available on acceptable terms or at all.
If HPH Trust defaults under such debt facilities, the creditors may be able to declare a default and initiate enforcement proceedings in respect of the relevant debt and any security provided, and/or call upon any guarantees provided.
If principal amounts due for repayment at maturity cannot be refinanced, extended or paid with proceeds from other capital sources, such as the issuance of new Units, HPH Trust will not be able to repay all maturing debt.
HPH Trust may be subject to the risk that the terms of any refinancing undertaken will be less favourable than the terms of the original borrowings. HPH Trust may also be subject to certain covenants that may limit or otherwise adversely affect its operations. Such covenants may also restrict HPH Trust’s ability to operate its ports or undertake capital expenditures and may require it to set aside funds for maintenance or repayment of security deposits or require HPH Trust to maintain certain financial ratios. The triggering of any of such covenants may have an adverse impact on the business, financial condition, results of operations and prospects of HPH Trust.
If prevailing interest rates or other factors at the time of refinancing (such as the possible reluctance of lenders or investors to make loans to or invest in debt instruments issued by port operators) result in higher interest rates, the interest expense relating to such refinanced indebtedness would increase, thereby adversely affecting HPH Trust’s cash flows.
HPH Trust may engage in hedging transactions which may not offer full protection against interest rate and exchange rate fluctuations.
HPH Trust may enter into hedging transactions to protect itself from the adverse effects of interest rates on floating rate debt and exchange rate fluctuations. However, hedging activities may not have the desired beneficial impact on the operations or financial condition of HPH Trust.
Hedging could fail to protect HPH Trust or may even adversely affect HPH Trust because, among other things:
• the available hedging may not correspond directly with the risk for which protection is sought;
• the duration or nominal amount of the hedge may not match the duration and/or principal amount of the related liability;
• the party owing money in the hedging transaction may default on its obligation to pay;
• the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs HPH Trust’s ability to sell or assign its side of the hedging transaction; and
• the value of the derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value. Downward adjustments of the value of the derivatives used for hedging would reduce the value of HPH Trust.
Hedging involves risks and costs, including transaction costs and these costs increase as the period covered by the hedging increases and during periods of rising and volatile interest rates. There is no assurance that appropriate hedging will be available on commercially acceptable terms or at all.
17 HPH Trust is exposed to credit risk with respect to its customers, and its business could be adversely affected if its customers default on their obligations.
While HPH Trust seeks to limit its credit risk by setting credit limits for individual customers, taking financial guarantees from certain customers and monitoring outstanding receivables, its customers may in the future default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. HPH Trust’s credit risk is increased by the fact that its major customers operate in the same industry and therefore may be similarly affected by changes in economic and other conditions. In addition, HPH Trust is often unable to obtain reliable information regarding the financial condition of many of its customers because they are privately-held companies and have no obligation to make such information publicly available. Delayed payment, non-payment or non-performance on the part of one or more of its major customers, or a number of its smaller customers, could have a material adverse effect on the business, financial condition (including cash flow), results of operations and prospects of HPH Trust.
The Portfolio Container Terminals may require significant periodic capital expenditure beyond the Trustee-Manager’s and/or HPH Trust’s current estimates and HPH Trust may not be able to secure funding.
HPH Trust operates in a capital intensive industry that requires substantial amounts of capital and other long-term expenditures. The Portfolio Container Terminals and ports that may be acquired by HPH Trust in the future may require periodic capital expenditures beyond the Trustee-Manager’s and/or HPH Trust’s current estimates for refurbishment, renovation and improvements. HPH Trust may not be able to obtain additional equity or debt financing, on favourable terms or at all. If HPH Trust is not able to obtain such financing, the appeal of the relevant Portfolio Container Terminals may be affected which could, in turn, have a material adverse effect on the business, financial condition (including cash flow), results of operations and prospects of HPH Trust.
The Trustee-Manager may not be able to successfully implement its investment strategies for HPH Trust.
There is no assurance that the Trustee-Manager will be able to implement its investment strategies for HPH Trust successfully or that it will be able to expand HPH Trust’s portfolio at any specified rate or to any specified size. The Trustee-Manager may not be able to make acquisitions or investments on favourable terms or within a desired time frame.
Even if HPH Trust were able to successfully acquire ports or make investments as desired, there is no assurance that HPH Trust will achieve its intended return on such acquisitions or investments. Acquisitions may cause disruptions to HPH Trust’s operations and divert the Trustee-Manager’s attention away from day-to-day operations which in turn could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust. In addition, HPH Trust may require additional debt and/or equity financing in order to make such acquisitions and investments.
Further, HPH Trust’s investment mandate involves a higher level of risks as compared to a portfolio which has a more diverse range of investments.
If the Amended Right of First Refusal Agreement dated 22 December 2015 entered into between HPH and the Trustee-Manager (the “Amended ROFR Agreement”) is terminated and/or HPH Trust is unable to reach agreement with HPH to purchase ports that are the subject of the Amended ROFR Agreement, such ports could compete with HPH Trust in the future.
Pursuant to the Amended ROFR Agreement, HPH Trust will have the right to acquire from HPH certain greenfield projects in the Pearl River Delta that HPH may decide to develop into deep-water container ports or to acquire deep-water container ports within the investment mandate of HPH Trust that are offered by third parties to HPH. In the event that the Trustee-Manager decides not to take up the development opportunity or the option to acquire such port, HPH would have the right to develop the port itself or acquire the asset from the third party. Under either of these circumstances, the container port(s) at issue would compete with HPH Trust, which may result in increased revenue for HPH at the expense of HPH Trust and which, in turn, could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
18 The rights under the Amended ROFR Agreement were granted to HPH Trust with effect from the listing of HPH Trust on the Main Board of the SGX-ST and will cease immediately upon the occurrence of any of the following events, whichever first occurs: (i) the Trustee-Manager or any of CKHH’s subsidiaries ceases to be the trustee-manager of HPH Trust, (ii) CKHH and/or any of its subsidiaries, alone or in aggregate, ceases to be a controlling shareholder (i.e. holding 15% or more of the voting shares) of the trustee-manager of HPH Trust or (iii) HPH Trust ceases to be listed on the Main Board of the SGX-ST.
There is no guarantee that the level of shareholding of CKHH in the Trustee-Manager required for the continued validity of the Amended ROFR Agreement will be maintained. HPH Trust will not be able to benefit from the Amended ROFR Agreement if the conditions to the Amended ROFR Agreement remaining in full force and effect are not satisfied. The termination of the Amended ROFR Agreement will adversely affect HPH Trust’s ability to implement its acquisition growth strategy and could have a material adverse effect on the business, financial condition (including cash flow), results of operations and prospects of HPH Trust.
Certain construction permits have not been received for YICT.
Yantian International Container Terminals Limited (“YICT (P1&2)”) had not applied for the construction work planning permit, the construction works commencement permit and the inspection acceptance certificate of certain of the facilities in YICT Phase I. Due to the lack of the above permits and certificates and the related title defects for the relevant facilities, there is a legal basis under the relevant PRC laws and regulations for the relevant PRC government authorities to require YICT (P1&2) (i) to apply for all the relevant permits, and to pay up to 10% of the consideration payable under the relevant construction agreement of the relevant facilities for lack of a construction work planning permit and to vacate the relevant facilities for lack of an inspection acceptance certificate; and (ii) to pay up to 2% and 4% of the consideration payable under the relevant construction agreement of the relevant facilities for lack of a construction work commencement permit and for lack of an inspection acceptance certificate respectively.
If the above events occur, the business, financial condition, results of operations and prospects of HPH Trust may be adversely affected.
HPH Trust may be adversely affected by the illiquidity of its investments.
The Trustee-Manager’s investment strategies involve a higher risk level as compared to an investment portfolio that is more diversified. Ports are relatively illiquid investments and their illiquidity may affect HPH Trust’s ability to vary its investment portfolio or liquidate part of its assets in response to changes in economic or other conditions. HPH Trust may be unable to sell its assets on short notice or may be forced to give a substantial reduction in the price that may otherwise be sought for such assets in order to ensure a quick sale. HPH Trust may face difficulties in securing timely and commercially favourable financing in asset-based lending transactions secured by the ports due to the illiquid nature of the assets. These factors could have an adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
HPH Trust is exposed to certain operational risks in respect of the expansion, development and construction of ports.
HPH Trust is subject to a number of construction, financing, operating and other risks beyond the control of HPH Trust, including, but not limited to:
• shortages of materials, equipment and relevant qualified labour;
• breakdown of equipment;
• damage or loss of cargo;
• adverse weather conditions and natural disasters;
19 • accidents;
• labour disputes and disputes with sub-contractors;
• an inability to secure necessary financing arrangements on terms favourable to HPH Trust, if at all;
• changes in demand for the services of HPH Trust;
• inadequate infrastructure, including as a result of failure by third parties to fulfil their obligations relating to the provision of utilities and transportation links that are necessary or desirable for the successful operation of a project;
• failure to complete projects according to specification;
• changes in governmental regulations, or an inability to obtain and maintain project development permission or requisite governmental licences, permits or approvals; and
• downturns in the overall performance of the container and shipping industry.
The occurrence of one or more of these events may negatively affect the ability of HPH Trust to complete its current or future projects on schedule, if at all, or within the estimated budget and may prevent them from achieving the projected revenues, internal rates of return or capacity. HPH Trust cannot give any assurance that the revenues generated from the projects will be sufficient to cover the associated capital expenditure.
In addition, HPH Trust’s ability to dispose of completed projects may be subject to governmental approval, which may result in its bearing the costs of inadequate or poorly performing projects for a prolonged period of time, negatively affecting the business, financial condition, results of operations and prospects of HPH Trust.
Even though HPH Trust will seek to allocate certain project risks to sub-contractors and suppliers to the extent possible, failure to obtain full indemnity from third parties (who may not even have the financial means to meet such an indemnity should it be called upon) may adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
Regulation on price in the PRC may adversely affect HPH Trust.
The PRC relevant government authorities may publish regulations to impose the spectrum of tariff and methods of calculation of charges for certain types of services, for example, berthing and port security charges. Any changes in the highest tariff allowed and calculations of charges may adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
Rising costs of power and fuel may affect HPH Trust.
Power and fuel costs account for a significant portion of the operating expenses of the business portfolio of HPH Trust. Any increase in the costs of power and fuel may adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
HPH Trust is exposed to certain operational risks in respect of the use of contract workers.
A significant portion of the workforce of HPH Trust is contract workers that are provided by agencies. If such agencies are unable to provide HPH Trust with a sufficient number of workers in a timely manner or such workers for any reason are not able to carry out the tasks assigned to them, the operations of HPH Trust may be adversely affected.
20 Upgrading or redevelopment works or physical damage to the Portfolio Container Terminals may disrupt the operations of the Portfolio Container Terminals and collection of income.
The Portfolio Container Terminals may need to undergo upgrading or redevelopment works from time to time to retain their competitiveness and may also require unforeseen ad hoc maintenance or repairs in respect of faults or problems that may develop or because of new planning laws or regulations. The business and operations of the Portfolio Container Terminals may suffer some disruptions and it may not be possible to continue operations on areas affected by such upgrading or redevelopment works.
In addition, physical damage to the Portfolio Container Terminals resulting from fire, severe weather or other causes may lead to a significant disruption to the business and operations of the Portfolio Container Terminals and, together with the foregoing, may impose unforeseen costs on HPH Trust and result in an adverse impact on the business, financial condition, results of operations and prospects of HPH Trust.
Delay may occur in the development and construction of berths and port facilities at YICT.
Although HPH Trust has intentions to develop the expansion plan for Yantian East Port Phase I which consists of three deep-water container berths with an estimated land area of approximately 1.2 million square metres and quay length of approximately 1.47 kilometres that is adjacent to the existing YICT Phase III expansion, there is no assurance that the project will actually proceed under the non-binding heads of agreement that has been executed.
Furthermore, the development of port facilities also faces other risks commonly associated with infrastructure projects, including shortages or delays in the supply of labour, materials and equipment, cost overruns, construction delays, natural disasters, accidents and other unforeseen circumstances. In light of these risks, the construction of the berths may not proceed or be completed as scheduled and cash flow projections of the berths may be subject to unforeseeable changes.
If HPH Trust is not able to develop Yantian East Port Phase I as planned, the business, financial condition, results of operations and prospects of HPH Trust may be adversely affected.
Existing or planned supporting infrastructure near YICT may be closed or relocated, terminated, delayed or not completed.
There is no assurance that existing or planned supporting road, highway and railway infrastructure near YICT will be completed or will not be closed, relocated, terminated or delayed. For example, if the railway infrastructure that connects YICT to other regions of the PRC is closed, YICT may not be able to serve as a gateway for the export of goods manufactured in such other parts of the PRC. Such an occurrence would adversely impact the accessibility of YICT and its appeal and marketability to customers. This, in turn, could have an adverse impact on the business, financial condition, results of operations and prospects of HPH Trust.
Failure in equipment, information, technological systems and support service could affect HPH Trust’s operations.
The operations of HPH Trust are dependent on certain key equipment and machinery, including but not limited to the technological system, the terminal management system, quay cranes and rubber-tyred gantry cranes. Any significant damage to, failure of or operational difficulties with the key components of the container handling operations of HPH Trust could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
HPH Trust’s information and technological systems are designed to enable HPH Trust to use its infrastructure resources as efficiently as possible and to monitor and control all aspects of its operations. Any failure or breakdown in these systems could interrupt normal business operations and result in a significant slowdown in operational and management efficiency for the duration of such failure or
21 breakdown. Any prolonged failure or breakdown could dramatically impact HPH Trust’s ability to offer services to its customers, which could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust. Similarly, any significant delays or interruptions in the loading or unloading of a customer’s cargo could negatively impact HPH Trust’s reputation as an efficient and reliable terminal operator.
HPH Trust is reliant on certain third party vendors to supply and maintain much of its equipment and information and technological systems. In the event that one or more of such third party vendors cease operations or become unable or unwilling to meet the needs of HPH Trust, there is no assurance that HPH Trust would be able to replace any such vendors promptly or on commercially reasonable terms. Delay or failure in finding suitable replacements could adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
In addition, the Trustee-Manager has entered into (i) a global support services agreement with HPH whereby HPH provides HPH Trust with certain services including company secretarial, legal, specialised engineering services, business development, marketing, risk management and treasury services (the “Global Support Services Agreement”) and (ii) a master agreement for provision of information technology, computer and other related services with Hutchison Ports nGen Limited (novated from HPH Information Services Limited (“HPHIS(BVI)”)) and Hutchison Ports nGen Services Limited (previously named HPH Information Services (Hong Kong) Limited) (“HPnS”), both subsidiaries of HPH, for the provision of certain IT support services by them to HPH Trust (the “Master IT Services Agreement”). If the Global Support Services Agreement and/or the Master IT Services Agreement is/are terminated and the Trustee-Manager is unable to engage a suitable replacement for any of the services that are the subject of the Global Support Services Agreement and/or the Master IT Services Agreement, the business, financial condition, results of operations and prospects of HPH Trust could be adversely affected.
HPH Trust may suffer material losses in excess of insurance proceeds or may not be able to put in place or maintain adequate insurance in relation to the Portfolio Container Terminals and its potential liabilities to third parties.
HPH Trust maintains insurance policies covering both its assets and employees on terms common to the industry and in line with what it believes are general business practices in jurisdictions in which it operates. The Portfolio Container Terminals face the risk of physical damage caused by fire, acts of God (such as natural disasters) or other causes, as well as potential public liability claims, including claims arising from the operations of the Portfolio Container Terminals.
In addition, certain types of risks, such as war, terrorist acts and losses caused by the outbreak of contagious diseases, contamination or other environmental breaches, may be uninsurable or not economically feasible to insure. Currently, HPH Trust’s insurance policies for the Portfolio Container Terminals cover natural hazards and other common hazards arising out of the operations of the Portfolio Container Terminals in accordance with customary industry practice in jurisdictions in which it operates. HPH Trust cannot fully insure against all potential hazards incidental to its operations, including losses resulting from war risks and terrorist acts. In addition, accidents and other mishaps may occur from time to time at the Portfolio Container Terminals, which may expose HPH Trust to liability or other claims by its customers and other third parties. Premiums and deductibles for certain insurance policies can increase substantially due to market conditions and, in some circumstances, insurance coverage for certain types of risk may become unavailable or available only for reduced amounts of coverage. If HPH Trust were to incur a significant liability for not being fully insured, its business, financial condition, results of operations and prospects could be adversely affected.
Should an uninsured loss or a loss in excess of insurance proceeds occur, HPH Trust could be required to pay compensation and/or lose capital invested in the affected port as well as anticipated future revenue from that port, which may not be operational. HPH Trust would also be liable for any debt or other financial obligations related to the affected port. There is no assurance that material losses in excess of insurance proceeds will not occur.
22 Losses or liabilities arising from the Portfolio Container Terminals and the Portfolio Ancillary Services (including its operators and intermediate holding companies) or any other liabilities may adversely affect HPH Trust’s earnings and cash flows.
Design, construction or other latent defects in the Portfolio Container Terminals may require additional capital expenditure, special repair or maintenance expenses or the payment of damages or performance of other obligations to third parties. In addition, any liabilities in the operators and intermediate holding companies of the Portfolio Container Terminals and the Portfolio Ancillary Services not known to the Trustee-Manager and HPH Trust, may result in additional expenditure or reduction in profits. If any of the foregoing events occurs, the business, financial condition, results of operations and prospects of HPH Trust may be adversely affected.
The operations of HPH Trust are susceptible to unforeseen catastrophic events and natural disasters.
The Portfolio Container Terminals are located in areas at risk from the effects of natural disasters and other potentially catastrophic events, such as typhoons, floods, wars and riots and the occurrence of any of these events could disrupt the operations of HPH Trust and materially and adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
Severe weather conditions or climatic changes, resulting in conditions such as typhoons, dense fog, low visibility, heavy rains, wind and waves, flooding, may force HPH Trust to temporarily suspend operations based on warnings from national meteorological departments.
There can be no assurance that natural disasters will not occur and result in major damage to the Portfolio Container Terminals or the supporting infrastructure facilities in the vicinity, which could adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
Prolonged disruption of port operations as a result of natural disasters may also entitle HPH Trust’s customers to terminate their contracts. The occurrence of any of the above events could have an adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
HPH Trust could be adversely affected by strikes or work stoppages.
HPH Trust may experience disruptions to its operations due to strikes, labour disputes or other labour unrest, which may adversely affect its business, financial condition, results of operations and prospects. Any disruptions of transportation services due to strikes (such as strikes by truckers), or other events could also impair customers’ ability to use any of the Portfolio Container Terminals. In addition, any labour interruptions in any of the ports that serve as starting points or final destinations for trade lanes calling at the Portfolio Container Terminals could lower the shipping volume passing through the Portfolio Container Terminals. Such disruptions could adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
HPH Trust depends on certain key personnel and the loss of any key personnel may adversely affect its operations.
HPH Trust’s performance depends, in part, upon the continued service and performance of the executive officers of the Trustee-Manager. These key personnel may leave the employment of the Trustee-Manager. The loss of any of these individuals, or the inability to replace such individuals, could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
23 HPH Trust may face risks related to its joint ventures and alliances.
HPH Trust conducts some of its businesses through non-wholly-owned subsidiaries, associated companies, joint ventures and alliances in which it shares control (in whole or in part) with strategic or business partners. There can be no assurance that any of these strategic or business partners will continue their relationships with HPH Trust in the future or that HPH Trust will be able to pursue its stated strategies with respect to its non-wholly-owned subsidiaries, associated companies, joint ventures and alliances. Furthermore, other investors in HPH Trust’s non-wholly-owned subsidiaries, associated companies, joint ventures and alliances may undergo a change of control or financial difficulties which may affect the relevant non-wholly-owned subsidiaries, associated companies, joint ventures and alliances, and which may in turn affect the business, financial condition, results of operations and prospects of HPH Trust.
HPH Trust’s ability to pursue or promptly pursue redevelopment opportunities for re-zoned properties with parties other than HPH is restricted.
In the event and to the extent that the properties on which HPH Trust carries on its port operations have been re-zoned for non-port use, HPH has agreed with HPH Trust pursuant to an amended redevelopment potential agreement (the “Amended Redevelopment Potential Agreement”) to assist HPH Trust to re-develop such properties, given HPH’s experience, track record and capabilities in non-port real estate development (which is not a core competency of HPH Trust).
If there is a change in the land use zoning of any part of the property such that such part of the property can only be used for a purpose other than the purpose permitted by the land grant of the property as at the date of the Amended Redevelopment Potential Agreement, (i) for so long as CKHH and/or its subsidiaries hold 15% or more of the total number of Units in issue or hold 15% or more of the total number of shares in issue in the company that is the trustee-manager of HPH Trust at the time the exclusive right of redevelopment is sought to be exercised, HPH shall have the exclusive right to assist the Trustee-Manager and (ii) in the event CKHH and/or its subsidiaries hold less than 15% of the total number of Units in issue and hold less than 15% of the total number of shares in issue in the company that is the trustee-manager of HPH Trust, HPH shall have the first right to assist the Trustee-Manager in assessing the feasibility of a redevelopment of the relevant part of the property by preparing a redevelopment proposal (including any revisions or new redevelopment proposals) contemplating that all financial risks and burdens relating to the redevelopment shall be assumed solely by HPH and that HPH Trust shall be entitled to participate in economic benefits arising from such development. In exchange for such assistance from HPH, HPH Trust is restricted from pursuing opportunities with parties other than HPH to redevelop or dispose of the re-zoned properties, which may result in HPH Trust being deprived of potentially better alternatives or offers from third parties. In addition, where compliance with the procedure set out in the Amended Redevelopment Potential Agreement does not result in acceptance of any redevelopment proposal of HPH by HPH Trust, not only will HPH Trust be required to cease its port operations on the re-zoned property, but such property will also be left undeveloped. In the event that HPH Trust’s port operations on the re-zoned properties cease and the opportunities to redevelop such properties are not taken up as a result of the operations of the Amended Redevelopment Potential Agreement, HPH Trust’s cash flow may be adversely affected.
While HPH is under an obligation to put up a redevelopment proposal, there is no assurance that after negotiations, HPH and the Trustee-Manager will agree on the proposal. If disagreement is referred to arbitration pursuant to the terms of the Amended Redevelopment Potential Agreement, there is no assurance that the arbitration process (given the nature of dispute resolution proceedings) will not be delayed, notwithstanding the parties’ respective obligations to use their best endeavours to conduct such arbitration process expeditiously. During the time of such arbitration, HPH Trust’s cash flow may be adversely affected.
24 The arrangement in relation to the Hong Kong Seaport Joint Operating Alliance is subject to the Commitments accepted by the Competition Commission of Hong Kong (“Competition Commission”).
The objective of the Hong Kong Seaport Joint Operating Alliance between HIT, COSCO-HIT, ACT and Modern Terminals Limited (“MTL”) (“HK Seaport Alliance”) is to establish a long-term collaboration which aims to further enhance efficiencies, increase utilisation and improve the value proposition of Hong Kong to customers, thereby enabling Hong Kong to be more competitive.
The HK Seaport Alliance commenced operations progressively in 2019. The Competition Commission conducted an investigation into whether the arrangement is in compliance with the Competition Ordinance (Chapter 619 of the Laws of Hong Kong, “Competition Ordinance”), which ended in October 2020 with the acceptance by the Competition Commission of commitments offered by HPHT Limited (on behalf of HIT, COSCO-HIT and ACT) and MTL (the “Commitments”). Pursuant to the Commitments, which became effective on 30 October 2020, HPHT Limited and MTL have agreed to comply with a number of obligations, which include price caps and maintaining service levels, that will remain in place for up to eight years (and, for one of the service level obligations, for the duration of the HK Seaport Alliance). Compliance with the Commitments will be monitored by a monitoring trustee on behalf of the Competition Commission. Where the Competition Commission considers that the Commitments have not been complied with, it may withdraw the acceptance of Commitments and commence a new investigation or bring proceedings before the Competition Tribunal, as part of which it may seek a number of orders, including the imposition of a pecuniary penalty and/or an order to unwind or terminate the HK Seaport Alliance. If any of the foregoing events occurs, the business, financial condition, results of operations and prospects of HPH Trust may be adversely affected.
RISKS RELATING TO THE PORT INDUSTRY
HPH Trust’s inability to maintain and renew concession agreements or government approvals may adversely affect its operations.
Substantially all terminal operations in the container terminal industry are conducted pursuant to long-term operating concessions or leases entered into between a terminal operator and the owner of the land on which the port is situated, typically a government entity. Concession agreements often contain clauses that allow the owner of the land on which the port is situated to cancel the agreement or impose penalties if specified obligations are not fulfilled. Similarly, because many of the counterparts to concession agreements are government entities, HPH Trust is subject to the risk that concession agreements may be cancelled because of political, social or economic instability or conditions. Ports are often viewed by governments as critical national assets and sentiment changes may affect port concessions. There can be no assurance that one or more of the existing concession agreements will not be prematurely cancelled or that HPH Trust will not be penalised, with or without cause, by the applicable counterparty.
In advance of the expiration of a concession agreement, the owner of the land on which the port is situated will typically agree to renew the concession with the existing concessionaire, but often only after significant renegotiation that usually involves, among other things, a commitment on the part of the concessionaire to make a capital expenditure with respect to the relevant operation. There can be no assurance that the concession agreements will be renewed upon their expiration on commercially reasonable terms, if at all, or that HPH Trust would be the winning bidder in any re-tender of one or more of the existing concessions should the relevant port owner elect not to renew the relevant concession with HPH Trust.
In the PRC, terminal operations in the container terminal industry are conducted pursuant to approval from the PRC Government. YICT (P1&2), Yantian International Container Terminals (Phase III) Limited (“YICT (P3)”) and Shenzhen Yantian West Port Terminals Limited (“YWP”) operate YICT based upon the port operation permits issued by the port authority and approvals from the National Development and Reform Commission and the Ministry of Commerce. The Port Law of the PRC and other relevant regulations authorise the port authority to impose penalties or even revoke the port operation permits if an enterprise engaging in port operation violates certain specified obligations. HPH Trust is subject to the risk that the port operation approvals may be cancelled or changed by the PRC Government due to political, social, military, economic instability or conditions.
25 The operation terms of YICT (P1&2), YICT (P3) and YWP have been specified in their current business licences. Any extension of such operation terms will be subject to the approval of the PRC Government. There can be no assurance that the operation terms of YICT (P1&2), YICT (P3) and YWP will be automatically renewed upon their expiry.
HPH Trust relies on security procedures carried out at other port facilities and by its shipping line customers, which are beyond its control.
HPH Trust inspects the physical condition and the seals of containers that enter the Portfolio Container Terminals in accordance with its own practice and the inspection procedures prescribed by, and under the authority of, the governmental body charged with oversight of the relevant port. HPH Trust also relies on the security procedures carried out by shipping line customers and the port facilities that containers have previously passed through to supplement its own inspection to varying degrees.
However, there can be no assurance that the cargo that passes through the Portfolio Container Terminals will not be affected by breaches in security or acts of terrorism, either directly or indirectly, in other areas of the supply chain, which would have an impact on HPH Trust. A security breach or act of terrorism that occurs at one or more of the facilities, or at a shipping line or other port facility that has handled cargo prior to the cargo arriving at the port facilities of HPH Trust, could subject HPH Trust to significant liability, including the risk of litigation and loss of goodwill.
In addition, a major security breach or act of terrorism that occurs at one of the facilities or one of HPH Trust’s competitors’ facilities may result in a temporary shutdown of the container terminal industry and/or the introduction of additional or more stringent security measures and other regulations affecting the container terminal industry, including HPH Trust. The costs associated with any such outcome could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
Additional security requirements may increase the operating costs and restrict HPH Trust’s ability to conduct its ports business.
Various international bodies and governmental agencies and authorities have implemented numerous security measures that affect container terminal operations and the costs associated with such operations. Examples of security measures include the International Ship and Port Facility Security Code, which was implemented in 2004, and, to the extent that the Portfolio Container Terminals handle cargo destined for the United States, the global security initiatives emanating from the US Safe Ports Act of 2006, specifically the Container Security Initiative and the Secure Freight Initiative. Failure to comply with the security requirements applicable to HPH Trust or to obtain relevant security-related certifications may, among other things, prevent certain shipping line customers from using the facilities of HPH Trust and result in higher insurance premiums, which could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
The costs associated with existing and any additional or updated security measures will negatively affect the operating income of HPH Trust to the extent that HPH Trust is unable to recover the full amount of such costs from its customers, who generally also have faced increased security-related costs. Similarly, additional security measures that require HPH Trust to increase the scope of its screening procedures may effectively reduce the capacity of, and increase congestion at, the Portfolio Container Terminals, which may negatively affect the business, financial condition, results of operations and prospects of HPH Trust.
As a result of terrorist activities and increased security concerns, there is a global move towards increased inspection procedures and tighter import/export controls and safety regulations. If the compliance costs of any new regulations or procedures cannot be recovered through higher ports fees and charges, the operating margins of HPH Trust may be adversely affected.
26 HPH Trust and its customers are subject to regulations that govern operational, environmental and safety standards.
HPH Trust’s terminal services are conducted under licences, concessions, permits or certificates granted by the applicable regulatory body in the PRC and Hong Kong. Failure to comply with relevant laws and regulations may result in financial penalties or administrative or legal proceedings against HPH Trust, including the revocation or suspension of its concessions or licences. If any of HPH Trust’s concessions, licences, permits or certificates are revoked, suspended or amended, the business, financial condition, results of operations and prospects of HPH Trust may be adversely affected.
HPH Trust is also required to comply with various environmental and safety standards applicable under the respective relevant laws and regulations in the PRC and Hong Kong. In addition, organisations and government entities may enact certain rules and regulations. These standards may become increasingly more burdensome and may require HPH Trust to incur significant capital expenditure or other obligations. If HPH Trust fails to comply with any of these standards, it may be subject to penalties and other sanctions and its operations in the relevant jurisdiction or jurisdictions may be adversely affected.
HPH Trust may handle goods that are hazardous, which could result in spills and/or environmental damage.
Certain of HPH Trust’s customers are involved in the transportation of hazardous materials. The transportation of these, which would be handled by HPH Trust, such as petroleum or chemicals, is subject to the risk of leaks and spills, causing environmental damage. Furthermore, customers may ship undeclared hazardous cargo to avoid the additional surcharge. Regulations also generally restrict the handling or storage of certain amounts of specified hazardous chemicals, some of which are handled and stored by the Portfolio Container Terminals. Although HPH Trust believes that the Portfolio Container Terminals do not handle or store these hazardous chemicals in quantities above the specified limits, there can be no assurance that they have not in the past or will not in the future violate applicable environmental regulations. Violations of environmental regulations may subject HPH Trust to fines and penalties or result in the closure or temporary suspension of its operations. If HPH Trust is found to have violated environmental regulations because of the cargo handled and stored or is required to discontinue handling such cargo or to close or suspend any of its operations, its business, financial condition, results of operations and prospects could be materially adversely affected.
The imposition or increase in the level of trade barriers, restrictions on exports or imports or trade disputes with principal trading partners of the PRC may adversely affect HPH Trust.
Developed countries may impose tariffs or non-tariff barriers to restrict the flow of imported products into their local markets. Such trade barriers or any trade dispute with the principal trading partners of the PRC may hinder international trade and the volume of shipment, which may in turn adversely affect the business, financial condition, results of operations and prospects of HPH Trust.
The Portfolio Container Terminals may face increased competition from other ports.
The income from, and market value of, the Portfolio Container Terminals may be dependent on their ability to compete against other ports in the region in attracting and retaining customers. The attractiveness of a port is dependent on factors such as location, facilities, supporting infrastructure, service and price. An increase in the number of ports and enhancement in port capacity in the Pearl River Delta, the widening of navigation channels, such as Tonggu Channel, or the enhancement of transport infrastructure such as the Hong Kong-Zhuhai-Macao Bridge may reduce the competitiveness of the Portfolio Container Terminals, which could have a material adverse effect on the revenue generated by the Portfolio Container Terminals. If, subsequent to the issue of the Notes, competing ports are built in the Pearl River Delta or substantially upgraded with superior facilities and supporting infrastructure and services, the revenue from the Portfolio Container Terminals could be reduced. In addition, competitors may offer lower tariffs than those offered by the Portfolio Container Terminals, which may lead to a decrease in the Portfolio Container Terminals’ market share or volume of containers handled, or increased price competition, in each case, adversely affecting HPH Trust’s cash flows, operating margins and profitability.
27 The PRC port industry is a highly regulated industry.
The PRC port industry is highly regulated. Operators are required to obtain a port operation licence, which has to be renewed every three years (which requires certain requirements to be fulfilled), as well as to comply with strict regulations in respect of, among other things, operational management, supervision, inspection and the loading, unloading and storage of hazardous goods.
Although HPH Trust does not expect to have any difficulties in obtaining or renewing its port operation licences, there is no assurance that future applications to obtain or to renew such licences will always be approved. Any failure by HPH Trust to obtain or renew its port operation licence would have a material adverse effect on its business, financial condition, cash flows and results of operations.
Relaxation of China’s cabotage rules may affect Hong Kong port industry.
China’s cabotage rules reserve the carriage of cargo between China’s ports for China-flagged vessels or vessels registered in China. Foreign-flagged vessels are not allowed to conduct coastal shipping of cargo between China’s ports. While these rules prevent foreign-owned or foreign-flagged ships undertaking domestic maritime transport within Mainland China, they do not apply to transport between Hong Kong (as a Special Administrative Region) and other ports in Mainland China, thereby giving Hong Kong an advantage over ports in Mainland China for international transhipment. In 2013, China’s cabotage rules were relaxed in the Shanghai Free Trade Zone. Chinese-owned but foreign- flagged vessels are now allowed to transport goods between the Shanghai Free Trade Zone and other China’s ports. There is no assurance that the Chinese government will not extend the relaxation of the cabotage rules to other domestic ports or free trade zones. Further relaxation on the cabotage rules could affect the attractiveness of Hong Kong as an international transhipment hub and may lead to significant decrease in Hong Kong’s transhipment volumes. This could in turn have a material adverse effect on HPH Trust’s business, financial condition, cash flows and results of operations.
The port industry is susceptible to cybersecurity risks.
Cyber attacks, including through the use of malware, computer viruses, denial of services attacks, credential harvesting and other means for obtaining unauthorised access to or disrupting the operation of HPH Trust’s networks and systems and those of its customers, suppliers, vendors and other service providers, could have an adverse effect on HPH Trust’s business. Cyber attacks may cause equipment failures, loss of information, including sensitive personal information of customers or employees, or valuable technical, commercial and marketing information, as well as disruptions to HPH Trust’s or its customers’ operations. Cyber attacks against companies have increased in frequency, scope and potential harm in recent years. Further, the perpetrators of cyber attacks are not restricted to particular group or persons. These attacks may be committed by company employees or external person operating in any geography, including jurisdictions where law enforcement measures to address such attacks are unavailable or ineffective, and may even be launched by or at the order of nation states. The preventive actions HPH Trust takes to reduce the risks associated with cyber attacks, including protection of its systems and networks, may be insufficient to repel or mitigate the effects of a major cyber attack.
The inability to operate HPH Trust’s networks and systems or those of its customers, suppliers, vendors and other service providers as a result of cyber attacks, even for a limited period of time, may result in significant expenses to HPH Trust. The costs associated with a major cyber attack on HPH Trust could include increased expenditures on cybersecurity measures and the use of alternate resources, lost revenues from business interruption and litigation. The potential costs associated with these attacks could exceed the insurance coverage HPH Trust maintains. In addition, a compromise of security or a theft or other compromise of valuable information, such as financial data, sensitive or private personal and/or commercial information, could result in lawsuits and government claims, investigations or proceedings. Any of these occurrences could damage HPH Trust’s reputation, adversely impact customer and investor confidence, and could materially and adversely affect HPH Trust’s financial condition, cash flows and results of operations.
28 RISKS RELATING TO THE CAYMAN ISLANDS, HONG KONG, THE PRC AND SINGAPORE
The PRC legal system is in the process of continuous development and has inherent uncertainties that could limit the legal protections available to HPH Trust in respect of its PRC operations.
As YICT is located in the PRC, its operations are governed by laws and regulations in the PRC. The PRC legal system is based on written statutes and prior court decisions are non-binding. However, the Supreme People’s Court can issue “Judicial Explanations” which can be cited and used by lower courts in its decisions or judgments. Since 1979, the PRC Government has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organisation and governance, commerce, taxation, trade and cybersecurity, with a view to developing a comprehensive system of commercial law. However, as these laws and regulations are continually evolving in response to changing economic and other conditions, they may be subject to publication of additional implementing regulations and guidelines, and because of the limited volume of published cases and their non-binding nature, any particular interpretation of PRC laws and regulations may not be definitive. In addition, the cost of HPH Trust and its subsidiaries in complying with new laws may be material and could materially and adversely affect HPH Trust’s financial condition, cash flows and results of operations.
Furthermore, the local people’s congresses and local governmental authorities in many provinces and cities also promulgate various local regulations or local rules. There may be uncertainties in the interpretation and application of these laws, administrative regulations, departmental rules, local regulations and local rules.
The Portfolio Container Terminals and the HPH Trust’s business portfolio are located in, or operate in, the PRC and Hong Kong and therefore will be subject to PRC and Hong Kong laws and policies, and political and economic conditions in the PRC and Hong Kong.
The Portfolio Container Terminals are situated in Hong Kong and the PRC. Therefore, HPH Trust’s financial position and the results of HPH Trust’s operations will be affected by the general state of the Hong Kong and the PRC economies and changes in the Hong Kong and the PRC regulatory environments. HPH Trust has limited control over any of these factors, for example, the Hong Kong economy experienced considerable volatility during the late 1990s and from 2000 to 2003, and political unrest in 2019 and 2020 (see “Civil unrest in Hong Kong could have an adverse impact on HPH Trust’s business, financial condition, operating results and prospects.” below). There can be no assurance that such events will not happen again in the future (or, if any such events are still continuing, such events will subside in the near future), which may have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust. The value of the Portfolio Container Terminals may be adversely affected by future policies of these governments, an economic downturn in Hong Kong or the PRC, including a slowdown of gross domestic product growth, rise in unemployment rate, inflation, changes in interest rates, political upheavals, natural disasters, insurgency movements, riots, local laws and external tensions with neighbouring countries.
Civil unrest in Hong Kong could have an adverse impact on HPH Trust’s business, financial condition, operating results and prospects.
Civil unrest and an uncertain political environment in Hong Kong may impact Hong Kong’s economy and result in an economic slowdown or downturn. Protests or demonstrations causing disruption to businesses and commercial activities, such as the protests in 2019 and 2020 relating to or arising from the proposed amendments to the extradition law, may adversely impact consumer confidence, dampen consumer spending and affect overall business activity in Hong Kong, which in turn may have a negative impact on the imports and exports of Hong Kong.
29 The laws, regulations and accounting standards in the Cayman Islands, Singapore, Hong Kong and the PRC may change.
HPH Trust may be affected by the introduction of new or revised legislation, regulations or accounting standards. Accounting standards in the Cayman Islands, Singapore, Hong Kong and the PRC are subject to change as they are further aligned with international accounting standards. The financial statements of HPH Trust may be affected by the introduction of such revised accounting standards. The extent and timing of these changes in accounting standards are unknown and subject to confirmation by the relevant authorities.
There is no assurance that these changes will not:
• have a significant impact on the presentation of HPH Trust’s financial statements;
• have a significant impact on HPH Trust’s results of operations;
• have an adverse effect on the ability of the Trustee-Manager to carry out HPH Trust’s investment mandate; and/or
• have an adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
The HKICPA is continuing its policy of issuing HKFRS amendments and interpretations which fully converge with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). The Commission of the European Communities has issued a report confirming that Hong Kong is identified as a region that has fully adopted or implemented IFRS. HKICPA has issued and may in the future issue more new and revised standards, amendments and interpretations, including those required to conform to standards, amendments and interpretations issued from time to time by the IASB. Such factors may require adoption of new accounting policies. There can be no assurance that the adoption of new accounting policies or new HKFRS will not have a significant impact on the financial statements of HPH Trust.
HPH Trust may be affected by the introduction of new or revised legislation, regulations, guidelines or directives affecting Registered Business Trusts.
HPH Trust may be affected by the introduction of new or revised legislation, regulations, guidelines or directives affecting business trusts registered with the Monetary Authority of Singapore (“Registered Business Trusts”). There is no assurance that new or revised legislation, regulations, guidelines or directives will not adversely affect Registered Business Trusts in general or HPH Trust specifically.
There may be political risks associated with doing business in Hong Kong.
A significant part of HPH Trust’s facilities and operations are currently located in Hong Kong. Hong Kong is a Special Administrative Region of the PRC, with its own executive, judicial and legislative branches. Hong Kong enjoys a high degree of autonomy from the PRC under the principle of “one country, two systems”. However, there can be no assurance that Hong Kong will continue to enjoy the same level of autonomy, and any deviation from the “one country, two systems” principle, may adversely affect HPH Trust’s revenues and HPH Trust’s unit prices. There can be no assurance that the political and legal environment in Hong Kong will remain favourable to HPH Trust’s business in the future. Future geopolitical or domestical political instability or a sustained slowdown in domestic and global economic activities as a result of such instability could have a material adverse effect on the business, financial condition, results of operations and prospects of HPH Trust.
30 HPH Trust’s results of operations could be affected by changes in foreign exchange regulations in the PRC.
The lawful currency of the PRC is Renminbi, which is subject to foreign exchange controls and is not at the current time freely convertible into foreign currency. The State Administration of Foreign Exchange (“SAFE”) of the PRC, under the authority of People’s Bank of China, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.
Transactions involving conversion between foreign currencies and Renminbi under the capital account of HPH Trust’s PRC subsidiaries, including principal payments in respect of foreign currency denominated obligations, are subject to significant foreign exchange controls and the approval of SAFE. There is no assurance that the current government policies regarding conversion of Renminbi into foreign currencies will continue in the future.
The ability of companies of HPH Trust that are incorporated in the PRC to declare dividends may be limited by trapped cash.
Under PRC law, a PRC enterprise is only permitted to declare and repatriate dividends on after tax earnings after deducting amounts for mandated reserves, which include: (i) an enterprise reserve; (ii) an enterprise development reserve; and (iii) reserves for employee welfare for Sino-foreign joint ventures, with the amounts deducted to be determined by the board of directors of each such Sino-foreign joint venture, and (iv) a 10% capital reserve (totalling up to 50% of the registered capital of each such company) for all limited liability companies other than Sino-foreign joint ventures. These reserve funds, if put aside discretionally by the board of directors of a Sino-foreign joint venture or mandatorily by law, cannot be repatriated even if an enterprise has no losses or likely prospect of losses or these reserve funds are not needed for their prescribed purpose. Additionally, dividends may only be paid from after tax earnings after taking into account depreciation expenses, which is a non-cash charge. These reserves and depreciation charges potentially create a significant pool of trapped cash that cannot be used to pay dividends. If there are not enough retained earnings, the amount of dividends the PRC enterprises can declare will be limited.
HPH Trust may be exposed to various types of taxes in Singapore, the PRC, the Cayman Islands, the British Virgin Islands (“BVI”) and Hong Kong.
The income and gains derived by HPH Trust, directly or indirectly, from its ports and ancillary services in Hong Kong and the PRC may be exposed to various types of taxes in Singapore, the PRC, the Cayman Islands, the BVI and Hong Kong. These include income tax, withholding tax, capital gains tax and other taxes specifically imposed on the ownership of assets. While HPH Trust intends to manage the taxation in each of these countries or regions efficiently, there can be no assurance that the desired tax outcome will necessarily be achieved. In addition, the level of taxation in each of these countries or regions is subject to changes in laws and regulations and such changes, if any, may lead to an increase in tax rates or the introduction of new taxes. All these factors may adversely affect the cash flow of HPH Trust.
There is uncertainty regarding PRC taxation.
The PRC Corporate Income Tax Law (“CIT Law”) provides that withholding tax at the rate of 10.0% is applicable to dividends and other distributions payable to shareholders who are “non-resident enterprises”. The CIT Law defines a “non-resident enterprise” as an enterprise established in accordance with the laws of foreign countries (regions) and with its place of effective management located outside the PRC, but which has an establishment or a place of business in the PRC; or an enterprise which, though having no establishment or place of business in the PRC, derives income that is sourced from the PRC. Relevant international agreements provide that withholding tax at the reduced rate of 5.0% is applicable to dividends payable to beneficial owners of the dividends from the PRC entities if certain requirements are met. If the comprehensive double taxation agreement with Hong Kong does not apply to dividends paid by PRC entities to the Hong Kong holding companies held by HPH Trust, the withholding tax rate will be 10.0% instead of 5.0%.
31 The PRC taxation system may undergo changes which may affect the return on investment.
The PRC income tax system has an increased focus on international tax, resulting in the issuance of various tax circulars, many of which may be interpreted differently by different local tax offices and may result in unforeseen additional tax liabilities. Differences of opinion may not be resolved in a timely manner.
HPH Trust and/or YICT may be unable to comply with the conditions for various tax exemptions and/or tax rulings obtained, or the tax exemptions and/or tax rulings may no longer apply.
HPH Trust may, from time to time, obtain various tax exemptions and/or tax rulings from the Inland Revenue Authority of Singapore (“IRAS”) or the Ministry of Finance, Singapore. The approvals for these tax exemptions and/or tax rulings may be subject to HPH Trust satisfying the stipulated conditions. In particular, HPH Trust has obtained an exemption from Singapore income tax under Section 13(12) of the Income Tax Act on dividends it receives from its wholly-owned subsidiary HPHT Limited throughout the life of HPH Trust subject to stipulated conditions being met. Where these conditions are not satisfied, or are no longer satisfied by HPH Trust, the tax exemptions and/or tax rulings may not apply. The approvals may also be granted based on the facts presented to the IRAS and/or the Ministry of Finance, Singapore. Where the facts turn out to be different from those represented to the IRAS and/or the Ministry of Finance, Singapore, or where there is a subsequent change in the tax laws, the tax exemptions and/or tax rulings may not apply.
YICT has also obtained or may obtain various tax exemptions and preferential tax treatment from the Ministry of Finance and The State Administration of Taxation in the PRC in accordance with applicable Value-Added Tax (“VAT”) Regulation and/or Corporate Income Tax (“CIT”). Currently, YICT has obtained VAT exemptions for the auxiliary logistics services (storage services excluded) provided to overseas companies in accordance with Cai Shui [2016] No.36. The research and development expenses of YICT (P1&2), YICT (P3) and YWP shall be eligible for a 50% super-deduction in the calculation of CIT. The approvals for tax exemptions and preferential tax treatment are subject to legal or regulatory requirements and the stipulated conditions being met. Where YICT fails to meet these requirements and/or conditions or where there is a subsequent change in PRC tax laws, the tax exemptions and/or preferential tax treatment may not apply.
RISKS RELATING TO THE NOTES
Holding Company Structure and Structural Subordination.
The Issuer is a wholly-owned subsidiary of HPH Trust and its primary purpose is to act as a financing subsidiary of HPH Trust. Each of the Guarantees is solely an obligation of the Guarantor providing such guarantee. The Guarantors’ ability to make payments to holders of the Notes and the Coupons pursuant to the Guarantees in respect of the Notes and the Coupons depends largely upon the Guarantors’ receipt of dividends, distributions, interest or advances from wholly or partially owned subsidiaries and associates of HPH Trust. The ability of the subsidiaries and associates of the Guarantors to pay dividends may be subject to applicable laws. Payments on the Notes are structurally subordinated to all existing and future liabilities and obligations of each of HPH Trust’s subsidiaries (other than the Issuer and the Hong Kong Guarantor) and these subsidiaries had an aggregate principal amount of HK$29,420.0 million (US$3,771.8 million) of bank and other debts outstanding as of 31 December 2020. Claims of creditors of such companies will have priority as to the assets of such companies over HPH Trust and their creditors, including holders of the Notes and the Coupons seeking to enforce the Guarantees. The Conditions do not contain any restrictions on the ability of the Issuer, the Guarantors, HPH Trust or their subsidiaries to incur additional indebtedness. In addition, the terms and conditions of the Notes contain a cross acceleration provision, but that provision is limited to the Issuer, any Guarantor and any Principal Subsidiary (as defined therein) (other than Listed Principal Subsidiaries (as defined therein) and their Subsidiaries) and contains certain carve outs for, among others, project financing indebtedness and secured limited recourse financing indebtedness. For further details, see “Terms and Conditions of the Notes — Events of Default”.
32 The Issuer or the Guarantors may be unable to redeem the Notes.
In certain circumstances, the holders of the Notes may require the Issuer or the Guarantors to redeem all of the holders’ Notes. If such an event were to occur, or at maturity of the Notes, no assurance can be given that the Issuer or the Guarantors will have enough funds or would be able to arrange financing to pay the redemption amount for all tendered Notes. The Issuer’s or the Guarantors’ ability to redeem the Notes in such event may be limited by law or the terms of other debt instruments. The Issuer or the Guarantors may be required to refinance the debts of HPH Trust in order to make such payments.
The Notes may not be a suitable investment for all investors.
Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
(a) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;
(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments in respect of the Notes is different from the potential investor’s currency;
(d) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and
(e) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
The Notes and the Guarantees are not secured.
The Notes and Coupons constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 4 of the Conditions) unsecured obligations of the Issuer and (subject as aforesaid) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights. Subject to the Conditions of the Notes, the payment obligations of each Guarantor under its Guarantee constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 4 of the Conditions) unsecured obligations of such Guarantor and (subject as aforesaid) rank, and will rank pari passu with all other outstanding unsecured and unsubordinated obligations of such Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.
Accordingly, on a winding-up of any Guarantor and/or HPH Trust and/or the Issuer at any time prior to maturity of any Notes, the Noteholders and the Couponholders will not have recourse to any specific assets of such Guarantor and the Issuer, HPH Trust or their respective subsidiaries and/or associated companies (if any) as security for outstanding payment or other obligations under the Notes, the Coupons and/or the relevant Guarantee owed to the Noteholders and the Couponholders and there can be no assurance that there would be sufficient value in the assets of such Guarantor and/or HPH Trust and/or the Issuer, after meeting all claims ranking ahead of the Notes, the Coupons and/or the relevant Guarantee, to discharge all outstanding payment and other obligations under the Notes, the Coupons and/or the relevant Guarantee owed to the Noteholders.
33 Enforcement of the Singapore Guarantee is subject to the Singapore Guarantor’s right of indemnity out of the properties and assets of HPH Trust.
Noteholders should note that the Singapore Guarantee is given by the Singapore Guarantor in its capacity as trustee-manager of HPH Trust only, and not HPH Trust since HPH Trust is not a legal entity, nor by the Singapore Guarantor in its personal capacity. Noteholders and Couponholders should note that under the terms of the Singapore Guarantee, they shall only have recourse in respect of the properties and assets of HPH Trust and not the Singapore Guarantor personally nor any other properties held by the Singapore Guarantor as trustee of any trust other than HPH Trust. Further, Noteholders and Couponholders can only gain access to the assets and properties of HPH Trust through the Singapore Guarantor’s right of indemnity as trustee-manager out of the assets and properties of HPH Trust. Accordingly, any claim of the Noteholders and the Couponholders to the assets and properties of HPH Trust is derivative in nature and such right of indemnity of the Singapore Guarantor may be limited by or lost through the failure of the Singapore Guarantor to exercise the degree of care and diligence required of a trustee-manager of a registered business trust.
The Guarantees provided by the Guarantors will be subject to certain limitations on enforcement and maybe limited by applicable laws or subject to certain defences that may limit its validity and enforceability.
Enforcement of the Guarantees in respect of the Notes would be subject to certain generally available defences. Local laws and defences may vary, and may include those that relate to corporate benefit (ultra vires), fraudulent conveyance or transfer (actio pauliana), voidable preference, financial assistance, corporate purpose, liability in tort, subordination and capital maintenance or similar laws and concepts. They may also include regulations or defences which affect the rights of creditors (including trust creditors) generally. Also, in the case of insolvency of HPH Trust, there may not be sufficient assets to meet to the claims of all trust creditors (including Noteholders and Couponholders), certain trust creditors and expenses may have priority over payment under the Notes and the Coupons and a court in Singapore could in administration action seek to regulate payment as among trust creditors.
If a court were to find the Guarantees in respect of the Notes and the Coupons or a portion thereof, void or unenforceable as a result of such local laws or defence, or to the extent that agreed limitations on guarantees apply, Noteholders and Couponholders would cease to have any claim against the Guarantors and, if payment had already been made under the Guarantees in respect of the Notes and the Coupons, the court could require that the recipient return the payment to the Guarantors.
Notes in bearer form where denominations involve integral multiples; definitive Bearer Notes.
The Notes are in bearer form. In relation to any issue of Notes in bearer form which have denominations consisting of a minimum specified denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum specified denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum specified denomination in its account with the relevant clearing system at the relevant time may not receive a definitive note in bearer form in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes, such that its holding amounts to a specified denomination.
Where definitive Notes in bearer form are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum specified denomination may be illiquid and difficult to trade.
The Issuer and the Guarantors may raise other capital which affects the price of the Notes.
The Issuer and/or the Guarantors may from time to time and without prior consultation of the Noteholders and the Couponholders raise additional capital through the issue of other notes or other means (see “Terms and Conditions of the Notes — Further Issues” for example). Under the terms of the Notes, there is no restriction, contractual or otherwise, on the amount of notes, debts or other liabilities which the Issuer and/or the Guarantors may issue or incur which rank senior to, or pari passu with, the
34 Notes, the Coupons and the Guarantees. The issue of any such notes or the incurrence of any such other debts and liabilities may reduce the amount (if any) recoverable by Noteholders and Couponholders on a winding-up of the Issuer and/or the Guarantors and may also have an adverse impact on the saleability of the Notes and the Coupons. There can be no assurance that such future issuance or capital raising activities will not result in a significant decrease of the market price of the Notes.
No Prior Market for the Notes.
The Notes are new issues of securities for which there is currently no trading market. If the Notes are traded after they are issued, they may trade at a discount from their initial offering price, depending on many factors, including prevailing interest rates, the market for similar securities, general economic conditions, and HPH Trust’s financial condition, performance and prospects. Although application will be made to the SGX-ST for the listing and quotation of the Notes on the Official List of the SGX-ST, no assurance is made that the application to the SGX-ST will be approved or that such listing will be maintained, or that, if listed, a liquid trading market will develop or continue. If an active trading market for the Notes does not develop or continue, the market price and liquidity of the Notes may be adversely affected. The Issuer may elect to apply for a de-listing of the Notes from any stock exchange or market of such stock exchange on which they are traded because the maintenance of such listing is or would be unduly burdensome.
Interest Rate Risk.
The Noteholders may suffer unforeseen losses due to fluctuation in interest rates. Generally, a rise in interest rates may cause a fall in the prices of the Notes, resulting in a capital loss for the Noteholders. However, the Noteholders may reinvest the interest payments at higher prevailing interest rates. Conversely, when interest rates fall, the prices of the Notes may rise. The Noteholders may enjoy a capital gain but interest payments received may be reinvested at lower prevailing interest rates.
Inflation Risk.
The Noteholders may suffer erosion on their return of their investments due to inflation. The Noteholders would have an anticipated rate of return based on expected inflation rates on the purchase of the Notes. An unexpected increase in inflation could reduce the actual returns.
35 TERMS AND CONDITIONS OF THE NOTES
The following is the text of the Terms and Conditions of the Notes which (subject to completion and modification and excluding italicised text) will be endorsed on each Note in definitive form:
The U.S.$500,000,000 2.00 per cent. Guaranteed Notes due 2026 (in these Conditions, the “Notes” which expression shall in these Conditions, unless the context otherwise requires, include any further Notes issued pursuant to Condition 14 and forming a single series with the Notes) of HPHT Finance (21) Limited (the “Issuer”) are issued subject to an agency agreement dated on or about 19 March 2021 (the “Agency Agreement”) made between the Issuer, Hutchison Port Holdings Management Pte. Limited in its capacity as the trustee-manager of Hutchison Port Holdings Trust (the “Singapore Guarantor”, which expression shall, where the context so permits, include any Replacement Guarantor (as defined herein)) and HPHT Limited (the “Hong Kong Guarantor” and, together with the Singapore Guarantor, the “Guarantors”) and The Bank of New York Mellon, London Branch as fiscal agent and principal paying agent (the “Fiscal Agent” and, together with any other paying agents appointed from time to time pursuant to the Agency Agreement, the “Paying Agents”). The Notes will have the benefit of a deed of guarantee dated on or about 19 March 2021 executed by the Singapore Guarantor (the “Singapore Deed of Guarantee”) and a deed of guarantee dated on or about 19 March 2021 executed by the Hong Kong Guarantor (the “Hong Kong Deed of Guarantee”, and together with the Singapore Deed of Guarantee, the “Deeds of Guarantee” and each a “Deed of Guarantee”). The issue of the Notes was authorised by a resolution of the Board of Directors of the Issuer passed on 15 March 2021 and the giving of the guarantee by the Singapore Guarantor in respect of the Notes (the “Singapore Guarantee”) was authorised by a resolution of the Board of Directors of the Singapore Guarantor passed on 15 March 2021 and the giving of the guarantee by the Hong Kong Guarantor in respect of the Notes (the “Hong Kong Guarantee”, and together with the Singapore Guarantee, the “Guarantees” and each a “Guarantee”) was authorised by a resolution of the Board of Directors of the Hong Kong Guarantor passed on 15 March 2021. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Agency Agreement. Copies of the Agency Agreement and the Deeds of Guarantee are available for inspection during normal business hours at the specified office of each of the Paying Agents. The holders of the Notes (the “Noteholders”) and the holders of the interest coupons appertaining to the Notes (the “Couponholders” and the “Coupons” respectively) are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement applicable to them. References in these Conditions to the Fiscal Agent and Paying Agent shall include any successor appointed under the Agency Agreement.
1 Form, Denomination and Title
(1) The Notes are in bearer form, serially numbered, in the denomination of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof, with Coupons attached on issue.
(2) Title to the Notes and to the Coupons will pass by delivery.
(3) The Issuer, each Guarantor and any Paying Agent may (to the fullest extent permitted by applicable laws) deem and treat the holder of any Note or Coupon as the absolute owner for all purposes (whether or not the Note or Coupon shall be overdue and notwithstanding any notice of ownership or writing on the Note or Coupon or any notice of previous loss or theft of the Note or Coupon).
2 Status of the Notes
The Notes and the Coupons are direct, unconditional, unsubordinated and (subject to the provisions of Condition 4) unsecured obligations of the Issuer and (subject as aforesaid) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.
36 3 Guarantee
The payment of the principal and interest in respect of the Notes has been unconditionally and irrevocably guaranteed by the Singapore Guarantor in its capacity as trustee-manager of Hutchison Port Holdings Trust (a business trust constituted on 25 February 2011 under the laws of the Republic of Singapore, “HPH Trust”) and by the Hong Kong Guarantor. Each Guarantor’s obligations in that respect are contained in the respective Deeds of Guarantee. The payment obligations of each Guarantor under its Guarantee constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 4) unsecured obligations of such Guarantor and (subject as aforesaid) rank, and will rank pari passu with all other outstanding unsecured and unsubordinated obligations of such Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.
In the event that the Singapore Guarantor resigns or is removed as trustee-manager of HPH Trust subject to and in accordance with the provisions of the trust deed dated 25 February 2011 constituting HPH Trust as amended and supplemented from time to time (the “Trust Deed”) and the Business Trusts Act, Chapter 31A of Singapore (the “BTA”) (the “Resigning Trustee-Manager”), the rights and obligations of the Resigning Trustee-Manager with respect to the Notes and under the Singapore Guarantee shall be automatically transferred to the trustee-manager replacing the Resigning Trustee-Manager (the “Replacement Trustee-Manager” and the “Replacement Guarantor”) and the Resigning Trustee-Manager shall be automatically released from its obligations with respect to the Notes and under the Singapore Guarantee subject to and in accordance with the BTA and subject to all other applicable laws, without the execution or filing of any papers or any further act on the part of any party, including the Issuer, the Resigning Trustee-Manager, the Replacement Trustee-Manager, the Fiscal Agent and the Paying Agents and without the consent of the Noteholders or the Couponholders.
The Issuer shall promptly upon such release of the Singapore Guarantor give notice of such release and details of the Replacement Guarantor to the Noteholders in accordance with Condition 12.
4 Covenants
(1) The Issuer will not create, incur, assume or permit to exist any Lien (as defined below) upon any of its property or assets, now owned or hereafter acquired, to secure any Indebtedness for Borrowed Money (as defined below) of the Issuer (or any secured guarantee or indemnity in respect thereof) without, in any such case, making effective provision whereby the Notes and the Coupons will be secured at least equally and rateably with such Indebtedness for Borrowed Money or by such other Lien as shall have been approved by the Noteholders as provided herein and in the Agency Agreement.
Each Guarantor will not, and the Singapore Guarantor will not permit any of the Principal Subsidiaries (as defined below) (other than Listed Principal Subsidiaries (as defined below)) to, create, incur, assume or permit to exist any Lien upon any of its or, in the case of the Singapore Guarantor, any of HPH Trust’s, property or assets, now owned or hereafter acquired, to secure any Indebtedness for Borrowed Money of such Guarantor or such Principal Subsidiary (or any secured guarantee or indemnity in respect thereof) without, in any such case, making effective provision whereby the Guarantee of such Guarantor will be secured either at least equally and rateably with such Indebtedness for Borrowed Money or by such other Lien as shall have been approved by the Noteholders as provided in the Agency Agreement, for so long as such Indebtedness for Borrowed Money will be so secured, unless, after giving effect thereto, the aggregate outstanding principal amount of all such secured Indebtedness for Borrowed Money (excluding that of Listed Principal Subsidiaries and their respective Subsidiaries (as defined below)) entered into after 19 March 2021 (the “Issue Date”) would not exceed 50 per cent. of HPH Trust’s Consolidated Total Assets (as defined below).
37 If there occurs a breach of the foregoing restriction and that breach would not have occurred but for a change in the accounting standards applicable to the audited consolidated accounts of HPH Trust as at 31 December 2020 and for the financial year ended 31 December 2020 that affects the calculation of HPH Trust’s Consolidated Total Assets, such breach shall be deemed not to have occurred provided that a written opinion from the auditors of HPH Trust is delivered to the Fiscal Agent opining on a calculation of HPH Trust’s Consolidated Total Assets as if there had been no change in accounting standards showing that a breach of the foregoing restriction would not have occurred but for the relevant change in accounting standards. Such opinion shall be conclusive and binding on all Noteholders and Couponholders.
The foregoing restriction will not apply to:
(a) Liens existing on or prior to the Issue Date;
(b) Liens for taxes or assessments or other applicable governmental charges or levies;
(c) Liens created or arising by operation of law or created in the ordinary course of business, including, but not limited to, landlords’ liens and statutory liens of carriers, warehousemen, mechanics, materialmen, vendors and other liens securing amounts which are not more than 60 days overdue or which are being contested in good faith;
(d) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations;
(e) easements, rights-of-way, zoning and similar restrictions and other similar charges or encumbrances not interfering with the ordinary conduct of the business of any Guarantor, HPH Trust and such Principal Subsidiaries;
(f) Liens created on any property or assets acquired, leased or developed after the Issue Date; provided however, that (i) any such Lien shall be confined to the property or assets acquired, leased or developed; (ii) the principal amount of the debt encumbered by such Lien shall not exceed the cost of the acquisition or development of such property or assets or any improvements thereto or thereon and (iii) any such Lien shall be created concurrently with or within three years following the acquisition, lease or development of such property or assets;
(g) rights of set-off of a financial institution with respect to deposits or other accounts of any Guarantor, HPH Trust or such Principal Subsidiary held by such financial institution in an amount not to exceed the aggregate amount owed to such financial institution by such Guarantor, HPH Trust or any Principal Subsidiary, as the case may be;
(h) Liens on documents and the goods they represent in connection with letters of credit and similar transactions entered into in the ordinary course of business;
(i) Liens arising in connection with industrial revenue, development or similar bonds or other means of project financing (not to exceed the value of the project financed and limited to the project financed);
(j) Liens in favour of any Guarantor, HPH Trust or any Principal Subsidiary;
(k) leases, subleases, licences and sublicences granted to third parties in the ordinary course of business;
(l) attachment, judgment and other similar Liens arising in connection with court proceedings which are effectively stayed while the underlying claims are being contested in good faith by appropriate proceedings;
38 (m) any Lien against any property or assets of a Person (as defined below) existing at the time such Person becomes a Principal Subsidiary or arising after such acquisition pursuant to contractual commitments entered into prior to and not in contemplation of such acquisition;
(n) any Lien existing on any property or assets prior to the acquisition thereof, which Lien was not created in connection with the acquisition thereof, except for Liens permitted pursuant to clause (f) above;
(o) Liens on any property or assets of a Guarantor, HPH Trust or any Principal Subsidiary in favour of any government or any subdivision thereof, securing the obligations of any Guarantor, HPH Trust or Principal Subsidiary under any contract or payment owed to such governmental entity pursuant to applicable laws, rules, regulations or statutes;
(p) Liens created in connection with any sale/leaseback transaction;
(q) any renewal or extension of any of the Liens described in the foregoing clauses which is limited to the original property or assets covered thereby; and
(r) Liens in respect of Indebtedness for Borrowed Money with respect to which any Guarantor, HPH Trust or any Principal Subsidiary has paid money or deposited money or securities with a fiscal agent, trustee or depository to pay or discharge in full the obligations of any of the Guarantors, HPH Trust and their respective Subsidiaries in respect thereof (other than the obligations that such money or securities so paid or deposited, and the proceeds therefrom, be sufficient to pay or discharge such obligations in full).
(2) Each of the Guarantors may not, without the consent of the holders of any outstanding (as defined in the Agency Agreement) Notes, consolidate with or merge into any other Person in a transaction in which such Guarantor is not the surviving entity, or convey, transfer or lease its or, in the case of the Singapore Guarantor, HPH Trust’s, properties and assets substantially as an entirety to, any Person unless, (i) any Person formed by such consolidation or into which such Guarantor is merged or to whom such Guarantor has conveyed, transferred or leased its, or, in the case of the Singapore Guarantor, HPH Trust’s, properties and assets substantially as an entirety is a corporation, partnership, trust or other entity validly existing under the laws of the jurisdiction of its organisation and such Person assumes such Guarantor’s obligations under the Agency Agreement and its Guarantee, (ii) immediately after giving effect to the transaction no Event of Default (as defined in Condition 10), and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing, (iii) any such Person not organised and validly existing under the laws of the Republic of Singapore, Hong Kong or the Cayman Islands, or the jurisdiction of incorporation of the Replacement Guarantor shall expressly agree in a deed of covenant made in favour of the Noteholders that all payments pursuant to its Guarantee in respect of principal of and interest on the Notes shall be made without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by, or on behalf of, the jurisdiction of organisation of such Person or any political subdivision or taxing authority thereof or therein, unless such taxes, duties, assessments or governmental charges are either (a) required by such jurisdiction or any such subdivision or authority to be withheld or deducted, in which case such Person will pay such additional amounts of, or in respect of, principal and interest (“Successor Additional Amounts”) as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or governmental charges payable in respect of such Successor Additional Amounts) in the payment to the Noteholders of the amounts which would have been receivable in respect of the Notes, the Coupons or such Guarantee had no such withholding been required, subject to the same exceptions and qualifications (other than the right to redeem the Notes as a result of such consolidation, merger, conveyance, lease or transfer) as apply with respect to the payment by such Guarantor of Additional Amounts in
39 respect of its Guarantee (inserting references to the taxing jurisdiction where appropriate) or (b) as a result of FATCA withholding (as defined in Condition 8), (iv) if, as a result of the transaction, property of such Guarantor or, in the case of the Singapore Guarantor, HPH Trust would become subject to a Lien that would not be permitted under Condition 4(1) above, such Guarantor or such successor Person takes such steps as shall be necessary to secure the Notes and its Guarantee equally and rateably with (or prior to) the indebtedness secured by such Lien, and (v) such Guarantor has delivered to the Fiscal Agent an officers’ certificate and an opinion of counsel each stating that such consolidation, merger, conveyance, transfer or lease comply with this paragraph and that all conditions precedent herein provided for relating to such transaction have been complied with.
(3) The Issuer has made an application to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the Notes to be listed and quoted on the Official List of the SGX-ST but an application may instead be made to another stock exchange which is: (a) a member of the World Federation of Exchanges; or (b) located in a state that is a member of the Organisation for Economic Co-operation and Development. In connection with such application, the Issuer will use endeavours considered in its sole opinion to be reasonable to it to obtain the listing as promptly as practicable after the Issue Date (if not already obtained). The Issuer may elect to apply for a de-listing of the Notes from any stock exchange or market of such stock exchange on which they are traded because the maintenance of such listing is or would be, in the opinion of the Issuer, unduly burdensome, including, without limitation, any requirement on the Issuer or a Guarantor to provide financial statements prepared in accordance with, or reconcile financial statements to, accounting principles or standards other than Hong Kong Financial Reporting Standards in which event the Issuer will use endeavours considered in its sole opinion to be reasonable to it to seek a replacement listing of such Notes on another section of any stock exchange on which they are traded or another stock exchange which is: (a) a member of the World Federation of Exchanges; or (b) located in a state that is a member of the Organisation for Economic Co-operation and Development, provided that obtaining or maintaining a listing on such section or stock exchange would not be, in the opinion of the Issuer, unduly burdensome, including, without limitation, any requirement on the Issuer or a Guarantor to provide financial statements prepared in accordance with, or reconcile financial statements to, accounting principles or standards other than Hong Kong Financial Reporting Standards. In the event that no listing is obtained or maintained which satisfies the foregoing requirements, the Issuer will use endeavours considered in its sole opinion to be reasonable to it to obtain a replacement listing elsewhere.
(4) For the purposes of these Conditions:
“Consolidated Total Assets” means the aggregate of (a) fixed assets; (b) other non-current assets; (c) associated companies; (d) interests in joint ventures; (e) managed funds and other investments; and (f) current assets; all as shown by the then latest audited consolidated statement of financial position of HPH Trust and its Subsidiaries;
“Indebtedness for Borrowed Money” means any indebtedness for or in respect of money borrowed that has a final maturity of one year or more from its date of incurrence or issuance and that is evidenced by any agreement or other instrument, excluding trade payables; provided however, that for the purposes of determining the amount of Indebtedness for Borrowed Money outstanding at any relevant time, the amount included as Indebtedness for Borrowed Money in respect of leases (to the extent they qualify as “Indebtedness for Borrowed Money” pursuant to the foregoing) shall be the net amount from time to time characterised as “obligations under finance leases” in accordance with Hong Kong Accounting Standard 17 Leases as revised and published by the Hong Kong Institute and Certified Public Accountants in January 2017 (and, in this regard, an opinion from the auditors of a Guarantor or HPH Trust opining on such amount shall be conclusive and binding on all Noteholders and Couponholders);
“Lien” means any mortgage, charge, pledge, lien, encumbrance, hypothecation, title retention, security interest or security arrangement of any kind provided that the term “Lien” shall not include an unsecured guarantee or Liens arising by operation of law;
40 “Listed Principal Subsidiary” means any Principal Subsidiary, the shares of which are at the relevant time listed on The Stock Exchange of Hong Kong Limited or any other recognised stock exchange;
“Person” means any person or entity;
“Principal Subsidiary” means, at any time, a Subsidiary of HPH Trust:
(1) as to which one or more of the following conditions is satisfied:
(a) its net profits (before taxation and extraordinary items) or (in the case of a Subsidiary of HPH Trust which has Subsidiaries) consolidated net profits (before taxation and extraordinary items) attributable to HPH Trust are at least 10 per cent. of the consolidated net profits of HPH Trust and its Subsidiaries (before taxation and extraordinary items but after deducting non-controlling interests’ share of the net profits (before taxation and extraordinary items) of the Subsidiaries); or
(b) its net assets or (in the case of a Subsidiary of HPH Trust which has Subsidiaries) consolidated net assets attributable to HPH Trust represent 10 per cent. or more of the consolidated net assets (after deducting non-controlling interests in Subsidiaries) of HPH Trust and its Subsidiaries,
all as calculated by reference to the then latest audited accounts or annual accounts reviewed by the auditor (consolidated or, as the case may be, unconsolidated) of such Subsidiary, and as adjusted to conform with the group accounting policies and measurement basis of HPH Trust, and the then latest consolidated audited financial statements of HPH Trust and its Subsidiaries, provided that:
(i) in the case of a Subsidiary of HPH Trust acquired after the end of the financial period to which the latest audited financial statements of HPH Trust and its Subsidiaries relate, the reference to the latest audited consolidated financial statements of HPH Trust and its Subsidiaries for the purposes of the calculation above shall, until the audited consolidated financial statements of HPH Trust and its Subsidiaries for the financial period in which the acquisition is made are published, be deemed to be a reference to the latest audited consolidated financial statements of HPH Trust and its Subsidiaries adjusted to consolidate the latest audited accounts or annual accounts reviewed by the auditor of such Subsidiary in such financial statements;
(ii) if, in the case of any Subsidiary of HPH Trust which itself has Subsidiaries, no consolidated accounts are prepared and audited, its consolidated net assets and consolidated net profits shall be determined on the basis of the combined accounts of the relevant Subsidiary and its Subsidiaries prepared for this purpose and opined on by HPH Trust’s auditors; or
(2) to which is transferred the whole or substantially the whole of the assets and undertaking of a Subsidiary of HPH Trust which immediately prior to such transfer was a Principal Subsidiary, provided that:
(a) the Subsidiary of HPH Trust which so transfers its assets and undertaking shall forthwith upon the transfer (notwithstanding the provisions of paragraph (1) above as applicable to such Subsidiary) cease to be a Principal Subsidiary until the date on which the first audited consolidated financial statements of HPH Trust and its Subsidiaries prepared as of a date later than such transfer are published, whereupon whether such Subsidiary shall constitute a Principal Subsidiary again by virtue of paragraph (1) above shall be determined on the basis of such financial statements; and
41 (b) the Subsidiary of HPH Trust to which the assets and undertaking are so transferred shall cease to be a Principal Subsidiary at the date on which the first audited consolidated financial statements of HPH Trust and its Subsidiaries prepared as of a date later than such transfer are published, unless such Subsidiary would continue to be a Principal Subsidiary on the basis of such financial statements by virtue of the provisions of paragraph (1) above.
An opinion from the auditors of HPH Trust on a calculation to show whether or not a Subsidiary is a Principal Subsidiary shall be conclusive and binding on all Noteholders and Couponholders in the absence of manifest error; and
“Subsidiary” means in relation to an entity, any other entity which would be accounted for and consolidated in the latest audited consolidated financial statements of that entity as a subsidiary pursuant to the accounting standards applicable to such financial statements.
5 Interest
(1) The Notes bear interest from and including 19 March 2021 (the “Interest Commencement Date”) to but excluding 19 March 2026 at the rate of 2.00 per cent. per annum, payable semi-annually in arrear on 19 March and 19 September in each year (each an “Interest Payment Date”). The first Interest Payment Date will be 19 September 2021, in respect of the period from and including 19 March 2021 to but excluding 19 September 2021.
(2) Each Note will cease to bear interest from and including the due date for redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of the payment. In such event, interest will continue to accrue up to but excluding whichever is the earlier of:
(a) the date on which all amounts due in respect of such Notes have been paid; and
(b) five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Fiscal Agent and notice to that effect has been given to the Noteholders in accordance with Condition 12.
(3) Interest shall be calculated on the basis of a year of 360 days with twelve 30-day months.
(4) Interest payable under this Condition 5 will be paid in accordance with Condition 6.
6 Payments
(1) Payments of principal and interest in respect of each Note will be made only against presentation and surrender (or, in the case of part payment only, endorsement) of the Note, except that payments of interest due on an Interest Payment Date will be made against presentation and surrender (or, in the case of part payment only, endorsement) of the relevant Coupon, in each case at the specified office outside the United States of any of the Paying Agents.
(2) Payments will be made by credit or transfer to a U.S. dollar account maintained by the payee with or, at the option of the payee, by U.S. dollar cheque drawn on, a bank in New York City for such payment.
(3) Each Note should be presented for payment together with all unmatured Coupons relating to it. Upon the date on which any Note becomes due and repayable, all unmatured Coupons appertaining to the Note (whether or not attached) shall become void and no payment shall be made in respect of such Coupons.
(4) Payments in respect of principal and interest on Notes are subject in all cases to any fiscal or other laws and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 8.
42 (5) A holder shall be entitled to present a Note or Coupon for payment only on a Presentation Date and shall not, except as provided in Condition 5, be entitled to any further interest or other payment if a Presentation Date is after the due date.
In this Condition:
“Business Day” means a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the place of the specified office of the Paying Agent at which a Note or Coupon is presented for payment, London, Hong Kong, New York City and (for so long as the Notes are listed on the SGX-ST and the rules of that exchange so require a Paying Agent in Singapore) Singapore; and
“Presentation Date” means a day which (subject to Condition 9):
(a) is or falls after the relevant due date; and
(b) is a Business Day.
(6) Notwithstanding the foregoing, payments will be made at the specified office in the United States of any Paying Agent and (if no such appointment is then in effect) the Issuer shall appoint and maintain a Paying Agent with a specified office in New York City at which payments will be made:
(a) if (i) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that the Paying Agents would be able to make payment at the specified offices outside the United States of the full amount payable with respect to the Notes in the manner provided above when due, (ii) payment of the full amount due in U.S. dollars at all specified offices of the Paying Agents outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions and (iii) the payment is then permitted under United States law; or
(b) at the option of the relevant Noteholder, if the payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences for the Issuer or the Guarantors.
(7) The names of the initial Paying Agents and their initial specified offices are set out in the Agency Agreement. The Issuer and the Guarantors reserve the right at any time to vary or terminate the appointment of any Paying Agent and to appoint additional or other Paying Agents provided that they will at all times maintain (i) a Fiscal Agent and (ii) so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, a Paying Agent in Singapore. Notice of any termination or appointment and of any changes in specified offices will be given to the Noteholders promptly by the Issuer in accordance with Condition 12.
7 Redemption and Purchase
(1) Unless previously redeemed or purchased and cancelled as provided below, the Issuer will redeem the Notes at their principal amount on 19 March 2026.
(2) If (a) as a result of any change in, or amendment to, the laws or regulations of the Cayman Islands (in the case of the Issuer), the Republic of Singapore (in the case of the Singapore Guarantor), Hong Kong (in the case of the Hong Kong Guarantor) or the jurisdiction of incorporation of any Replacement Guarantor (or, in each case, of any political subdivision or taxing authority thereof or therein having power to tax) or any regulations or rulings promulgated thereunder or any change in the official interpretation or official application of such laws, regulations or rulings, or any change in the official application or interpretation of, or any execution of or amendment to, any treaty or treaties affecting taxation to which the Cayman Islands, the Republic of Singapore, Hong Kong or, as the case may be, the jurisdiction of incorporation of any Replacement Guarantor or such political subdivision or
43 taxing authority is a party, which change, amendment or treaty becomes effective on or after 16 March 2021, on the next Interest Payment Date either the Issuer would be required to pay Additional Amounts as provided or referred to in Condition 8 or a Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such Additional Amounts, and (b) the requirement cannot be avoided by the Issuer or, as the case may be, such Guarantor taking reasonable measures available to it, the Issuer may at its option, having given not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 12 (which notice shall be irrevocable), redeem all the Notes, but not some only, at their principal amount together with interest accrued to but excluding the date of redemption, provided that no notice of redemption shall be given earlier than 90 days before the earliest date on which the Issuer or, as the case may be, such Guarantor would be required to pay the Additional Amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition 7(2), the Issuer or the relevant Guarantor, as the case may be, shall deliver to the Fiscal Agent a certificate signed by two Directors of the Issuer or, as the case may be, the relevant Guarantor stating that the requirement referred to in (a) above will apply on the occasion of the next payment due in respect of the Notes and cannot be avoided by the Issuer or, as the case may be, such Guarantor taking reasonable measures available to it and an opinion of independent tax or legal advisers of recognised standing to the effect that the Issuer or, as the case may be, such Guarantor has or will become obliged to pay such Additional Amounts as a result of the change, amendment or treaty.
(3) The Notes may, at the option of the Issuer or a Guarantor, be redeemed in whole but not in part, on any date falling on or after 19 February 2026, upon not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 12, at a redemption price equal to the principal amount thereof plus accrued interest to, but excluding the date fixed for redemption.
(4) The Issuer, the Guarantors or any of their respective, or HPH Trust’s, Subsidiaries (as defined above), may at any time purchase Notes (provided that all unmatured Coupons appertaining to the Notes are purchased with the Notes) in any manner and at any price.
(5) All Notes and/or Coupons which are redeemed will, and any Notes and/or Coupons purchased by or on behalf of the Issuer, any Guarantor or any of their respective, or HPH Trust’s, Subsidiaries, may (but need not) be cancelled, together with all relative unmatured Coupons attached to the Notes or surrendered with the Notes, and accordingly may not be reissued or resold. Notes purchased by the Issuer, a Guarantor or any of their respective, or HPH Trust’s, Subsidiaries, and not cancelled may be resold.
(6) Upon the expiry of any notice as is referred to in Condition 7(2) above the Issuer shall be bound to redeem the Notes to which the notice refers in accordance with the terms of such condition.
8 Taxation
(1) Subject to Condition 8(3), all payments of principal and interest in respect of the Notes, the Coupons or the Guarantees shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the Cayman Islands (in the case of payments by the Issuer), the Republic of Singapore (in the case of payments by the Singapore Guarantor), Hong Kong (in the case of payments by the Hong Kong Guarantor) or the jurisdiction of incorporation of any Replacement Guarantor (or, in each case, any political subdivision or taxing authority thereof or therein having power to tax) unless such withholding or deduction is required by law. In that event, the Issuer or the relevant Guarantor shall pay such additional amounts (“Additional Amounts”) as will result in receipt by the Noteholders or Couponholders of such amounts as would have been received in respect of the Notes, the Coupons or the relevant Guarantee had no such withholding or deduction been required, except that no such Additional Amounts shall be payable:
(a) in respect of any tax, duty, assessment or other governmental charge that would not have been imposed but for any present or former connection between the holder or
44 beneficial owner of a Note or Coupon (or a fiduciary, settlor, beneficiary, partner, member or shareholder of or possessor of a power over, such holder, if such holder is an estate, trust, partnership, limited liability company or corporation) and the Cayman Islands, the Republic of Singapore, Hong Kong or the jurisdiction of incorporation of any Replacement Guarantor or, in each case, any political subdivision or any authority thereof or therein, as the case may be, (including being or having been a resident, citizen or national of such jurisdiction, being or having been present or engaged in a trade or business therein or having or having had a permanent establishment therein for tax purposes) other than merely holding such Note or Coupon or receiving principal and/or interest in respect thereof;
(b) in respect of any Note or Coupon presented for payment more than 30 days after the Relevant Date, except to the extent that the holder thereof would have been entitled to such Additional Amounts on presenting the same for payment on the last day of such 30 day period;
(c) to a Noteholder, Couponholder or to a third party on behalf of a person who would have been able to avoid such withholding or deduction by duly presenting the Note or Coupon to another Paying Agent;
(d) in respect of any taxes, duties, assessments or other governmental charges imposed or withheld by reason of the failure of the holder or beneficial owner of a Note or Coupon to comply with any reasonable request (made at a time that would enable such holder or beneficial owner acting reasonably to comply with that request) of the Issuer, the Guarantors or the Paying Agents to satisfy any certification, identification, information or other reporting requirements as a precondition to exemption from, or reduction in the rate of deduction or withholding of, taxes, duties, assessments or other governmental charges imposed by the Cayman Islands, the Republic of Singapore, Hong Kong or the jurisdiction of incorporation of any Replacement Guarantor but in each case, only to the extent the holder or beneficial owner of a Note or Coupon is legally entitled to provide such certification, identification, information or documentation;
(e) in respect of any estate, inheritance, gift, sales, personal property, transfer or similar taxes, duties, assessments or other governmental charges;
(f) in respect of any taxes, duties, assessments or other governmental charges which are payable other than by deduction or withholding from payments of principal of or interest or any premium on a Note;
(g) in respect of any taxes, duties, assessments or other governmental charges imposed on or with respect to any payment by the Issuer or the Guarantors to the holder if such holder is a fiduciary or partnership or person other than the sole beneficial owner of such payment to the extent that taxes, duties, assessments or other governmental charges would not have been imposed on such payment had such holder been the sole beneficial owner of such Note; or
(h) in respect of any combination of taxes, duties, assessments or other governmental charges referred to in paragraphs (a) to (g) above.
For the purposes of these Conditions, the “Relevant Date” in relation to any Note or Coupon means (i) the due date for payment thereof or (ii) if the full amount payable on such due date has not been received by the Fiscal Agent on or prior to such due date, the first date on which such full amount has been so received and notice to that effect has been given to the Noteholders in accordance with Condition 12.
(2) Unless the context otherwise requires, any reference in the Notes and these Conditions to principal or interest shall be deemed also to refer to any Additional Amounts which may be payable as described in Condition 8(1) above.
45 (3) Notwithstanding any other provision of these Conditions, any amounts to be paid on the Notes and the Coupons by or on behalf of the Issuer or a Guarantor will be paid net of any deduction or withholding imposed or required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement) (any such withholding or deduction, a “FATCA Withholding”). Neither the Issuer, any Guarantor nor any other person will be required to pay any additional amounts in respect of any FATCA Withholding.
9 Prescription
Claims in respect of principal, redemption price and interest will become void unless the relevant Notes and Coupons are presented for payment within ten years (in the case of principal or redemption price) and five years (in the case of interest) from the appropriate Relevant Date, subject to the provisions of Condition 6.
10 Events of Default
The occurrence of each of the following events will constitute an event of default (each an “Event of Default”) with respect to the Notes:
(a) failure to pay principal of any Note within five days after the due date for such payment; or
(b) failure to pay interest on any Note within 30 days after the due date for such payment; or
(c) failure to perform any other covenant of the Issuer or any Guarantor in the Agency Agreement, a Guarantee or the Notes (excluding Condition 4(3)) which has continued for 60 days after there has been given, by registered or certified mail, to the Issuer or such Guarantor by the Fiscal Agent or by the holders of at least 25 per cent. in principal amount of the Notes then outstanding, a written notice specifying such failure and requiring it to be remedied and stating that such notice is a notice of default under the Agency Agreement, a Guarantee or the Notes, as the case may be; or
(d) (i) failure to pay upon final maturity (after giving effect to the expiration of any applicable grace period therefor) the principal of any Indebtedness for Borrowed Money of the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries), (ii) acceleration of the maturity of any Indebtedness for Borrowed Money of the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries) following a default by the Issuer, such Guarantor or such Principal Subsidiary, if such Indebtedness for Borrowed Money is not discharged, or such acceleration is not annulled, within 10 days after receipt of the written notice as provided in the Agency Agreement, or (iii) failure to pay any amount payable by the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries) under any guarantee or indemnity in respect of any Indebtedness for Borrowed Money of any other Person; provided however, that:
(1) no such event set forth in (i), (ii) or (iii) of this paragraph (d) shall constitute an Event of Default unless the aggregate Indebtedness for Borrowed Money to which all such events relate exceeds U.S.$30,000,000 (or its equivalent in any other currency or currencies converted at the date of the relevant event); and
46 (2) Indebtedness for Borrowed Money which is:
(x) in the form of secured project financing or secured limited recourse financing; and
(y) not guaranteed by a Guarantor or a Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries),
shall be deemed not to be Indebtedness for Borrowed Money for the purposes of this paragraph (d); or
(e) the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries) becomes insolvent and is unable to pay its debts as they fall due, stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all of its Indebtedness for Borrowed Money (or any part of its Indebtedness for Borrowed Money which it will or might otherwise be unable to pay when due) or proposes or makes a general assignment or any arrangement or composition with or for the benefit of its creditors or a moratorium is agreed or declared in respect of or affecting all or a material part of the Indebtedness for Borrowed Money of the Issuer, any Guarantor or any Principal Subsidiaries (other than a Listed Principal Subsidiary or any of its Subsidiaries) or of the Issuer or the Guarantors and their respective Subsidiaries taken as a whole; or
(f) a distress, attachment, execution or other legal process is levied, enforced or sued out on or against all or any material part of the assets of the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries) and is not discharged or stayed within 30 days (or such longer period as the holders of a majority in principal amount of the Notes may permit); or
(g) any present or future encumbrance on or over all or any material part of the assets of the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries) becomes enforceable and any step (including the taking of possession or the appointment of a receiver, manager or similar officer) is taken to enforce that encumbrance; or
(h) any bona fide step is taken by any person for the dissolution of the Issuer, any Guarantor or any Principal Subsidiary (other than a Listed Principal Subsidiary or any of its Subsidiaries), except (in each such case) for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (1) on terms approved by an Extraordinary Resolution of the Noteholders, or (2) in the case of a Principal Subsidiary, whereby the undertaking and assets of such Principal Subsidiary are transferred to or otherwise vested in a Guarantor or another subsidiary of HPH Trust pursuant to a merger of such Principal Subsidiary with such Guarantor or such other Subsidiary of HPH Trust or by way of a voluntary winding up or dissolution where there are surplus assets in such Principal Subsidiary and such surplus assets attributable to the relevant Guarantor and/or such other Subsidiary of HPH Trust are distributed to such Guarantor and/or such other Subsidiary of HPH Trust; or
(i) any event occurs which under the laws of any relevant jurisdiction has an analogous or equivalent effect to any of the events referred to in sub-paragraphs (e) through (h) above.
If an Event of Default (other than an Event of Default described in sub-paragraphs (e) to (i) above) with respect to the Notes shall occur and be continuing, the holders of at least 25 per cent. in aggregate principal amount of the Notes then outstanding by notice as provided in the Agency Agreement may declare the principal amount of such Notes and any accrued and unpaid interest thereon to be due and payable immediately. If an Event of Default referred to in sub-paragraphs (e) to (i) above with respect to the Notes shall occur, the principal amount of all the Notes and any accrued and unpaid interest thereon will automatically, and without any action
47 by any Noteholder, become immediately due and payable. After any such acceleration but before a judgment or decree based on acceleration has been obtained, the holders of a majority in aggregate principal amount of the outstanding Notes may, under certain circumstances, rescind and annul such acceleration if all the then existing Events of Default have been cured or waived as provided in the Agency Agreement.
11 Replacement of Notes and Coupons
Should any Note or Coupon be lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Fiscal Agent in London (and for so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the specified office of the Paying Agent in Singapore), subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with the replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued.
12 Notices
All notices to the Noteholders will be valid if published in a leading English language daily newspaper with general circulation in Asia as the Issuer may decide. It is expected that publication will normally be made in the Asian Wall Street Journal. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are for the time being listed. Any such notice will be deemed to have been given on the date of the first publication or, if published more than once or on different dates, on the first date on which publication is made or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers.
13 Meetings of Noteholders and Modification
(1) The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the modification by Extraordinary Resolution of these Conditions or the provisions of the Agency Agreement or the Deeds of Guarantee. The quorum at any meeting for passing an Extraordinary Resolution will be one or more persons present holding or representing a clear majority in principal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons present whatever the principal amount of the Notes held or represented by him or them, except that at any meeting, the business of which includes the modification of certain of these Conditions, the necessary quorum for passing an Extraordinary Resolution will be one or more persons present holding or representing not less than 75 per cent., or at any adjourned meeting not less than one-third, of the principal amount of the Notes for the time being outstanding. The Agency Agreement does not contain any provisions requiring higher quorums in any circumstances. An Extraordinary Resolution passed at any meeting of the Noteholders will be binding on all Noteholders and Couponholders, whether or not they are present at the meeting. The Agency Agreement provides that a written resolution signed by or on behalf of the holders of not less than 90 per cent. of the aggregate principal amount of the Notes outstanding shall be valid and effective as an Extraordinary Resolution.
(2) The Fiscal Agent may agree, without the consent of the Noteholders or Couponholders, to any modification of any of these Conditions or any of the provisions of the Agency Agreement or the Deeds of Guarantee which is not, in the opinion of the Fiscal Agent, materially prejudicial to the interests of the Noteholders or to any modification which is of a formal, minor or technical nature or to correct a manifest or proven error.
(3) Any modification made in accordance with these Conditions shall be binding on the Noteholders and the Couponholders and, unless the Fiscal Agent agrees otherwise, any modification shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 12.
48 14 Further Issues
The Issuer may from time to time without the consent of the Noteholders or the Couponholders create and issue further notes, having terms and conditions the same as those of the Notes, or the same except for the date and the amount of the first payment of interest, which may be consolidated and form a single series with the outstanding Notes.
15 Currency Indemnity
The Issuer’s obligations under the Notes or the Guarantors’ obligations under the Guarantees, as the case may be, to make all payments in U.S. dollars will not be satisfied by any payment, recovery or any other realisation of proceeds in any currency other than U.S. dollars. If, for the purpose of obtaining a judgment in any court with respect to any obligation of the Issuer under any Notes or any Guarantor’s obligations under a Guarantee, as the case may be, it shall become necessary to convert into any other currency or currency unit any amount in the currency or currency unit due under any Notes then such conversion shall be made by the Fiscal Agent at the market exchange rate (as determined by the Fiscal Agent) as in effect on the date of entry of the judgment (the “Judgment Date”); it being understood that the Fiscal Agent shall effect such conversion only after receipt of the relevant funds from the Issuer or, as the case may be, the relevant Guarantor and that such conversion may require up to three Business Days to effect after the receipt of such funds. If pursuant to any such judgment, conversion shall be made on a date (the “Substitute Date”) other than the Judgment Date and there shall occur a change between the market exchange rate for U.S. dollars as in effect on the Substitute Date and the market exchange rate as in effect on the Judgment Date, the Issuer agrees to pay such additional amounts (if any) in U.S. dollars as may be necessary to ensure that the amount paid is equal to the amount in such other currency or currency unit which, when converted at the market exchange rate as in effect on the Judgment Date, is the amount due under any Notes. Any amount due from the Issuer under this Condition shall be due as a separate debt and is not to be affected by or merged into any judgment being obtained for any other sums due in respect of any Notes. In no event, however, shall the Issuer be required to pay more in U.S. dollars due under the Notes at the market exchange rate as in effect on the Judgment Date than the amount of U.S. dollars stated to be due under the Notes so that in any event the Issuer’s obligations under the Notes or the Guarantors’ obligations under the Guarantees will be effectively maintained as obligations in U.S. dollars and the Issuer shall be entitled to withhold (or be reimbursed for, as the case may be) any excess of the amount actually realised upon any such conversion on the Substitute Date over the amount due and payable on the Judgment Date.
For the purpose of this Condition 15, “Business Day” means a day other than a Saturday or Sunday on which commercial banks and foreign exchange markets are open for business in Hong Kong, New York City and London.
16 Governing Law and Submission to Jurisdiction
The Agency Agreement, the Notes, the Coupons and the Hong Kong Deed of Guarantee and any non-contractual obligations arising out of or in relation to any of them, are governed by, and will be construed in accordance with, English law. The Singapore Deed of Guarantee is governed by, and will be construed in accordance with, Singapore law.
Each of the Issuer and the Guarantors irrevocably agrees for the benefit of the Noteholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Agency Agreement, the Deeds of Guarantee, the Notes or the Coupons (including, without limitation, disputes relating to any non-contractual obligations arising out of or in connection with any of them) and that accordingly any suit, action or proceedings arising out of or in connection therewith (together referred to as “Proceedings”) may be brought in the courts of England.
49 Each of the Issuer and the Guarantors irrevocably and unconditionally waives and agrees not to raise any objection which it may have now or subsequently to the laying of the venue of any Proceedings in the courts of England and any claim that any Proceedings have been brought in an inconvenient forum and have further irrevocably and unconditionally agreed that a judgment in any Proceedings brought in the courts of England shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction. Nothing in this Condition shall limit any right to take Proceedings against the Issuer or any Guarantor in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.
Each of the Issuer and the Guarantors hereby irrevocably and unconditionally appoints Hutchison Ports Europe Limited at its registered office in England (presently Tomline House, the Dock, Felixstowe, Suffolk, IP11 3SY, United Kingdom) as its agent for service of process in England in respect of any Proceedings and undertakes that in the event of Hutchison Ports Europe Limited ceasing so to act it will appoint another person as its agent for that purpose.
17 Contracts (Rights of Third Parties) Act 1999
No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.
18 Limitation of Liability
Notwithstanding any provision to the contrary in these Conditions, the Notes, the Coupons, the Agency Agreement and the Deeds of Guarantee (collectively, the “Transaction Documents” and each, a “Transaction Document”), each Noteholder and Couponholder by its acceptance and holding of the Notes and the Coupons acknowledges and agrees that the Singapore Guarantor has entered into the Agency Agreement and the Singapore Deed of Guarantee only in its capacity as trustee-manager of HPH Trust and not in its personal capacity and all references to the Singapore Guarantor in the Transaction Documents shall be construed accordingly. Accordingly, notwithstanding any provision to the contrary in any Transaction Document, the Singapore Guarantor has assumed all obligations under the relevant Transaction Documents only in its capacity as trustee-manager of HPH Trust and not in its personal capacity. Any liability of or indemnity, covenant, guarantee, undertaking, representation and/or warranty given or to be given by the Singapore Guarantor under any relevant Transaction Document is given by the Singapore Guarantor in its capacity as trustee-manager of HPH Trust and not in its personal capacity and any power and right conferred on any receiver, attorney, agent and/or delegate under any relevant Transaction Document shall be limited to the assets of or held on trust for HPH Trust over which the Singapore Guarantor in its capacity as trustee-manager of HPH Trust has recourse and shall not extend to any personal assets of the Singapore Guarantor or to any assets held by the Singapore Guarantor in any other capacity and accordingly the Singapore Guarantor’s liabilities under any relevant Transaction Document shall not be construed as indebtedness on its personal account. Any obligation, matter, act, action or thing required to be done, performed or undertaken or any covenant, representation, warranty or undertaking given by the Singapore Guarantor under any relevant Transaction Document shall only be in connection with matters relating to HPH Trust or the relevant Transaction Documents.
Notwithstanding any provision to the contrary in any Transaction Document, each Noteholder and Couponholder by its acceptance and holding of the Notes and the Coupons acknowledges and agrees that the Singapore Guarantor’s obligations under the relevant Transaction Documents will be solely the corporate obligations of the Singapore Guarantor in its capacity as the trustee-manager of HPH Trust and there shall be no recourse against the shareholders, directors, officers or employees of the Singapore Guarantor for any claims, losses, damages, liabilities or other obligations whatsoever with any of the transactions contemplated by the provisions of any Transaction Document.
Notwithstanding any provision to the contrary in any Transaction Document, any legal action or proceedings commenced against the Singapore Guarantor whether in Singapore or elsewhere pursuant to the relevant Transaction Documents shall be brought against the Singapore Guarantor in its capacity as the trustee-manager of HPH Trust and not in its personal capacity.
The foregoing shall not restrict or prejudice the rights or remedies of the Noteholders and the Couponholders in connection with any negligence, fraud, willful default or breach of trust by the Singapore Guarantor.
This Condition 18 shall survive the termination or rescission of any Transaction Document, and the redemption or cancellation of the Notes or Coupons.
50 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM
The following is a summary of certain provisions to be contained in the Temporary Global Note and/or the Permanent Global Note (together, the “Global Notes”) which will apply to, and in some cases modify, the Conditions of the Notes while the Notes are represented by the Global Notes. Terms defined in the Conditions have the same meaning in the paragraphs below.
1. Exchange
The Permanent Global Note will be exchangeable in whole but not in part (free of charge to the holder) for definitive Notes only:
(a) on or following the giving of a default notice pursuant to Condition 10 of the Conditions; or
(b) if the Issuer has been notified that both Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream”) have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intentional permanently to cease business or have in fact done so and no successor clearing system is available; or
(c) if the Issuer or a Guarantor, as the case may be, has or will become subject to adverse tax consequences which would not be suffered were the Notes in definitive form.
In the case of (a), (b) or (c) above, the Issuer shall promptly give notice to the Noteholders by publication in a leading English language daily newspaper of general circulation in Asia as the Issuer may decide (which newspaper is expected to be the Asian Wall Street Journal)in accordance with Condition 12 of the Conditions. In the case of (a) or (b) above, the holder of the Permanent Global Note, acting on the instructions of one or more of the Accountholders (as defined in paragraph 4 below), may give notice to the Issuer and the Fiscal Agent and, in the case of (c) above, the Issuer may give notice to the Fiscal Agent of its intention to exchange the Permanent Global Note for definitive Notes on or after the Exchange Date (as defined below).
On or after the Exchange Date the holder of the Permanent Global Note may (or in the case of (c) above, the holder of the Permanent Global Note shall on the Exchange Date) surrender the Permanent Global Note to or to the order of the Fiscal Agent. In exchange for the Permanent Global Note the Issuer will deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated definitive Notes (having attached to them all Coupons in respect of interest which has not already been paid on the Permanent Global Note), security printed in accordance with any applicable legal and stock exchange requirements and in or substantially in the form set out in the Agency Agreement. On exchange in full of the Permanent Global Note, the Issuer will procure that it is cancelled.
“Exchange Date” means a day specified in the notice requiring exchange falling not less than 60 days after that on which such notice is given, being a day on which banks are open for general business in the place in which the specified office of the Fiscal Agent is located and, except in the case of exchange pursuant to (b) above, in the place in which the relevant clearing system is located.
51 2. Payments
On and after 28 April 2021, no payment will be made on the Temporary Global Note unless exchange for an interest in the Permanent Global Note is improperly withheld or refused. Payments of principal, redemption price and/or interest in respect of Notes represented by a Global Note will, subject as set out below, be made against presentation for endorsement and, if no further payment falls to be made in respect of the Notes, surrender of such Global Note to the order of the Fiscal Agent or such other Paying Agent as shall have been notified to the Noteholders for such purposes. A record of each payment made will be endorsed on the appropriate part of the schedule to the relevant Global Note by or on behalf of the Fiscal Agent, which endorsement shall be prima facie evidence that such payment has been made in respect of the Notes. Payments of interest on the Temporary Global Note (if permitted by the first sentence of this paragraph) will be made only upon certification as to non-U.S. beneficial ownership unless such certification has already been made.
3. Notices
For so long as all of the Notes are represented by one or both of the Global Notes and such Global Note(s) is/are held on behalf of Euroclear and/or Clearstream, notices to holders of Notes may be given by delivery of the relevant notice to Euroclear and/or Clearstream for communication to the relative Accountholders (as defined below) rather than by publication as required by Condition 12 of the Conditions. Any such notice shall be deemed to have been given to the holders of the Notes on the second day after the day on which such notice is delivered to Euroclear and/or Clearstream (as the case may be) as aforesaid.
4. Accountholders
For so long as any of the Notes are represented by one or both of the Global Notes and such Global Note(s) is/are held on behalf of Euroclear and/or Clearstream, each person who is for the time being shown in the records of Euroclear and/or Clearstream as the holder of a particular principal amount of Notes (each an “Accountholder”) (in which regard any certificate or other document issued by Euroclear and/or Clearstream as to the principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes) shall be treated as the holder of that principal amount for all purposes (including but not limited to for the purposes of any quorum requirements of, or the right to demand a poll at, meetings of the holders of the Notes and giving notice to the Issuer pursuant to Condition 10 of the Conditions) other than with respect to the payment of principal, redemption price and interest on the Notes, the right to which shall be vested, as against the Issuer and the Guarantor, solely in the bearer of the relevant Global Note in accordance with and subject to its terms. Each Accountholder must look solely to Euroclear and/or Clearstream, as the case may be, for its share of each payment made to the bearer of the relevant Global Note.
The Issuer covenants in favour of each Accountholder that it will make all payments in respect of the principal amount and redemption price of Notes for the time being shown in the records of Euroclear and/or Clearstream as being held by the Accountholder and represented by one or both of the Global Notes to the bearer of such Global Note and acknowledges that each Accountholder may take proceedings to enforce this covenant and any of the other rights which it has pursuant to the Issuer’s promise to pay as contained in each Global Note.
52 If the principal in respect of any Notes is not paid when due and payable (but subject as provided below), the bearer of the relevant Global Note may from time to time elect that Direct Rights (as defined in the Global Notes) shall come into effect. If Direct Rights come into effect each Accountholder in respect of which such Direct Rights have come into effect shall acquire all the rights which such Accountholder would have had if, immediately before such Direct Rights came into effect, it had been the holder of the definitive Notes issued on the issue date of the relevant Global Note in a principal amount equal to the principal amount of the relevant Accountholder as shown in the records of Euroclear and/or Clearstream, including the right to receive payments due in respect of such definitive Notes, other than payments already made under the Global Notes.
5. Prescription
Claims against the Issuer and the Guarantor in respect of principal, redemption price and interest on the Notes represented by a Global Note will be prescribed after 10 years (in the case of principal or redemption price) and five years (in the case of interest) from the Relevant Date (as defined in Condition 8 of the Conditions).
6. Cancellation
Cancellation of any Notes represented by a Global Note and required by the Conditions of the Notes to be cancelled following its redemption or purchase will be effected by endorsement by or on behalf of the Fiscal Agent of the reduction in the principal amount of the relevant Global Note on the relevant part of the schedule thereto.
7. Euroclear and/or Clearstream
Notes represented by a Global Note are transferable in accordance with the rules and procedures for the time being of Euroclear and/or Clearstream. References in the Global Notes and this summary to Euroclear and/or Clearstream shall be deemed to include references to any other clearing system through which interests in the Notes are held.
53 USE OF PROCEEDS
The net proceeds from the issue of the Notes after deducting fee, commissions and expense will be approximately US$497 million. HPH Trust intends to use the net proceeds of the offering to refinance certain indebtedness owed by subsidiaries of HPH Trust, indebtedness falling due in the near term and indebtedness which would provide an economic benefit to HPH Trust upon early repayment. In the event that HPH Trust determines not to use certain of the proceeds for this purpose, such proceeds will be used for general corporate purposes, including the funding of capital expenditures.
54 THE ISSUER
HPHT Finance (21) Limited is a company incorporated as an exempted company with limited liability under the laws of the Cayman Islands and a wholly-owned subsidiary of HPH Trust. Its registered office address is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
The Issuer, whose primary purpose is to act as a financing subsidiary of HPH Trust, will remain a wholly-owned subsidiary of HPH Trust as long as the Notes issued by it are outstanding. The Issuer has no material assets.
The directors of the Issuer are as follows:
Name Position Mr. Frank John SIXT ...... Director Ms. Edith SHIH ...... Director Mr. IP Sing Chi ...... Director Mr. LAM Hing Man...... Director Ms. LEE Tung Wan, Diana ...... Director
The business address of the abovementioned directors for the purposes of their directorships of the Issuer is Terminal 4, Container Port Road South, Kwai Chung, Hong Kong.
The objects for which the Issuer are established are set forth in clause 3 of the Issuer’s Memorandum of Association (copies of which are available as described under “General Information”). The Issuer has full power and authority to carry out any object not prohibited by the laws of the Cayman Islands.
The authorised share capital of the Issuer is US$50,000, divided into 50,000 shares of US$1.00 each, of which one ordinary share is issued and outstanding and has been fully paid.
No part of the equity securities of the Issuer is listed or dealt on any stock exchange and no listing or permission to deal in such securities is being or is proposed to be sought. The Issuer has no subsidiaries. The Issuer has not audited or published, and does not propose to audit or publish, any of its accounts since it is not required to do so under the laws of the Cayman Islands.
The Issuer’s non-audited financial statements are not published and are prepared only for internal purposes. The Issuer is, however, required to keep such accounts and records as are necessary to give a true and fair view of the Issuer’s affairs and to explain its transactions. If the Issuer publishes any of its accounts, such published accounts of the Issuer will, in the event that and for as long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require (or for as long as the Notes are listed on another stock exchange and its rules so require), be made available free of charge at the offices of the Fiscal Agent.
55 CAYMAN ISLANDS DATA PROTECTION
The Issuer has certain duties under the Data Protection Act (As Revised) of the Cayman Islands (the “DPL”).
Prospective investors should note that, by virtue of making investments in the Notes and the associated interactions with the Issuer and its affiliates and/or delegates, or by virtue of providing the Issuer with personal information on individuals connected with the investor (for example directors, trustees, employees, representatives, shareholders, investors, clients, beneficial owners or agents) such individuals will be providing the Issuer and its affiliates and/or delegates with information which constitutes personal data within the meaning of the DPL. The Issuer may constitute a data controller in respect of this personal data and its affiliates and/or delegates may act as data processors (or data controllers in their own right in some circumstances).
By investing in the Notes, the Noteholders and individuals connected with the Noteholders shall be deemed to acknowledge that they have read in detail and understood the Privacy Notice set out below and that such Privacy Notice provides an outline of their data protection rights and obligations as they relate to the investment in the Notes.
Oversight of the DPL is the responsibility of the Ombudsman’s office of the Cayman Islands. Breach of the DPL by the Issuer could lead to enforcement action by the Ombudsman, including the imposition of remediation orders, monetary penalties or referral for criminal prosecution.
56 PRIVACY NOTICE
Introduction
The purpose of this notice is to provide Noteholders and individuals connected with the Noteholders with information on the Issuer’s use of their personal data in accordance with the DPL.
In the following discussion, “Issuer” refers to the Issuer and its or their affiliates and/or delegates, except where the context requires otherwise.
Investor Data
By virtue of making an investment in the Issuer and a Noteholder’s associated interactions with the Issuer (including any subscription (whether past, present of future), including the recording of electronic communications or phone calls where applicable) or by virtue of a Noteholder otherwise providing the Issuer with personal information on individuals connected with the Noteholder as an investor (for example directors, trustees, employees, representatives, shareholders, investors, clients, beneficial owners or agents), the Noteholder will provide the Issuer with certain information which constitutes personal data within the meaning of the DPL (“Investor Data”). The Issuer may also obtain Investor Data from other public sources. Investor Data includes, without limitation, the following information relating to a Noteholder and/or any individuals connected with a Noteholder as an investor: name, residential address, email address, contact details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence records, passport number, bank account details, source of funds details and details relating to the Noteholder’s investment activity.
In the Issuer’s use of Investor Data, the Issuer may be characterised as a “data controller” for the purposes of the DPL. The Issuer’s affiliates and delegates may act as “data processors” for the purposes of the DPL.
Who this Affects
If a Noteholder is a natural person, this will affect such Noteholder directly. If a Noteholder is a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides the Issuer with Investor Data on individuals connected to such Noteholder for any reason in relation to such Noteholder’s investment with the Issuer, this will be relevant for those individuals and such Noteholder should transmit the content of this Privacy Notice to such individuals or otherwise advise them of its content.
How the Issuer May Use Investor Data
The Issuer may collect, store and use Investor Data for lawful purposes, including, in particular:
(i) where this is necessary for the performance of the rights and obligations under the Notes and any subscription agreements or purchase agreements and other documents relating to the Notes;
(ii) where this is necessary for compliance with a legal and regulatory obligation to which the Group is subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or
(iii) where this is necessary for the purposes of the legitimate interests of the Group and such interests are not overridden by the Noteholder’s interests, fundamental rights or freedoms.
Should the Issuer wish to use Investor Data for other specific purposes (which requires Noteholder’s consent with respect to such specific purposes), the Issuer will contact the applicable Noteholders.
57 Why the Issuer May Transfer Investor Data
In certain circumstances the Issuer and/or its authorised affiliates or delegates may be legally obliged to share Investor Data and other information with respect to a Noteholder’s interest in the Issuer with the relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange this information with foreign authorities, including tax authorities.
The Issuer anticipates Investor Data will be disclosed by the Issuer or the Noteholders to others who provide services to the Issuer, the Group, CKHH or their respective affiliates (which may include certain entities located outside the Cayman Islands or the European Economic Area), who will process Investor Data on the Issuer’s behalf.
The Data Protection Measures the Issuer Takes
The Issuer and/or its duly authorised affiliates and/or delegates shall apply appropriate technical and organisational information security measures designed to protect against unauthorised or unlawful processing of Investor Data, and against accidental loss or destruction of, or damage to, Investor Data.
The Issuer shall notify a Noteholder of any Investor Data breach that is reasonably likely to result in a risk to the interests, fundamental rights or freedoms of either such Noteholder or those data subjects to whom the relevant Investor Data relates.
58 THE TRUSTEE-MANAGER
The Trustee-Manager of HPH Trust
The Trustee-Manager, Hutchison Port Holdings Management Pte. Limited, was incorporated in Singapore with limited liability under the Companies Act on 7 January 2011. It has an issued and paid-up capital of HK$100,001. Its registered office is located at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, and its telephone and facsimile numbers are +65 6536 5355 and +65 6536 1360, respectively. The Trustee-Manager is an indirect wholly-owned subsidiary of CKHH.
Board of Directors of the Trustee-Manager
Name Age Position Mr. FOK Kin Ning, Canning...... 69 Chairman and Non-executive Director Ms. Edith SHIH ...... 69 Non-executive Director Mr. IP Sing Chi ...... 67 Executive Director Ms. TSIM Sin Ling, Ruth ...... 64 Non-executive Director Mr. CHAN Tze Leung, Robert ...... 74 Independent Non-executive Director Dr. FONG Chi Wai, Alex ...... 64 Independent Non-executive Director Mr. Graeme Allan JACK ...... 70 Independent Non-executive Director Mrs. SNG Sow-Mei (alias Poon Sow Mei) . . . 79 Independent Non-executive Director and Lead Independent Director Mr. WONG Kwai Lam ...... 71 Independent Non-executive Director
The Board of Directors of the Trustee-Manager consists of nine members of which 5 are Independent Non-executive Directors, 3 are Non-executive Directors and 1 is Executive Director. Set forth below is selected biographical information for each of the Directors:
Mr. FOK Kin Ning, Canning, aged 69, has been the Chairman and a Non-executive Director of the Trustee-Manager since February 2011. He is also a member of the Remuneration Committee of the Trustee-Manager. He is an executive director and a group co-managing director of CKHH, the chairman of Hutchison Telecommunications Hong Kong Holdings Limited (“HTHKH”), Hutchison Telecommunications (Australia) Limited, Power Assets Holdings Limited, HK Electric Investments Manager Limited (as the trustee-manager of HK Electric Investments) and HK Electric Investments Limited. He is also the deputy chairman of CK Infrastructure Holdings Limited (“CKI”), a director of Cenovus Energy Inc. and a non-executive director of TPG Telecom Limited. He holds a Bachelor of Arts degree and a Diploma in Financial Management, and is a Fellow of Chartered Accountants Australia and New Zealand.
Ms. Edith SHIH, aged 69, has been a Non-executive Director of the Trustee-Manager since January 2017. She is an executive director and the company secretary of CKHH, a non-executive director of Hutchison China MediTech Limited and HTHKH, and a member of the Board of Commissioners of PT Duta Intidaya Tbk. Ms. Shih is the Chairman of the Process Review Panel for the Financial Reporting Council and panel member of the Securities and Futures Appeals Tribunal. She is also the immediate past international president and current member of the executive committee of The Chartered Governance Institute (“CGI”), a past president of The Hong Kong Institute of Chartered Secretaries (“HKICS”) and the immediate past chairman of the governance committee and past council member of the Hong Kong Institute of Certified Public Accountants. Ms. Shih is a solicitor qualified in England and Wales, Hong Kong and Victoria, Australia and a Fellow of the CGI and HKICS, holding Chartered Secretary and Chartered Governance Professional dual designations. She holds a Bachelor of Science degree in Education and a Master of Arts degree from the University of the Philippines and a Master of Arts degree and a Master of Education degree from Columbia University, New York.
59 Mr. IP Sing Chi, aged 67, has been an Executive Director of the Trustee-Manager since February 2011. He is group managing director of HPH and chairman of YICT (P1&2). He is also a non- independent non-executive director of Westports Holdings Berhad, an independent non-executive director of Piraeus Port Authority S.A. and a non-executive director of Orient Overseas (International) Limited and COSCO SHIPPING Development Co., Ltd.. In addition, he was a member of the Hong Kong Port Development Council until the end of December 2014 and was the founding chairman (in 2000-2001) of the Hong Kong Container Terminal Operators Association Limited. He has over 40 years of experience in the maritime industry. He holds a Bachelor of Arts degree.
Ms. TSIM Sin Ling, Ruth, aged 64, has been a Non-executive Director of the Trustee-Manager since January 2017. She has extensive background in internal auditing and controls, financial analysis and reporting and has experience in both public accounting firm and several different industries in the commercial sector with roles in financial controllership. Ms. Tsim is the group chief financial officer of HPH and is a non-independent non-executive director of Westports Holdings Berhad. She holds a Master of Business Administration degree from the Chinese University of Hong Kong, and is an Associate of the Institute of Chartered Accountants in England and Wales, Fellow of the Chartered Association of Certified Accountants and the Hong Kong Institute of Certified Public Accountants and a member of the Chartered Professional Accountants British Columbia of Canada.
Mr. CHAN Tze Leung, Robert, aged 74, has been an Independent Non-executive Director of the Trustee-Manager since February 2011. He is also the Chairman of the Remuneration Committee and a member of the Audit Committee of the Trustee-Manager. He is the non-executive chairman of The Hour Glass (HK) Limited and an independent non-executive director of TOM Group Limited. Mr. Chan is an experienced banker with over 39 years of experience in both commercial and investment banking. He retired as chief executive officer of United Overseas Bank, Hong Kong on 31 December 2011. He is a senior adviser to Long March Capital Limited, a fund management company based in Beijing and Shanghai in partnership with leading Chinese institutions and a Fellow of the Hong Kong Institute of Directors. He holds a Bachelor of Science (Econ) Hons. and a Master’s degree in Business Administration.
Dr. FONG Chi Wai, Alex, aged 64, has been an Independent Non-executive Director of the Trustee- Manger since February 2020. He is an independent non-executive director of TOM Group Limited, HK Electric Investments Limited, HK Electric Investments Manager Limited (as trustee-manager of HK Electric Investments) and Glory Mark Hi-Tech (Holdings) Limited. He is also a director of The Hongkong Electric Company, Limited. He was the Chief Executive Officer of the Hong Kong General Chamber of Commerce (2006 to 2011) and the former secretary to the Hong Kong Port and Maritime Board and the Hong Kong Logistics Development Council. He has over 25 years of experience in the government of Hong Kong with operational and policy formulation expertise. Dr. Fong holds Bachelor of Social Science degree in Business and Economics from the University of Hong Kong, Master of Technology Management degree in Global Logistics Management from the Hong Kong University of Science and Technology, Master of Science degree in Global Finance from the New York University/Hong Kong University of Science and Technology, Doctor of Business Administration degree from the City University of Hong Kong and Doctor of Philosophy from the City University of Hong Kong. He is a Fellow of the Chartered Institute of Logistics and Transport in Hong Kong and a Fellow of the Hong Kong Institute of Directors.
Mr. Graeme Allan JACK, aged 70, has been an Independent Non-executive Director of the Trustee-Manager since February 2011. He is also Chairman of the Audit Committee of the Trustee- Manager. He has extensive experience in finance and audit. He is an independent non-executive director of The Greenbrier Companies, Inc., COSCO SHIPPING Development Co., Ltd. and Hutchison China MediTech Limited. He retired as a partner of PricewaterhouseCoopers in 2006. He holds a Bachelor of Commerce degree and is a Fellow of the Hong Kong Institute of Certified Public Accountants and an Associate of Chartered Accountants Australia and New Zealand.
Mrs. SNG Sow-Mei (alias POON Sow Mei), aged 79, has been an Independent Non-executive Director of the Trustee-Manager since January 2011. She is also a member of the Audit Committee, Remuneration Committee and Lead Independent Director of the Trustee-Manager. Mrs. Sng is an independent non-executive director of CKI and ARA Asset Management (Prosperity) Limited (as manager of Prosperity Real Estate Investment Trust). She was conferred the title of PPA(P) — Pingat Pentadbiran Awam (Perak), the Singapore Public Administration Medal (Silver) by the Republic of Singapore. She holds a Bachelor of Arts degree.
60 Mr. WONG Kwai Lam, aged 71, has been an Independent Non-executive Director of the Trustee-Manager since December 2015. He is an independent non-executive director of CKHH, ARA Asset Management (Prosperity) Limited (as manager of Prosperity Real Estate Investment Trust), K. Wah International Holdings Limited, Langham Hospitality Investments Limited and LHIL Manager Limited (as trustee-manager of Langham Hospitality Investments). He is a director of CUHK Medical Centre Limited, the chairman of IncitAdv Consultants Limited and the Chamber of Hong Kong Listed Companies and a vice chairman of the board of trustees and a member of the investment sub-committee of the board of trustees of New Asia College of the Chinese University of Hong Kong. He was a former member of the advisory committee of the Securities and Futures Commission in Hong Kong. He retired as managing director of the Asia investment banking division of Merrill Lynch (Asia Pacific) Ltd. in 2009 and served as their senior client advisor until 2010. He was conferred with an honorary fellowship by the Chinese University of Hong Kong. He has over 33 years of experience in the commercial and investment banking industry. He holds a Bachelor of Arts degree from the Chinese University of Hong Kong and has a Ph. D degree from Leicester University, England.
Constituent Documents of HPH Trust and the Trustee-Manager
Certain key provisions of the Trust Deed and the Memorandum and Articles of Association of the Trustee-Manager which are relevant to the issuance of the Notes and the Singapore Guarantee are set out below.
The borrowing powers exercisable by the Trustee-Manager (acting in its capacity as trustee- manager of HPH Trust) and how such borrowing powers may be varied.
Pursuant to the Memorandum of Association of the Trustee-Manager, the Trustee-Manager has full rights, powers and privileges necessary to carry on or undertake any business or activity, do any act or enter into any transaction subject to the provisions of the Companies Act, Chapter 50 of Singapore and any other written law and the Memorandum and Articles of Association of the Trustee-Manager, and in this case, the business of acting as trustee-manager of HPH Trust.
Section 28(4) of the BTA prohibits the Trustee-Manager from borrowing on behalf of HPH Trust unless the power of borrowing is conferred upon it by the Trust Deed. The Trust Deed empowers the Trustee-Manager to, whenever it considers it desirable in the interests of Unitholders to do so or for the purpose of enabling the Trustee-Manager to meet any contractual obligations or liabilities under or in connection with the trusts of the Trust Deed or with any investment of HPH Trust or for the purpose of financing the conduct, carrying on or furtherance of any Authorised Businesses (as defined in the Trust Deed) undertaken by HPH Trust or for the purpose of financing or facilitating any distributions to Unitholders or financing the repurchase and/or redemption of Units by the Trustee-Manager or for any other purpose deemed desirable by the Trustee-Manager in connection with any Authorised Businesses (as defined in the Trust Deed) undertaken by HPH Trust or any asset of HPH Trust, lend, borrow or raise monies (upon such terms and conditions as it thinks fit, including, without limitation, raising monies by the issue of securities or the incurrence of borrowings involving the charging, mortgaging or creating security of over all or any of the investments, assets or rights of HPH Trust or by issuing debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Trustee-Manager, as trustee-manager of HPH Trust) and enter into swap derivative transactions for the management of foreign exchange and/or interest rate risks and as otherwise permitted under the Trust Deed. The Trustee-Manager may secure the repayment of such monies and interest costs and other charges and expenses in such manner and upon such terms and conditions as the Trustee-Manager may think fit and provide such priority, subordination or sharing of any liabilities owing to HPH Trust in such manner and upon such terms and conditions as the Trustee-Manager may think fit provided that the Trustee-Manager shall not be required to execute any instrument, lien, charge, pledge, hypothecation, mortgage or agreement in respect of the lending, borrowing or raising of monies which (in its opinion) would render HPH Trust’s liability to extend beyond it being limited to the Trust Property.
61 Any variation of the borrowing powers as contained in the Trust Deed would require the approval of the Unitholders by way of an Extraordinary Resolution held at a Unitholders’ general meeting convened in accordance with the Trust Deed and such other regulatory approvals as may be required to vary the terms of the Trust Deed.
Roles and Responsibilities of the Trustee-Manager
The Trustee-Manager has the dual responsibility of safeguarding the interests of Unitholders, and managing the business conducted by HPH Trust. The Trustee-Manager has general powers of management over the business and assets of HPH Trust and its main responsibility is to manage HPH Trust’s assets and liabilities for the benefit of the Unitholders as a whole.
The Trustee-Manager will set the strategic direction of HPH Trust and decide on the acquisition, divestment or enhancement of assets of HPH Trust in accordance with its stated investment mandate. Additionally, the Trustee-Manager will undertake active management of HPH Trust’s assets to enhance the performance of the portfolio. It will also undertake capital and risk management strategies in order to maintain a strong balance sheet for HPH Trust.
The Trustee-Manager is also obliged to exercise the degree of care and diligence required of a trustee-manager of a business trust registered with the MAS under the BTA and its regulations (“Due Care”) to comply with the applicable provisions of all relevant legislation, as well as the listing manual of SGX-ST, and is responsible for ensuring compliance with the Trust Deed and all relevant contracts entered into by the Trustee-Manager on behalf of HPH Trust.
Furthermore, the Trustee-Manager will prepare business plans on a regular basis, which may contain proposals and forecasts on net income, capital expenditure, sales and valuations, explanations of major variances to previous forecasts, written commentary on key issues and any relevant assumptions. The purpose of these plans is to explain the performance of HPH Trust’s investments.
The Trustee-Manager, in exercising its powers and carrying out its duties as HPH Trust’s trustee-manager, is required to:
• treat Unitholders who hold Units in the same class fairly and equally;
• ensure that all payments out of the Trust Property of HPH Trust are made in accordance with the BTA and the Trust Deed;
• report to the relevant authority any contravention of the BTA or the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 by any other person that relates to HPH Trust; and has had, has or is likely to have, a material adverse effect on the interests of all Unitholders, or any class of Unitholders, as a whole, as soon as practicable after the Trustee-Manager becomes aware of the contravention;
• ensure that the Trust Property of HPH Trust is properly accounted for; and
• ensure that the Trust Property of HPH Trust is kept distinct from the property held in its own capacity.
The board of directors of the Trustee-Manager will meet regularly to review HPH Trust’s business activities and strategies pursuant to its then prevailing investment mandate. Such regular review is aimed at ensuring adherence to the Trust Deed and compliance with any applicable legislation, regulations and guidelines.
62 The Trustee-Manager also has the following statutory duties under the BTA:
• at all times act honestly and exercise reasonable diligence in the discharge of its duties as HPH Trust’s trustee-manager in accordance with the BTA and the Trust Deed;
• act in the best interests of all Unitholders as a whole and give priority to the interests of all Unitholders as a whole over its own interests in the event of a conflict between the interests of all the Unitholders as a whole and its own interests;
• not make improper use of any information acquired by virtue of its position as HPH Trust’s trustee-manager to gain, directly or indirectly, an advantage for itself or for any other person to the detriment of the Unitholders; and
• hold the Trust Property of HPH Trust on trust for all Unitholders as a whole in accordance with the terms of the Trust Deed.
Should the Trustee-Manager contravene any of the provisions setting out the aforesaid duties, it is:
• liable to all Unitholders as a whole for any profit or financial gain directly or indirectly made by it or any of its related corporations or for any damage suffered by all Unitholders as a whole as a result of the contravention; and
• be guilty of an offence and shall be liable on conviction to a fine not exceeding S$100,000.
While the Trustee-Manager is required to be dedicated to the conduct of the business of HPH Trust, it is not prohibited from delegating its duties and obligations to third parties. Save for an instance of fraud, wilful default or breach of trust by the Trustee-Manager or where the Trustee-Manager fails to exercise Due Care, it shall not incur any liability by reason of any error of law or any matter or thing done or suffered to be done or omitted to be done by it in good faith under the Trust Deed. In addition, the Trustee-Manager shall be entitled, for the purpose of indemnity against any actions, costs, claims, damages, expenses or demands to which it may be put as trustee-manager, to have recourse to the Trust Property of HPH Trust or any part thereof save where such action, cost, claim, damage, expense or demand is occasioned by the fraud, wilful default or breach of trust by the Trustee-Manager or by the failure of the Trustee-Manager to exercise Due Care. The Trustee-Manager may, in managing HPH Trust and in carrying out and performing its duties and obligations under the Trust Deed, appoint such person to exercise any or all of its powers and discretions and to perform all or any of its obligations under the Trust Deed, and shall not be liable for all acts and omissions of such persons provided that the Trustee-Manager exercised Due Care in selecting as well as monitoring such persons.
Under and subject to the terms of the Trust Deed, the Trustee-Manager is entitled to receive certain fees in respect of its services to HPH Trust. Such fees consist of base fee, performance fee, acquisition fee, divestment fee and development fee and they may be paid to the Trustee-Manager either in the form of cash and/or Units (as the Trustee-Manager may elect).
Retirement or Removal of the Trustee-Manager
Under the BTA, the Trustee-Manager may be removed as trustee-manager of HPH Trust by the Unitholders only by an extraordinary resolution, or it may resign as trustee-manager. Any removal or resignation of the Trustee-Manager must be made in accordance with the procedures that the MAS may prescribe. Any purported change of the trustee-manager of a registered business trust is ineffective unless it is made in accordance with the BTA.
Under the Trust Deed, the Trustee-Manager may be removed only if such removal is approved by an extraordinary resolution of the Unitholders (with no Unitholder being disenfranchised).
63 The Trustee-Manager will remain the trustee-manager of HPH Trust until another person is appointed by:
• the Unitholders to be the trustee-manager of HPH Trust; or
• by the court under Section 21(1) of the BTA to be the temporary trustee-manager of HPH Trust, and such appointment shall be effective from the date stated in the resolution of the Unitholders or court order as the effective date of the appointment of the replacement trustee-manager or temporary trustee-manager, as the case may be.
Pursuant to Section 21(1) of the BTA, on an application by the MAS or the Trustee-Manager or a Unitholder, the court may, by order, appoint a company that has consented in writing to serve as a temporary trustee-manager to be the temporary trustee-manager of HPH Trust for a period of three months if the court is satisfied that the appointment is in the interest of the Unitholders.
The temporary trustee-manager of HPH Trust is required, within such time and in accordance with such requirements as may be prescribed by MAS, to take steps to enable the Unitholders to appoint another person as the trustee-manager (not being a temporary trustee-manager) of HPH Trust.
64 THE HONG KONG GUARANTOR
The Hong Kong Guarantor, HPHT Limited, was incorporated with limited liability under the laws of Hong Kong on 7 January 2011. Its registered office address is Terminal 4, Container Port Road South, Kwai Chung, New Territories, Hong Kong. The Hong Kong Guarantor is primarily an investment holding company.
The directors of the Hong Kong Guarantor are as follows:
Name Position Mr. FOK Kin Ning, Canning(1) ...... Director Mr. Frank John SIXT ...... Director Mr. IP Sing Chi ...... Director
Note: (1) Mr. LAI Kai Ming, Dominic is alternate director to Mr. FOK Kin Ning, Canning.
The business address of the abovementioned directors for the purposes of their directorships of the Hong Kong Guarantor is Terminal 4, Container Port Road South, Kwai Chung, New Territories, Hong Kong.
The Hong Kong Guarantor has a total number of 10,000,000 shares in issue.
No part of the equity securities of the Hong Kong Guarantor is listed or dealt on any stock exchange and no listing or permission to deal in such securities is being or is proposed to be sought. The Hong Kong Guarantor has not published, and does not propose to publish, any of its accounts since it is not required to do so under the laws of Hong Kong.
The Hong Kong Guarantor’s audited financial statements are not published and are prepared only for internal purposes as required by relevant laws in Hong Kong. The Hong Kong Guarantor is, however, required to keep such accounts and records as are necessary to give a true and fair view of the Hong Kong Guarantor’s affairs and to explain its transactions. If the Hong Kong Guarantor publishes any of its accounts, such published accounts of the Hong Kong Guarantor will, in the event that and for as long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require (or for as long as the Notes are listed on another stock exchange and its rules so require), be made available free of charge at the offices of the Fiscal Agent.
65 CAPITALISATION OF HPH TRUST
The following table sets forth the consolidated capitalisation of HPH Trust as of 31 December 2020 as adjusted to give effect to the issuance of the Notes. The table has been prepared on a basis consistent with the principal accounting policies of HPH Trust as set out in HPH Trust’s financial statement announcement for the year ended 31 December 2020 that is incorporated by reference in this Offering Circular and should be read in conjunction with such audited consolidated financial information.
As of 31 December 2020 Actual As adjusted As adjusted(1) (in millions) (in millions) (in millions) Short-term bank and other debts(2) (including current portion of long-term bank and other debts)...... HK$3,992.0 HK$3,992.0 US$511.8 Long-term bank and other debts(2) (net of current portion) ...... HK$25,428.0 HK$25,428.0 US$3,260.0 Interest bearing loans from non-controlling interests ...... HK$113.7 HK$113.7 US$14.5 Interest free loans from non-controlling interests ...... HK$35.3 HK$35.3 US$4.5 Notes offered hereby(1) ...... — HK$3,900.0(1) US$500.0 Total unitholders’ equity(3) ...... HK$26,002.0 HK$26,002.0 US$3,333.6 Non-controlling interests ...... HK$19,601.9 HK$19,601.9 US$2,513.1 Total capitalisation ...... HK$75,172.9 HK$79,072.9 US$10,137.5
(1) Translated based on an exchange rate of US$1 = HK$7.80. Notes offered hereby represent the aggregate principal amount of the Notes, translated into Hong Kong dollar for convenience only at the aforementioned rate. (2) Short-term bank and other debts and long-term bank and other debts represent the principal amounts and are stated before the unamortised loan facilities fees and discounts related to debts. (3) Total unitholders’ equity comprises units in issue, exchange and other reserves, revaluation reserve, hedging reserve, costs of hedging reserve, pension reserve and retained earnings as of 31 December 2020.
As of 31 December 2020, the issued and fully paid units comprised 8,711,101,022 units.
Except for the adjustments included in the table above, there has been no material change in the total capitalisation of HPH Trust since 31 December 2020.
66 THE BUSINESS OF HPH TRUST
Overview
HPH Trust is the first publicly traded container port business trust that provides its Unitholders with an opportunity to invest in the market leader of the world’s largest trading hub by throughput, the Pearl River Delta, which includes two of the world’s busiest container port cities by throughput — Hong Kong and Shenzhen, the PRC. HPH Trust’s initial public offering was sponsored by HPH, a global leader in the container port sector by throughput and a subsidiary of CKHH.
HPH Trust’s investment mandate is principally to invest in, develop, operate and manage deep-water container ports(1) in the Pearl River Delta.
Currently, HPH Trust holds interests in deep-water container ports strategically located in Hong Kong and Shenzhen, the PRC. It operates HIT, COSCO-HIT, ACT, YICT and HICT, collectively the Portfolio Container Terminals. In aggregate, the Portfolio Container Terminals has 38 container berths across 647 hectares of land, which delivered a combined throughput of approximately 23.3 million TEU and 23.7 million TEU in 2019 and 2020, respectively.
HPH Trust’s core port operations are complemented by river ports and ancillary services, which aim to provide customers with seamless logistics supply chain solutions for both imports and exports. HPH Trust holds economic benefits(2) in two river ports in the PRC, namely Jiangmen Terminal and Nanhai Terminal. It also operates ancillary services via APS, including container depots, trucking, feeder and shipping agency, Hutchison Logistics, which offers supply chain solutions across rail, sea and land networks, and SHICD, operator of an inland container depot and warehouse in Shenzhen.
HPH Trust is managed by the Trustee-Manager, which is an indirect wholly-owned subsidiary of CKHH.
Notes: (1) For the purposes of the investment mandate of HPH Trust, a “deep-water container port” means any port that has the ability to accommodate a fully laden vessel with a capacity in excess of 8,000 TEU. (2) The River Ports Economic Benefits represent the economic interest and benefits of the River Ports, including all dividends and any other distributions or other monies payable to HPH or any of its subsidiaries in its capacity as a shareholder of the relevant holding company of the River Ports arising from the profits attributable to the business of the River Ports and all sale or disposal proceeds derived from such businesses, assets, rights and/or liabilities constituting any part of the business of the River Ports as agreed with HPH and any of its subsidiaries.
67 The map below shows the locations of HIT, COSCO-HIT, ACT, YICT, HICT and the River Ports.
Competitive Strengths The Trustee-Manager believes that the Portfolio Container Terminals have the following competitive strengths: Portfolio Container Terminals — Competitive Strengths Natural deep-water geographic advantages underpinned by long-term operating rights The Portfolio Container Terminals offer natural deep-water ports with direct and unimpeded channel access. With natural deep-water ports, the Portfolio Container Terminals are well-positioned to accommodate container vessels of all sizes, with the flexibility to respond to constant changes in the shipping industry and resultant re-alignment of shipping services. As the Portfolio Container Terminals are naturally deep-water, it would generally not be necessary for them to be dredged, which would otherwise be a costly and disruptive exercise. In addition, the ease of access to the Portfolio Container Terminals, due to their deep-water approach channels leading to the terminals, saves time and costs for container vessels, as the latter can take the most direct route to the terminals. This is particularly important for mega-vessels, which are increasingly being operated by liners in their efforts to achieve cost efficiencies. Moreover, the long-term rights granted by the respective governmental authorities, with operating periods ending from 2038 to 2059, enable capital investments to be planned and staggered across the relevant terms. This further enhances customers’ confidence in the long-term stability of the operation of the Portfolio Container Terminals. See “HIT, COSCO-HIT and ACT — Port Concessions” and “YICT — Government Approvals for Port Operation” for further details of these rights. Strong and established global connectivity One of the key drivers of the strategic value of the Portfolio Container Terminals is their connectivity. A port’s connectivity is determined by its location, number of destinations served by the port, the number of shipping lines calling at the port, the services offered by the port as well as the access to the port’s hinterland.
68 On a combined basis, Hong Kong and Shenzhen, the PRC have a total throughput of approximately 45 million TEU in 2020. As at 31 December 2020, the Portfolio Container Terminals served all major shipping lines with about 308 weekly container movements to a wide range of destinations around the world. The global network reach of these shipping lines establishes the Portfolio Container Terminals’ position as the key O&D gateway and transshipment hub in the Pearl River Delta.
Established reputation and brand name with strong customer relationships
The Portfolio Container Terminals have established a strong and well-recognised reputation and brand name due to their track record of serving the container port industry in the Pearl River Delta, the world’s busiest and largest trading hub. With one of the longest operating histories in the container port industry as well as their continued achievement of operational performance and customer service, the Portfolio Container Terminals enjoy close and established working relationships with a large and diverse range of customers and shippers, which include all the major shipping lines, as well as shippers of O&D cargoes such as multinational retailers and manufacturers.
Customised and quality service ensuring customer satisfaction
The Portfolio Container Terminals work closely with shipping lines to better understand their needs. The operating systems of the Portfolio Container Terminals are integrated with those of their major customers. The Portfolio Container Terminals have a licence to use HPH’s proprietary and award winning terminal management system, nGen. The customer relationship management and integrated systems of nGen enable the Portfolio Container Terminals to offer flexible and customised services, such as late cargo acceptance, express customs processing and last-minute route modification. These services increase customer satisfaction and build customer loyalty.
Optimised design and layout, with advanced port infrastructure and facilities, capable of servicing mega-vessels
The Trustee-Manager believes that the Portfolio Container Terminals have advanced infrastructure compared to their regional and global peers. The Portfolio Container Terminals are designed using state-of-the-art simulation models to optimise the terminal layout in order to maximise productivity, optimise efficiency, increase throughput per berth and minimise berthing time for vessels. The use of advanced container equipment, such as Super Post Panamax Quay Cranes and Tandem-Lift Quay Cranes, also differentiates the Portfolio Container Terminals from other ports. The Trustee-Manager believes that this allows the Portfolio Container Terminals to offer fast turnaround times and reliability to their customers.
The Portfolio Container Terminals’ market leader position for innovation, best-in-class service and sustainable development is further reaffirmed with YICT as the sole winner of the distinguished Ports & Terminals Award at the Seatrade Maritime Awards Asia 2016 and the winner of the “Year 2019 Shenzhen Mayor Quality Award” in December 2020 and HIT as recipient of the ERB Manpower Developers Award 2018 and Wastewise Certificate “Excellence Level” 2019.
Complementary services offering to customers at the Portfolio Container Terminals
HIT, COSCO-HIT and ACT, collectively, is primarily a transshipment hub and is regarded as the gateway to the PRC and its vast mainland hinterland, YICT is primarily an O&D gateway for Europe and North America and HICT currently provides feeder and intra-Asia services for cargoes in Huizhou hinterland. Together, they offer shipping lines a wide spectrum of services. The Portfolio Container Terminals are further supported by an in house feeder service, integrated operating systems, and complementary business models.
69 APS offers marine feeder services between HIT, COSCO-HIT, ACT, YICT and the River Ports, and facilitates efficient movement of cargo between the ports. The integration of the Portfolio Container Terminals’ operating systems also enhances the efficiency of the port operations. See “YICT — Competitive Strengths — Well-developed intermodal network to the PRC hinterland, presenting significant growth potential”.
HIT, COSCO-HIT and ACT — Competitive Strengths
In addition, the Trustee-Manager believes that HIT, COSCO-HIT and ACT have the following competitive strengths:
Strategically located transshipment hub
Given the strategic central location of Hong Kong in the Asia-Pacific region, HIT, COSCO-HIT and ACT benefit from being the key transshipment hub at the nexus of major trade routes. There are about 227 weekly services connecting to destinations around the globe in 2020. This enables HIT, COSCO-HIT and ACT to capture a substantial share of the east-west, north-south and intra-regional transshipment and intra-Asia O&D cargoes.
Freeport status of Hong Kong complemented by conducive business environment and infrastructure
HIT, COSCO-HIT and ACT benefit from the freeport status of Hong Kong, which does not impose any customs duties except on tobacco, liquor, hydrocarbon oil and methyl alcohol. In addition, Hong Kong has late cargo cut-off times and liberal export declarations, which allow electronic declaration within 14 days after a vessel’s departure from the port. This enhances Hong Kong’s position as the key transshipment hub in Asia.
As a Special Administrative Region of the PRC, Hong Kong is exempt from Chinese cabotage rules which give it a competitive edge and flexibility to freely provide non-Chinese liners with transshipment services for Chinese container trades.
On a macro level, Hong Kong’s efficient government, vibrant financial sector (which facilitates global trade), stable regulatory framework and exchange rate stability create a competitive business environment in which HIT, COSCO-HIT and ACT may operate their businesses.
Scale of operations and contiguous yards, resulting in operational synergies
On 8 January 2019, HIT, COSCO-HIT, ACT and MTL entered into a Hong Kong Seaport Joint Operating Alliance Agreement regarding the terms on which they will collaborate with each other for the efficient management and operation of the 23 berths across Terminals 1, 2, 4, 5, 6, 7, 8 and 9 in Kwai Tsing, Hong Kong. The Trustee-Manager believes the formation of HK Seaport Alliance further enhance efficiencies, increase utilisation and improve HPH Trust’s overall service offering to customers. The port of Hong Kong will continue to be a reliable transshipment hub in the region and a key gateway to the PRC.
YICT — Competitive Strengths
Further, the Trustee-Manager believes that YICT has the following competitive strengths:
The largest and scalable deep-water port in Shenzhen, the PRC, with first mover advantage
YICT is the first and only deep-water container port in eastern Shenzhen. Since commencing operations in mid-1994, it has been able to capitalise on its first mover advantage and has developed into the largest port in Shenzhen, the PRC, with a wide spectrum of port services being offered. YICT’s throughput first exceeded 10 million TEU in 2007 and subsequently exceeded 10 million TEU in each of the years from 2010 to 2020. In February 2021, YICT reached a total throughput of 200 million TEU in just over 25 years, a milestone for the port industry.
70 With its existing developments and access to expansion sites, YICT has substantial scope for long term development to increase throughput capacity on a timely basis to cater to future customer demand, which will increase throughput and revenue. YICT has executed a non-binding heads of agreement to develop YICT East Port Phase I in the future.
Gateway to the Guangdong Province trade catchment area, one of the densest manufacturing regions in the world
The Trustee-Manager believes that YICT’s geographic proximity to the major industrial regions in South China, such as Shenzhen and Guangzhou, its natural deep-water harbour and well-developed public infrastructure have positioned YICT as the port of choice for export of manufactured products. Its proximity to the manufacturing centres in the Pearl River Delta and its highly efficient terminal operations has made it a major port for exports in the PRC.
The Trustee-Manager also believes that YICT is ideally positioned to capitalise on the growing import of goods by the PRC as its economy continues to grow and its population becomes more affluent, bringing with it a corresponding increase in consumer purchasing power.
Well-developed intermodal network to the PRC hinterland, presenting significant growth potential
YICT is well-connected to the public transportation system in the PRC. In addition to the advanced highway network which allows the movement of cargo across the Guangdong Province, HPH Trust also owns Pingyan Railway, which connects YICT to the national railway network of the PRC. The 22.7 kilometre-long railway interfaces with the PRC’s main railway network, specifically the Beijing-Kowloon Line and the Beijing-Guangzhou Line, which enables YICT to provide one-stop logistics services to importers and exporters in the Guangdong Province and provinces and cities in Inner China including Chongqing, Guizhou, Hubei, Hunan, Jiangxi, Sichuan, Xinjiang and Yunnan.
The Trustee-Manager believes that this advanced transportation network facilitates the movement of goods between the inland regions of the PRC and YICT, and the expansion of this network will further increase the catchment area of YICT beyond Guangdong Province. With the PRC’s “Go West” Policy(1), YICT is well positioned to serve the import and export needs of western China.
Additional handling capacity and operational synergies to be realised following the strategic acquisition of HICT
On 28 December 2016, YICT (P3) and Shenzhen Pingyan Multimodal Company Limited (“SPMC”) acquired 65% and 15% equity interest respectively in HICT, a port that is located near the manufacturing hinterland in eastern Guangdong, immediately east of Hong Kong and Shenzhen and the first dedicated container terminal in Huizhou. Due to HICT’s strategic location, its two 50,000-tonne container berths are well-positioned for provision of feeder services to YICT, as well as, to attract more intra-Asia cargoes and to provide additional handling capacity and generates operational synergies with YICT through the sharing of resources and better utilisation of port and related facilities.
Strategies
The principal investment mandate of the Trustee-Manager for HPH Trust involves investing in, developing, operating and managing deep-water container ports in the Pearl River Delta. HPH Trust may also invest in other types of port assets, including river ports, which may be complementary to the deep-water container ports operated by HPH Trust as well as undertake certain port ancillary services, including but not limited to trucking, feedering, freight-forwarding, supply chain management, warehousing and distribution services. In 2020, HPH Trust’s revenue from its deep-water port business represented more than 90% of its revenue.
(1) The “Go West” Policy is a policy adopted by the PRC Government to develop the western regions of the PRC.
71 The Trustee-Manager intends to pursue deep-water container port investment opportunities based on its assessment of their potential for value creation, growth and sustained profitability to ensure that these investments will deliver long-term distribution per unit (“DPU”)-accretive returns.
The Trustee-Manager aims to provide Unitholders with stable and regular distributions as well as long-term DPU growth. The Trustee-Manager believes that the positive outlook of the deep-water container port market in the Pearl River Delta provides HPH Trust with the opportunity to increase the returns of the Portfolio Container Terminals through a combination of the following strategies.
Active Business and Asset Management Strategy
The Trustee-Manager intends to actively manage HPH Trust’s Portfolio Container Terminals in the Pearl River Delta. In particular, it intends to:
• Increase throughput of the Portfolio Container Terminals
o enhance customer satisfaction with innovative and tailored solutions by offering value-added port and logistics solutions to customers of the Portfolio Container Terminals. For example, the Portfolio Container Terminals provide differentiated solutions such as flexible scheduling of berth and quay cranes to optimise turnaround time for time-sensitive customers. In addition, the Electronic Data Interchange System (as defined herein) of HPH Trust supports and integrates the exchange of information between the Portfolio Container Terminals and its customers from the submission of vessel arrival schedules to the eventual bill processing;
o engage in long-term planning with a strong understanding of customers’ future needs by making timely strategic capital expenditures on its port facilities and infrastructure to maintain its first-mover advantage and capitalise on emerging trends;
o maintain close ties with key stakeholders such as shipping lines, freight-forwarders and shippers, including multinational retailers and manufacturers, to capitalise on the expanding throughput of the PRC’s exports and imports. The PRC’s imports remain low relative to its exports, but are expected to grow as a result of the rising affluence of the PRC’s urban population; and
o capitalise on the expanding throughput of hinterland cargo in the central and western regions of the PRC by promoting intermodal connectivity between YICT and the PRC’s road, barge and rail networks. HPH Trust already owns the 22.7 kilometre Pingyan Railway, which connects YICT to the national railway network of the PRC.
• Implement strategies to enhance throughput mix
The Trustee-Manager intends to pro-actively identify throughput trends and devise strategies to capture opportunities arising from such trends by:
o capitalising on the trend of increasing imports of the PRC as a result of the rising affluence of the PRC’s urban population; and
o implementing strategies to improve the proportion of inbound laden containers as compared to empty containers, because the average revenue for inbound laden containers is higher than that for empty containers.
72 • Improve operational efficiency and reduce operating costs
The Trustee-Manager intends to actively manage HPH Trust’s cost base in order to maintain its strong profitability by:
o maximising efficiency and productivity of its operations;
o investing in cost reduction initiatives that reduce fuel and power costs;
o continuing to develop and improve technology;
o leveraging the provision of labour by subcontractors to maintain a variable cost structure to better align costs with peak or seasonal demand; and
o working closely with customers to implement cost saving and resource sharing initiatives.
Risk and Capital Management Strategy
• Optimise overall capital structure of HPH Trust and its assets
The Trustee-Manager’s strategy involves adopting and maintaining an appropriate mix of debt and equity for HPH Trust to ensure optimal returns to Unitholders, while maintaining sufficient flexibility for HPH Trust to implement growth strategies or acquisitions.
As and when appropriate, the Trustee-Manager may consider diversifying its sources of debt financing by continuing to access the debt capital markets through the issuance of additional bonds to diversify HPH Trust’s funding sources and to optimise its balance of fixed and floating rate debt. The Trustee-Manager may also pursue growth opportunities that may require raising additional equity capital for HPH Trust through the issue of new Units. The decision to raise additional equity will also take into account HPH Trust’s strategy of maintaining an optimal capital structure.
• Proactively manage overall financing costs
The Trustee-Manager may utilise interest rate hedging strategies where appropriate to optimise risk-adjusted returns to Unitholders, and will adopt a proactive interest rate management policy to manage the risks associated with changes in interest rates on debt financing while seeking to ensure the competitiveness of HPH Trust’s ongoing cost of debt.
Development and Acquisition Growth Strategy
The Trustee-Manager will endeavour to identify, evaluate and selectively pursue value-enhancing greenfield or brownfield development and acquisition opportunities with attractive cash flow generation characteristics and long-term DPU-accretion potential.
• Pursue selective value-enhancing development projects
HPH’s expertise as a port operator provides HPH Trust with access to HPH’s global experience in undertaking container port development activities.
The Trustee-Manager seeks to adhere to its investment mandate by only undertaking developments on a selective basis that it believes will be value enhancing to the portfolio. HPH Trust has executed a non-binding heads of agreement to develop YICT East Port Phase I in the future.
73 • A right of first refusal over HPH’s pipeline in the Pearl River Delta
To demonstrate its support for HPH Trust, HPH has granted HPH Trust certain rights to participate in, and rights of first refusal over, any future deep-water container ports developed or acquired by HPH that fall within HPH Trust’s investment mandate, subject to the terms and conditions set out in the Amended ROFR Agreement.
• Selectively pursue third party acquisition opportunities
The Trustee-Manager believes there are good prospects for consolidation and investment opportunities in the deep-water container port market in the Pearl River Delta due to greater demand for deep-water container ports as a result of economic growth and expanding trade activity. Accordingly, in addition to future projects under the Amended ROFR Agreement, the Trustee-Manager will independently source projects that satisfy HPH Trust’s investment mandate.
74 STRUCTURE OF HPH TRUST
The following diagram illustrates the relationship between HPH Trust, the Trustee-Manager and the Unitholders as at the date of this Offering Circular. The percentages in the following diagram represent HPH Trust’s effective interests in these assets/businesses:
Unitholders
Holding Distributions Acting on behalf of of Units Hutchison Port Unitholders/Provision of management services Holdings Management Pte. HPH Trust Limited Fees (Trustee-Manager) Dividends/interest income, net of Ownership and applicable taxes and expenses, shareholder loans and principal repayment of shareholder loans
HPHT Limited
Dividends/interest income, net of Ownership and applicable taxes and expenses, shareholder loans and principal repayment of shareholder loans Intermediate BVI, Cayman Islands, Hong Kong and PRC companies(1)
HIT, COSCO-HIT Portfolio Ancillary YICT and HICT (2) and ACT River Ports Services
50.0%Jiangmen 100.0% HIT YICT (P1&2) APS 100.0%(Terminals 4, 6, 56.4% (YICT Phases Terminal 7 and 9 North) I & II) 50.0%Nanhai 100.0% Hutchison Terminal Logistics 50.0% COSCO-HIT YICT (P3) (Terminal 8 East) (YICT Phase III 51.6% and YICT 86.5% SHICD Phase III 40.0% ACT Expansion) (Terminal 8 West)
YWP 51.6% (West Port Phases I and II)
41.3% HICT
Notes: (1) There are multiple layers of intermediate BVI, Cayman Islands, Hong Kong and PRC companies. (2) HPH Trust holds the River Ports Economic Benefits, but not the shares of the River Ports’ holding companies.
75 PORTFOLIO CONTAINER TERMINALS
Overview of Facilities
The table below summarises certain key information in relation to the Portfolio Container Terminals as of 31 December 2020.
Container Throughput (TEU in thousands) No. of Rubber Vessel No. of Total Container Tyred HPH Trust Container Barge Berth Water Depth Quay Gantry Total Ownership of Terminals Berths(1) Berths(1) Length Alongside(2) Cranes Cranes Area 2016 2017 2018 2019 2020 Operator(3) (metres) (metres) (ha)
HIT, COSCO-HIT and ACT (Total) ...... 16 (16) 9 (3) 5,820 14.2 to 16.0 62 216 170 10,810 11,365 10,616 9,991 10,055 — HIT...... 12 (12) 4 (1) 3,992 14.2 to 16.0 46 156 111 8,313 7,875 (4) 7,357(4) 6,924(4) 6,968(4) 100.0% COSCO-HIT ...... 2 (2) 5 (2) 1,088 15.5 8 30 30 1,374 1,921 (4) 1,794(4) 1,688(4) 1,699(4) 50.0% ACT ...... 2 (2) 0 (0) 740 15.5 8 30 29 1,123 1,568 (4) 1,465(4) 1,379(4) 1,388(4) 40.0% YICT (Total) ...... 20 (25) 3 (4) 9,078 14 to 17.6 85 229 417 11,698 (6) 12,916(6) 13,413(6) 13,309(6) 13,619(6) — YICT Phases I & II. .... 5 (5) 1 (2) 2,437 14 to 15 (5)
76 20 63 130 2,971 3,097 3,007 2,947 3,002 56.4% YICT Phase III and YICT Phase III Expansion. . . 11 (15) — (—) 4,697 16 to 17.6 55 134 226 7,542 8,269 8,030 7,871 8,018 51.6% West Port Phase I ..... 1 (1) 2 (2) 802 14.3 (5) 5 12 17 437 456 443 434 442 51.6% West Port Phase II..... 3 (4) — (—) 1,142 15 5 20 44 746 882 1,680 1,817 1,887 51.6% HICT ...... 2 (3) — (—) 800 15.7 6 22 60 — (6) —(6) —(6) —(6) —(6) 41.3% Total ...... 38 (44) 12 (7) 15,698 14 to 17.6 153 467 647 22,508 24,280 24,029 23,300 23,674 —
Notes: (1) The figures in brackets are based on HPH’s global definition of a berth at 300 metres per berth. These figures are computed by dividing the total berth length by 300 metres. (2) The water depth alongside refers to the quay side depth of the terminal where the vessel will berth. (3) The percentages represent HPH Trust’s effective interests in these assets/businesses. (4) Following the taking effect of the Co-management Agreement from 1 January 2017 and the Hong Kong Seaport Joint Operating Alliance Agreement from 1 April 2019, the figures represent the allocated throughput according to the agreed split ratio under the aforesaid agreements. (5) The figure excludes the water depth of the barge berth. (6) The throughput volume of HICT, an affiliated company of YICT has been grouped under YICT’s reported throughput from 28 December 2016, the date of acquisition. HIT, COSCO-HIT AND ACT
Description
HIT
Established in 1969 and situated in the Kwai Tsing container port area of Hong Kong (which is one of the busiest container ports in the world), Hongkong International Terminals Limited (“HITL”) operates twelve berths (Terminals 4, 6, 7 and 9 North) with total area of 111 hectares at Kwai Tsing, Hong Kong. HPH Trust owns 100% of the issued shares of HITL.
COSCO-HIT
COSCO-HIT Terminals (Hong Kong) Limited (“CHT”) is a 50/50 joint venture between HIT Investments Limited (“HITIL”, an indirect holding company of HITL and an indirect subsidiary of HPH Trust) and COSCO SHIPPING Ports Limited (“COSCO”), an affiliate of China Ocean Shipping (Group) Company. CHT operates two container berths at the eastern side of Terminal 8 at Kwai Tsing, Hong Kong. The shareholders of CHT have agreed that certain matters relating to CHT, such as the sale of material assets or changes in the business or share capital of CHT, require the approval of both shareholders and that each shareholder shall have a pre-emptive right to acquire the shares in CHT of the other shareholder. CHT has appointed HITL to provide general advisory and management services to CHT in relation to CHT’s business. In addition, COSCO has undertaken to CHT and HITIL not to participate, engage or be involved directly or indirectly in the ownership, development, expansion or operation of any container terminal facility in Hong Kong or any neighbouring region that, in the reasonable opinion of HITIL, is likely to compete with or have a detrimental effect on the business of CHT or the business of HITL. However, HITIL has also undertaken to COSCO that if it becomes involved in the development of new container terminal facilities in Hong Kong or any neighbouring region for which it requires a joint venture participant, it would first offer COSCO the opportunity to participate in such venture on a joint venture basis. The joint venture may be terminated by either shareholder if the other shareholder becomes unable to pay its debts as and when they fall due or an order is made for the other shareholder’s liquidation or dissolution or by either shareholder upon the other shareholder being in material breach of the terms of the joint venture contract or by either shareholder after it disposes of all of its shares in CHT by giving not less than three years’ notice of termination of the joint venture.
ACT
ACT is operated by Asia Container Terminals Limited (“ACTL”), a wholly-owned subsidiary of Asia Container Terminals Holdings Limited (“ACT Holdings”), which HPH Trust acquired 100% interest from DP World ACT Holdings Limited, DP World 8 Limited and PSA China Pte Ltd on 7 March 2013. In March 2014, HPH Trust entered into strategic partnerships with COSCO and China Shipping Terminal Development (Hong Kong) Company Limited which was subsequently renamed to China Shipping Ports Development Co., Limited through their investments of 40% and 20%, respectively, of effective equity and loan interests in ACT Holdings and its group companies. After COSCO’s reorganisation, COSCO has 60% interest in ACT. ACT commenced operations at Terminal 8 West at Kwai Tsing, Hong Kong in 2005. The terminal comprises two container berths with a combined area of 29 hectares.
Co-management agreement
In December 2016, HITL, CHT and ACTL signed the co-management agreement (“Co-management Agreement”). The arrangement was effective from 1 January 2017, on which the parties collaborated for efficient co-management and operation of the 16 berths across Terminals 4, 6, 7, 8 and 9 North in Kwai Tsing, Hong Kong.
Hong Kong Seaport Joint Operating Alliance
On 8 January 2019, HITL, CHT, ACTL and MTL entered into a Hong Kong Seaport Joint Operating Alliance Agreement regarding the terms on which they will collaborate with each other for the efficient management and operation of the 23 berths across Terminals 1, 2, 4, 5, 6, 7, 8 and 9 in Kwai Tsing, Hong Kong (the “Hong Kong Seaport Joint Operating Alliance Agreement”).
77 Layout of Kwai Tsing Port
The map below illustrates layout of Kwai Tsing Port and the location of terminals operated by HIT, COSCO-HIT and ACT.
(A) HIT (B) COSCO-HIT (C) ACT
Throughput
The throughput of HIT, COSCO-HIT and ACT during the period from 1993 to 2020 is indicated in the table below.
HIT, COSCO-HIT and ACT have transformed from an O&D port into a transshipment hub over the years. The percentage of total throughput represented by transshipment cargo at HIT, COSCO-HIT and ACT increased from 21% in 2001 to 79% in 2020.
Throughput (TEU in thousands) Year HIT COSCO-HIT ACT Total 1993...... 3,487 — — 3,487 1994...... 4,015 631 — 4,646 1995...... 4,078 1,193 — 5,271 1996...... 4,499 1,154 — 5,653 1997...... 5,087 1,302 — 6,389 1998...... 4,540 1,092 — 5,632 1999...... 4,875 1,101 — 5,976 2000...... 5,308 1,293 — 6,601 2001...... 4,959 1,193 — 6,152 2002...... 5,188 1,399 — 6,587 2003...... 5,020 1,372 — 6,392 2004...... 5,922 1,530 — 7,452 2005...... 6,132 1,678 — 7,810 2006...... 6,657 1,578 — 8,235 2007...... 7,231 1,741 — 8,972 2008...... 7,428 1,664 — 9,092 2009...... 8,127 1,378 — 9,505 2010...... 9,466 1,574 — 11,040
78 Throughput (TEU in thousands) Year HIT COSCO-HIT ACT Total 2011...... 10,004 1,653 — 11,657 2012...... 10,576 1,706 — 12,282 2013...... 9,270 1,663 1,070(1) 12,003(1) 2014...... 9,463 1,661 1,441 12,565 2015...... 8,865 1,593 1,302 11,760 2016...... 8,313 1,374 1,123 10,810 2017...... 7,875(2) 1,921(2) 1,568(2) 11,365 2018...... 7,357(2) 1,794(2) 1,465(2) 10,616 2019...... 6,924(2) 1,688(2) 1,379(2) 9,991 2020...... 6,968(2) 1,699(2) 1,388(2) 10,055
Notes: (1) Included throughput volume of ACT from 7 March 2013, the date of acquisition. (2) Following the taking effect of the Co-management Agreement from 1 January 2017 and the Hong Kong Seaport Joint Operating Alliance Agreement from 1 April 2019, the figures represent the allocated throughput according to the agreed split ratio under the aforesaid agreements.
HPH Trust estimates the current combined annual capacity of HIT, COSCO-HIT and ACT to be approximately 13.5 million TEU. The estimated capacity of a container port could vary and fluctuate due to a number of factors, such as but not limited to the following:
• design and layout of berths, length of berth, quay side depth, yard area and other physical factors;
• average size of vessels and the number of mega-vessels that call at the port;
• availability and lifting capacity of quay cranes and yard cranes and availability of internal tractors and other hardware;
• maintenance of equipment and hardware;
• functionality and performance of the terminal management system;
• workflow design and work practices;
• availability and skill level of labour; and
• emergence of technology, such as GPS and mobile communication devices.
The Trustee-Manager believes that there is potential to increase the capacity of HIT, COSCO-HIT and ACT through enhancements in equipment, systems, work processes and staff skill levels.
79 Productivity Data
Certain productivity data in relation to HIT, COSCO-HIT and ACT are set out below.
2016 2017 2018 2019 2020 Throughput per hectare (TEU)...... HIT 74,888 70,951(1) 66,280(1) 62,375(1) 62,774(1) COSCO-HIT 45,792 64,020(1) 59,805(1) 56,282(1) 56,642(1) ACT 38,726 54,079(1) 50,519(1) 47,543(1) 47,847(1) Vessel operating rate (per hour)...... HIT 70.9 68.6 61.6 61.9 60.5 COSCO-HIT 67.9 81.7 76.8 80.4 82.1 ACT 64.2 81.7 76.8 80.4 82.1 Gross quay crane moves (per hour)...... HIT 29.4 28.1 25.7 25.9 25.7 COSCO-HIT 28.4 25.2 25.5 25.4 25.3 ACT 28.5 25.2 25.5 25.4 25.3 Gross truck turn-around time (minutes) .... HIT 47.5 50.0 48.1 45.1 49.7 COSCO-HIT 44.9 41.9 39.3 41.0 40.3 ACT 44.9 41.9 39.3 41.0 40.3
Note: (1) Following the taking effect of the Co-management Agreement from 1 January 2017 and the Hong Kong Seaport Joint Operating Alliance Agreement from 1 April 2019, the figures represent the allocated throughput according to the agreed split ratio under the aforesaid agreements.
Port Concessions
The table below sets out certain additional details concerning the port concessions of HITL, CHT and ACTL.
Concession Approximate Terminal Term Operator Authority land area Usage (ha) 1. Terminal 4, Kwai Tsing Port Expires June 2047 HITL HK Government 28 Container Terminal 2. Terminal 6, Kwai Tsing Port Expires June 2047 HITL HK Government 29 Container Terminal 3. Terminal 7, Kwai Tsing Port Expires June 2047 HITL HK Government 35 Container Terminal 4. Terminal 9 North, Kwai Tsing Port Expires June 2047 HITL HK Government 19 Container Terminal 5. Terminal 8 West, Kwai Tsing Port Expires June 2047 ACTL HK Government 29 Container Terminal 6. Terminal 8 East, Kwai Tsing Port Expires June 2047 CHT HK Government 30 Container Terminal
YICT
Description
YICT (P1&2)
YICT (P1&2) operates Phases I and II of YICT, the first deep-water port in southern China. YICT (P1&2) commenced operations in mid-1994 and is located in Da Peng Bay, three kilometres from the Hong Kong border. YICT Phases I and II provide 130 hectares of yard space, five container berths and one barge berth.
YICT (P1&2) was initially established as a 70/30 joint venture between Hutchison Ports Yantian Limited (“HPY”, currently an indirect 79.45% subsidiary of HPH Trust) and Shenzhen Yantian Port Group Company Limited (“YPG”), which was subsequently amended to 73% and 27%, respectively. In 2001, YPG transferred the 27% equity interest it held in YICT (P1&2) to Shenzhen Yantian Port Holdings Co., Limited (“YPH”), currently an indirect 67.37% subsidiary of YPG. YPH acquired a further 2% equity interest in YICT (P1&2) from HPY in 2011, increasing its interest in YICT (P1&2) to 29%. As at the date of this Offering Circular, HPH Trust has an effective interest of 56.4% in YICT (P1&2). YPG is a state-owned limited liability company authorised by the Shenzhen Municipal Government, and is 100%
80 held by the State-owned Assets Supervision and Administration Commission of the Shenzhen Municipal Government. The principal activities of YPG include investment in port construction, integrated logistics and port ancillary services. The shareholders of YICT (P1&2) have agreed that certain matters relating to YICT (P1&2)’s registered capital, termination and dissolution, and merger with another company require the approval of all the directors of YICT (P1&2) and that each shareholder has a pre-emptive right to acquire the interest in YICT (P1&2) of the other shareholder. See “Risk Factors — Risks relating to the Business — HPH Trust may face risks related to its joint ventures”.
The term of YICT (P1&2) commenced on 16 November 1993 and, subject to extension, will expire on 16 November 2043. The joint venture will terminate upon the term of YICT (P1&2) expiring and may also be terminated under certain circumstances, including a material breach of the terms of the joint venture contract by either shareholder or where YICT (P1&2) has suffered serious financial losses with no foreseeable prospect of achieving profitable operations.
YICT (P3)
YICT Phase III and YICT Phase III Expansion are adjacent to YICT Phases I and II, and are operated by YICT (P3). Together they provide a total yard space of 226 hectares. The first berth commenced operations in October 2003. The construction of YICT Phase III Expansion was completed in September 2011.
YICT (P3) was initially established as a 65/35 joint venture between HPY and YPG. In March 2012, YPG transferred the 35% equity interest it held in YICT (P3) to Shenzhen Yantian Port Investment Holdings Company Limited (“SYPI”) (formerly known as Shenzhen Yantian East Port Terminals Limited), a wholly-owned subsidiary of YPG. However, in September 2017, this 35% equity interest held in YICT (P3) was transferred back to YPG by SYPI. As at the date of this Offering Circular, HPH Trust has an effective interest of 51.6% in YICT (P3). The shareholders of YICT (P3) have agreed that certain matters relating to YICT (P3)’s registered capital, termination and dissolution, merger with another company and the provision of a guarantee for a single amount of 10% or more of the registered capital of YICT (P3) require the approval of all the directors of YICT (P3) and that each shareholder has a pre-emptive right to acquire the interest in YICT (P3) of the other shareholder. See “Risk Factors — Risks relating to the Business — HPH Trust may face risks related to its joint ventures”.
The term of YICT (P3) commenced on 26 December 2002 and, subject to extension, will expire on 26 December 2052. The joint venture will terminate upon the term of YICT (P3) expiring and may also be terminated under certain circumstances, including a material breach of the terms of the joint venture contract by either shareholder or where YICT (P3) has suffered serious financial losses with no foreseeable prospect of achieving profitable operations.
On 28 December 2016, YICT (P3) and SPMC acquired 65% and 15% equity interest respectively (giving HPH Trust an effective interest of 41.3%) in HICT, a port that is located near the manufacturing hinterland in eastern Guangdong, immediately east of Hong Kong and Shenzhen and the first dedicated container terminal in Huizhou for approximately HK$673 million (US$86 million). HICT comprises two container berths with a land area of 60 hectares, a total quay length of 800 metres and depth alongside of 15.7 metres. It provides additional handling capacity and generates operational synergies with YICT through sharing of resources and better utilisation of port and related facilities.
81 YWP
West Port is adjacent to YICT Phases I and II, and is operated by Shenzhen Yantian West Port Terminals Limited (“YWP”).
YWP was initially established as a 41.67/58.33 joint venture between HPY and YPH, which was subsequently amended to 65% and 35%, respectively. As at the date of this Offering Circular, HPH Trust has an effective interest of 51.6% in YWP. The shareholders of YWP have agreed that certain matters relating to YWP’s registered capital, termination and dissolution, merger with another company and the provision of a guarantee for a single amount of 10% or more of the registered capital of YWP require the approval of all the directors of YWP and that each shareholder has a pre-emptive right to acquire the interest in YWP of the other shareholder. See “Risk Factors — Risks relating to the Business — HPH Trust may face risks related to its joint ventures”.
The construction of West Port Phase II was completed in January 2018.
The term of YWP commenced on 1 April 2005 and, subject to extension, will expire on 1 April 2055. The joint venture will terminate upon the term of YWP expiring and may also be terminated under certain circumstances, including a material breach of the terms of the joint venture contract by either shareholder or where YWP has suffered serious financial losses with no foreseeable prospect of achieving profitable operations or where the property permits in respect of berths 1, 2 and 3 owned by YWP at West Port expire and cannot be extended.
Transportation Network Connecting YICT
YICT is connected to the highway network serving the Pearl River Delta as well as the national railway network of the PRC through the Pingyan Railway. The transportation network connected to YICT is illustrated by the map below.
Shenzhen Highway Network
82 Pingyan Railway Service Coverage
Layout of YICT
The map below illustrates the layout of YICT.
83 Throughput
The table below sets out YICT’s historical throughput from 1994 to 2020. The global financial crisis negatively affected the U.S. and Europe volume in 2008 and 2009, leading to a drop in throughput in YICT for the corresponding years. With the subsequent recovery of trade volume, new handling capacity coming on line and YICT’s successful initiatives in attracting new businesses, throughput have rebounded to over 10 million TEU each year from 2010 to 2020. YICT has always focused on O&D container traffic, which makes up approximately 82% of its 2020 total throughput. The O&D throughput mainly consists of Trans-Pacific and Europe Asia volume.
Year Throughput (TEU in thousands) 1994...... 13 1995...... 106 1996...... 354 1997...... 638 1998...... 1,038 1999...... 1,588 2000...... 2,148 2001...... 2,752 2002...... 4,182 2003...... 5,258 2004...... 6,260 2005...... 7,581 2006...... 8,865 2007...... 10,016 2008...... 9,684 2009...... 8,579 2010...... 10,134 2011...... 10,264 2012...... 10,667 2013...... 10,796 2014...... 11,673 2015...... 12,166 2016(1) ...... 11,698 2017(1) ...... 12,916 2018(1) ...... 13,413 2019(1) ...... 13,309 2020(1) ...... 13,619
Note: (1) From 2016 onwards, this includes the throughput volume of HICT following its acquisition on 28 December 2016.
HPH Trust estimates the annual capacity of YICT to be around 17.5 million TEU. As discussed in “HIT, COSCO HIT and ACT — Throughput” above, the current estimated annual capacity is capable of change, depending on the factors described in that section.
84 Productivity Data
Certain productivity data in relation to YICT are set out below.
Productivity Metric 2016 2017 2018 2019 2020 Throughput per hectare (TEU)...... 29,081 31,586 31,588 31,372 32,042 Vessel operating rate (per hour)...... 117.7 115.3 112.7 117.5 104.5 Gross quay crane move (per hour) . . 29.2 28.6 28.8 29.3 27.4 Gross truck turnaround time (minutes) ...... 30.7 31.0 31.7 31.2 33.6
Government Approvals for Port Operation
The PRC Government has approved:
• YICT (P1&2) to operate YICT Phases I and II until November 2043;
• YICT (P3) to operate YICT Phase III and YICT Phase III Expansion until December 2052;
• YWP to operate West Port Phase I until April 2055 and West Port Phase II until August 2038; and
• HICT, an affiliated company of YICT, to operate Huizhou Port until July 2059.
The table below sets out certain additional details concerning the government approvals for operation of YICT and its affiliated company, HICT.
Approved Approximate Terminal Operation Term Operator Approving Authority land area Usage (ha) YICT Phases I & II, YICT ..... Expires November 2043 YICT (P1&2) Ministry of Commerce 130 Container Terminal YICT Phase III and YICT Phase Expires December 2052 YICT (P3) Ministry of Commerce 226 Container Terminal III Expansion, YICT ...... West Port Phase I, YICT ..... Expires April 2055 YWP Shenzhen Municipal 17 Container Terminal Government West Port Phase II, YICT ..... Expires August 2038 YWP National Development and 44 Container Terminal Reform Commission Huizhou Port, HICT ...... Expires July 2059 HICT People’s Government of 60 Container Terminal Guangdong Province
85 Core Services
Cargo Handling and Storage
HPH Trust’s core port services include the loading and unloading of containers to and from container vessels, the temporary storage of containers and cargo and the handling of containers within the container terminal premises.
Import of Containers
Import containers are unloaded from vessels by quay cranes and placed on trucks which operate within the terminals and are provided by the terminal operators (“Internal Trucks”). These Internal Trucks transport the containers to the yard, and the containers are placed by yard cranes into a storage yard. The containers remain in the storage yard until the yard cranes retrieve them for collection by trucks in service of the shippers, which transport these containers in and out of the terminals (“External Trucks”). The flow of import containers is illustrated below.
Retrieval pickup by customer Unloading storage
Terminal Storage Customer Quayside Vessel Gate Yard External External Internal Quay Truck Truck Truck Crane
Export of Containers
Export containers follow the same sequence as import containers but in reverse. The External Trucks bring the containers to the yard through the terminal gate and the containers are stored in the yard until their designated vessel arrives. They are thereafter retrieved from the storage yard, taken by Internal Trucks to the berth and loaded by the quay cranes onto vessels. The flow of containers for export through the terminal is illustrated below.
Arrival at terminal and storage Retrieval and loading into vessel
Terminal Storage Customer Quayside Vessel Gate Yard External External Internal Quay Truck Truck Truck Crane Documentation Inspection Storage space assignment
YICT offers rail as an additional mode of transport for containers entering and leaving YICT.
Transshipment
Transshipment refers to the transfer of containers from one vessel to another at the terminal, en route to a final destination. There are broadly two types of transshipment flow:
• vessel-to-vessel transshipment, which involves the transfer of containers from one deep-sea container vessel to another; and
• vessel-to-barge transshipment, which involves the transfer of containers from deep-water container vessels to barges and feeders, or vice versa.
86 Gate and Yard Operations
Movement of Containers in and out of Terminals
The movement of containers in and out of HIT, COSCO-HIT, ACT or YICT through the various terminal gates is highly automated. The procedure for such movement of containers mainly consists of:
• inspection of the physical condition of the container at the terminal gates prior to the entry into the terminal;
• collection of transport documents and processing of such documents at the terminal gates; and
• inspection of the physical condition of the container at the terminal gates prior to its exit from the terminal.
Gate Automation
Gate operations is greatly enhanced with two technological advances recently, i.e. Electronic Release Order (eRO) and Remote Container Inspection (RCI).
eRO is a digitalised solution to conventionally paper-based process of import container cycle. Shipping line is now able to issue an electronic equivalent of a conventional container release document which enables each entity involved — terminals, shipping lines, cargo owners, trucking companies and truck drivers — to benefit from a paperless, environment-friendly, secure and efficient process. With QR Code (presented by mobile phone) scanning at gate lane kiosk, incoming tractor drivers will receive yard location via mobile apps — HKiPort, which has shortened gate processing time by 25%.
HIT launched Remote Container Inspection at both its exit and entry gates in 2019 and 2020, respectively. The gates are now fully equipped with the visual imaging technology, allowing inspectors performing container inspection to work at an indoor office while the trucks can pass through without needing to stop. The system has enhanced operational efficiency by reducing the container inspection time by more than 50%.
Process Digitalisation
HIT launched a remote Reefer Monitoring System to improve reefer container handling process at the end of 2020. The digitalisation of the process will allow greater visibility and accuracy on reefer container conditions, reduce the frequency of manual inspections in the yard and ensure workers can complete tasks in a safer working environment. In the old workflow, reefer men had to go on site to check reefer temperature and alarms every 4 hours.
Equipment Automation
In addition to remote rubber-tyred gantry cranes (“RTGC”) at T9 and remote rail-mounted gantry cranes at T4, the increased adoption of 10 units of remote RTGC at T8 in 2020 has further created a wide range of far-reaching benefits, including a better working environment for RTGC operators, enhanced occupational safety and health, improved yard productivity, and reduced carbon dioxide emissions.
Automated Systems for Trucks
In 2016, YICT launched an autogate project to shorten tractor turnaround time. Equipment for the autogate project includes two drive-through optical character recognition portals with the latest line scan and area scan technology that can capture a picture of a whole container when a truck passes through the portal. The autogate project was further expanded in 2017 by doubling the number of recognition portals and increasing the number of autogate lanes to further capitalise on efficiency improvement.
87 Customs Procedures
The customs handling procedures for Hong Kong and the PRC are different.
The customs handling procedure at Hong Kong, which is a freeport, varies based on the type of cargo. For example, different procedures are in place for special cargo such as detention cargo (cargo is detained at the discretion of the customs authorities) and dutiable cargo (for dutiable goods such as cigarettes and light diesel oil). As Hong Kong is a freeport and has efficient customs handling procedures, these advantages have contributed to its status as the key transshipment hub for the region.
The PRC’s customs handling procedure involves a number of parties, including the shipping lines’ agents (brokers), shippers, consignees and container terminals. The Trustee-Manager believes that YICT’s streamlined procedures assist its customers in expediting customs clearance, making it a key O&D port for the Guangdong trade catchment area, which is one of the densest manufacturing regions in the world.
Terminal Management System — nGen
nGen is HPH’s proprietary, scalable, and customer-oriented terminal operating system that streamlines port processes, improves the efficiency of port operations and enhances information exchange with shipping lines by integrating with their systems.
The Trustee-Manager has entered into the Master IT Services Agreement with Hutchison Ports nGen Limited (novated from HPHIS (BVI)) and Hutchison Ports nGen Services Limited (“HPnS”) for the usage of nGen. Pursuant to this agreement, HPnS will also support the future development and enhancement of nGen at the request of the Trustee-Manager.
nGen was launched at YICT in 2003. An updated version of nGen was then introduced at HIT and COSCO-HIT in 2005. In 2013, it was also implemented in ACT.
nGen has three main product suites, being “Peripheral Operation Systems”, “Corporate Systems” and “Port Community Communications”, and details of the individual systems within each of these product suites are set out below.
Product Suite Full Name Alias Key Functionality Peripheral Operation Terminal Operation TOPS A system which provides graphic Systems ...... Planning System user interface for the allocation of berths to calling vessels according to operations requirements, vessel specifications and calling schedule
Guider Guider A system which facilitates the vessel discharge and loading planning process
Automated Grounding A system that helps yard System planners identify the most appropriate areas for the temporary storage of each container based on its designated vessel, weight class and port of discharge
Operations Monitoring OMS A system which monitors yard System operations including inventory distribution and container movement status
88 Product Suite Full Name Alias Key Functionality
Terminal Reporting TRACS A system which provides real and Communications time reporting and control of System container picking/grounding moves by yard equipment and vessel loading/unloading by quay cranes through radio data communications
ASC System ASC A system which coordinates the operation of automatic stacking cranes to support the pickup and delivery of containers
Corporate Systems ...... Enterprise Data nEDR A data repository which records Repository historical operations data for performance reporting, operations analysis and trend analysis
Billing Management nBIS A system to maintain information on customer tariff, invoice calculation and generating of invoices
Port Community Electronic Data EDI A system which supports the Communications ...... Interchange exchange of a variety of electronic message formats and types
Port Community An information hub supporting System real-time information exchange within a port community, including the relevant port authority, shipping lines/agents, freight forwarders and trucking companies
Participation in OnePort
OnePort was founded by HITL, CHT and MTL in February 2003 with an objective of strengthening the competitive position of Hong Kong as a logistics hub through the provision of information and related services. Tradelink Electronic Commerce Limited later became one of the shareholders of OnePort.
Since its establishment in 2003, the aim of OnePort has been to improve the efficiency of the local logistics industry. OnePort supports a substantial number of registered customers including shipping lines, shippers, freight forwarders, trucking companies, barge operators and all Hong Kong container terminals.
The services provided by OnePort include (i) berth booking solutions, (ii) information delivery system solutions, (iii) billing and payment system solutions, (iv) data integration and interchange solutions, (v) fleet management solutions; and (vi) the PRC mainland customs declaration solutions.
89 Customers
HPH Trust’s major customers are international shipping companies.
The number of shipping lines served by the Portfolio Container Terminals is set out in the table below.
Number of shipping lines served 2016 2017 2018 2019 2020 HIT, COSCO-HIT and ACT ...... 59 54 53 53 47 YICT...... 52 51 52 50 52
The top ten customers (by throughput) of the Portfolio Container Terminals for 2020 are (in alphabetical order) A.P. Moller Maersk A/S, CMA CGM, COSCO SHIPPING Lines Co., Ltd., Evergreen Marine Corporation, Hapag-Lloyd, Hyundai Merchant Marine Company Ltd., Mediterranean Shipping Co. S.A., Ocean Network Express Pte. Ltd., Wan Hai Lines Ltd. and Yang Ming Marine Transport Corporation. For the year ended 31 December 2020, the Portfolio Container Terminals’ five and ten largest customers accounted for 61% and 87%, respectively, of the gross throughput of the Portfolio Container Terminals although none of these customers individually accounted for more than 15% of the gross throughput for all the Portfolio Container Terminals.
As at 31 December 2020, the number of weekly shipping lines services for the Portfolio Container Terminals (by trade routes) is set out in the table below.
HIT, COSCO-HIT Number of weekly services by trade routes and ACT YICT North America...... 14 33 Europe...... 9 16 Asia...... 172 20 Others ...... 32 27 Total ...... 227 96
Sales and Marketing
The ability to provide customers with efficient, high-quality and competitive service has always been fundamental to the continued success of the Portfolio Container Terminals.
The Portfolio Container Terminals’ major customers are international shipping companies, which contribute to global trade flows through their deployment of container vessels. The Portfolio Container Terminals enter into terminal services agreements with its customers, with terms ranging from one to three years, setting out detailed fees and charges for services at the terminals. See “Tariffs and Fees” for further details of the terminal services agreement.
Customer Service
The HIT, COSCO-HIT and ACT customer service team provides customers with a dedicated hotline to cater to their special requests. In addition, the customer service team provides feedback to relevant departments of HIT, COSCO-HIT and ACT to improve overall service levels. The customer service team is also involved in building and maintaining customer relationships.
The YICT customer service team provides similar services. However, due to the different regulatory environment in the PRC, the YICT customer service team liaises with additional parties, such as customs brokers and direct shippers.
A proprietary Customer Plus system was launched in 1998, offering a web-based and real-time communication channel between HIT and its customers. Customer Plus App was launched in 2015 to provide convenience to all stakeholders to enquire terminal operation information and receive update on special arrangements on mobile devices.
90 A similar community platform was also established in YICT in early 2004 with an upgraded version 156yt.cn launched in October 2020. Compared to the Customer Plus system, 156yt.cn aims to provide a one-stop service for Yantian port community users, ranging from customs, China Inspection Quarantine, shipping lines, ship agents and third-party logistics providers, such as freight forwarders, cargo consolidators and trucking companies.
End-user Marketing
An end-user marketing team was established to promote the use of the Portfolio Container Terminals by engaging with end-customers of shipping lines such as large internationally renowned retailers and manufacturers, freight forwarders and cargo consolidators.
Diversification of sourcing options and supply chain strategies in recent decades has led to many international companies setting up manufacturing capacity in the PRC. Although YICT does not directly provide services to these international companies, their long-term supply chain decisions play a vital role in the development of YICT.
YICT is actively involved in promoting the port with the local government. YICT participates in the China International Logistics and Transportation Fair, held annually in Shenzhen, the PRC. The fair brings together trade and logistics companies along the whole international supply chain and provides a platform for YICT to promote its services to industry players engaged in different stages of the supply chain.
YICT also actively participates in the Trans-Pacific Maritime (“TPM”) conferences held annually in the United States and the PRC (Shenzhen), one of the most important industry events for Trans-Pacific trade. YICT invited the organiser of the TPM Conference to bring the conference to Shenzhen, the PRC in 2007. YICT is now a Platinum Sponsor of the conference and helps the organiser in identifying and introducing industry leading speakers to the conference.
International Marketing and Sales
The objective of the commercial team is to expand the customer base and throughput of the Portfolio Container Terminals. The commercial team collects market intelligence and monitors emerging shipping companies for business opportunities.
The commercial team works closely with the shipping companies to achieve the above objectives. The commercial team engages in discussion with the shipping companies to optimise assets and terminal resources allocation through berthing windows arrangements and crane and labour deployment.
The Portfolio Container Terminals benefit from HPH’s global relationship with international shipping companies.
Tariffs and Fees
In addition to supply and demand, a port operator’s ability to set tariffs depends on its overall competitiveness, which is in turn determined by a number of factors, such as geographical location and connectivity, operating efficiency, berth availability, handling capability, transportation and logistics network, ancillary services and facilities.
The tariffs and fees at which the Portfolio Container Terminals offer their services and facilities to customers are set out in the relevant terminal service agreements.
Tariffs are charged for loading and unloading of containers, storage of containers and movement of containers within the terminal. Other fees which may be charged include fees in relation to dockage (i.e. the docking of vessels), change of vessel or port of discharge, cargo re-consolidation and the provision of administrative services.
91 The tariff rates charged to customers may depend on:
(a) the type of services provided (such as loading and unloading of containers and transfer of containers both within and out of the terminal);
(b) the type of containers, such as reefer, hazardous goods, dutiable, empty containers and others;
(c) the trade routes (such as transocean, intra-Asia and transshipment);
(d) the physical dimensions of the cargo being handled, which can be broadly classified into 20-ft, 40-ft, 45-ft and oversize containers and non-containerised cargo; and
(e) the volume of the cargo being handled.
For the Portfolio Container Terminals, the term of a typical terminal service agreement range between one to three years, although there are terminal service agreements with longer terms or with options for extension.
The Portfolio Container Terminals provide trade credit to their customers for periods of 30 to 60 days from the invoice delivery to the customers, depending on several factors, including the individual customer’s financial position, volume and track record. On average, it takes approximately 40 to 52 days to collect the payments.
Competition
Operational Competition
The Portfolio Container Terminals face competition from other container port operators and container terminal operators in Shenzhen, the PRC and the wider Asia Region.
Hong Kong
On 8 January 2019, HIT, COSCO-HIT, ACT and MTL entered into a Hong Kong Seaport Joint Operating Alliance Agreement regarding the terms on which they will collaborate with each other for the efficient management and operation of the 23 berths across Terminals 1, 2, 4, 5, 6, 7, 8 and 9 in Kwai Tsing, Hong Kong. The formation of HK Seaport Alliance will further enhance efficiencies, increase utilisation and improve the value proposition of Hong Kong to customers and enable Hong Kong to more effectively compete within the region.
Shenzhen, the PRC
In Shenzhen, the PRC, YICT competes with other container terminal operators in West Shenzhen, such as Shekou Container Terminal (“SCT”), Chiwan Container Terminal (“CCT”) and Da Chan Bay Terminal One (“DB One”). YICT has 20 container berths.
China Merchants Holdings (International) Co. Ltd., a Hong Kong-listed Chinese port operator, is the largest shareholder of SCT and CCT. SCT has nine container berths and CCT has nine container berths.
MTL is the largest shareholder of DB One. DB One has five container berths.
Currently, the Portfolio Container Terminals do not consider ports operating in the PRC outside of the Pearl River Delta as major competitors. However, as the PRC develops over time, the ports that are outside of the Pearl River Delta may eventually become significant competitors of the Portfolio Container Terminals.
92 YICT Development
HPY has entered into a non-binding heads of agreement with YPG in December 2008 for the joint construction and development of YICT East Port Phase I. The main definitive agreements for YICT East Port Phase I include: (i) the Joint Venture Contract and Articles of Association; and (ii) the land transfer contract and/or lease agreement (as appropriate). It is currently planned that YICT East Port Phase I will consist of three deep-water container berths with estimated land area of approximately 1.2 million square metres and quay length of approximately 1.47 kilometres.
Employees
The Trustee-Manager believes that human capital is critical to the long-term success of HPH Trust. To promote staff retention and career progression goals, HPH Trust conduct regular review of HPH Trust’s employment practices, employee appraisal process and incentive programmes.
Apart from traditional training sponsorship that provides employees with the necessary skills and knowledge, opportunities are provided to employees to acquire a broad overview of the container port business through job rotations and overseas assignments. Such career development opportunities enhance the technical expertise and business knowledge of employees.
In addition, HIT has developed a number of in-house training programs. Training offered includes both technical and trade-related skills, such as Mandatory Safety Training, Crane Licensing and Re-validation courses and the Portworker Development Program. HIT also issues official competency licences following technical training courses offered by the Labour Department of Hong Kong.
As at 31 December 2020, HIT, COSCO-HIT and ACT had around 1,700 employees while YICT and HICT had around 2,300 employees.
Sub-Contractors and Suppliers
Instead of hiring employees for all operational positions, the Portfolio Container Terminals engage third-party sub-contractors to provide contract workers for non-core positions such as tractor drivers, frontloader/forklift drivers, stevedores, gatehouse clerks and security guards. These contract workers account for a significant portion of the workforce of the Portfolio Container Terminals. The costs of such contract workers are therefore a major component of the operating costs of the Portfolio Container Terminals. In order to avoid dependence on any particular source for contract workers, the Portfolio Container Terminals use a large number of sub-contractors on contract terms ranging from one to two years to provide contract workers.
As at 31 December 2020, HIT, COSCO-HIT and ACT uses on average approximately 2,700 external contract workers on a daily basis.
At YICT and HICT, averages of approximately 4,500 external contract workers are used on a daily basis as at 31 December 2020.
Besides operations, the Portfolio Container Terminals also engage sub-contractors and suppliers in its port construction, maintenance and development. Selection of such sub-contractors and suppliers and incurrence of any material capital expenditures will be governed by HPH Trust’s tender process and capital expenditure policy.
93 Seasonality
The demand for port services of the Portfolio Container Terminals is affected by seasonality.
On an annual basis, the peak season for container ports in the Pearl River Delta runs from May to October, which precedes the peak in consumer demand at Halloween, Thanksgiving and Christmas. Exports from the PRC are reduced significantly during the Chinese New Year holidays whereas volumes are typically higher before and after this period. Seasonality particularly affects the proportion of throughput handled by HIT, COSCO-HIT and ACT in Kwai Tsing Port.
Security
ISPS compliance
All of the facilities of the Portfolio Container Terminals are in compliance with the International Ship & Port Facility Security Code (“ISPS”) issued by the International Maritime Organisation. In order to receive ISPS compliance certification, terminals and shipping vessels are required to submit security assessments and detailed security plans, to be followed by regular assessments.
HIT successfully obtained the Statement of Compliance on 2 April 2004, and was among the first terminal facilities to receive ISPS compliance in Hong Kong. COSCO-HIT and ACT obtained the Statement of Compliance on 23 April 2004. In Hong Kong, an annual ISPS audit is conducted by the Marine Department with the assistance from other local law-enforcement agencies. The Port Facility Security Officer ensures the compliance with the ISPS code of any ocean vessels visiting the terminal.
In the PRC, ISPS Compliance is issued by the Ministry of Transport. YICT first received its compliance certificate for Berths 1-5 in June 2004 and for all the remaining berths in subsequent years. YICT was also among the first terminal operators to receive its “Port Facility Security Certificate” under ISPS in the PRC.
Container Security Initiative
Container Security Initiative (“CSI”) is a series of measures adopted by the United States customs authorities to commence security screening on container cargo entering or transiting through the United States (such as identifying high risk containers in foreign ports before they are loaded on vessels destined to or transited through the United States). The Portfolio Container Terminals are in compliance with CSI.
The nGen system supports shipping lines computer systems in tracing and tracking container movement and submits the cargo manifests to destination ports in compliance with CSI 24 hours rule requirements.
At YICT, a container scanning device has been in operation since February 2009. Two customs examination areas are available at YICT, one for ordinary manual inspection and one for X-ray scanning. A new X-ray scanning machine, FS6000, was installed in 2017, which greatly improves scanning efficiency. There are also mini-sized scanners, FS-3000, for checking pre-identified containers at the gate terminals. In addition, there is a radioactivity detector, RM2000, in the cargo examination area, which was installed in February 2009. The detector can scan up to two or three trucks per minute. The results of such scans are submitted to the customs authorities.
The Trustee-Manager believes that YICT is one of the few ports in the PRC that is CSI compliant.
94 Customs-Trade Partnership Against Terrorism
The Customs-Trade Partnership Against Terrorism (“C-TPAT”) is a voluntary supply chain security program led by U.S. customs authorities and is focused on improving the security of private companies’ supply chains with respect to terrorism. As at the date of this Offering Circular, the Portfolio Container Terminals are fully certified and validated members of C-TPAT. The Trustee-Manager expects that the Portfolio Container Terminals will remain as fully certified and validated members of C-TPAT after the date of this Offering Circular. The benefit of participating in C-TPAT includes reductions in customs inspection and in cargo delay at borders for cargo movement into the United States. As members of C-TPAT, the Portfolio Container Terminals are regularly provided with the latest updated security information from Customs and Border Protection.
Stowaway Prevention
A standard carbon dioxide inspection procedure has been in place to detect suspicious containers since 2005. In addition, at YICT, mini-sized scanners, FS-3000 are used to random scan export containers in accordance with customs’ instructions for the purpose of stowaway prevention.
CCTV System
The facilities have installed closed circuit television (“CCTV”) systems that monitor all critical parts of the terminal facilities 24 hours a day. At the gate area, where external trucks enter the terminal, barriers and card readers for identification of truck drivers are installed to verify the identity of incoming truck drivers.
CCTV systems with 398 cameras are available as at 31 December 2020 (267 cameras in HIT, 68 cameras in COSCO-HIT and 63 cameras in ACT) to facilitate the operations of HIT, COSCO-HIT and ACT. All cameras are monitored and controlled centrally by duty staff 24 hours a day and rolling records are kept for a maximum of three months. HIT has also installed E-Fencing systems on the perimeter fences to detect intruders. Other security facilities, such as carbon dioxide detectors and metal detectors, are also used by the qualified professional security team at HIT, COSCO-HIT and ACT.
CCTV systems with 1,181 cameras are available at YICT as at 31 December 2020 to facilitate the operations of the port. All cameras are monitored and controlled centrally by duty staff 24 hours a day and records are kept for one month with some key records being kept for three months.
Insurance
The insurance policies relating to the Portfolio Container Terminals are maintained at levels which the Trustee-Manager believes to be adequate and consistent with industry standards. Insurance policies procured include insurance against business interruption, as well as property and equipment insurance.
95 Properties and Equipment
Properties
Certain details concerning the properties owned/leased by HPH Trust (apart from the concessions) as at 31 December 2020 are as follows:
Leasehold/Term/ Approximate Property/Building Concession period Owner/Lessor land area Usage (square metres) 1. HIT Tower, T9, Hong Kong ...... Expires June 2047 HK Government 5,548 Office 2. Berth #0 of West Port, Shenzhen, the PRC ...... Expires April 2024 YPG 8,860 Container Terminal 3. Pingyan Railway, Shenzhen, the PRC(1) ...... Expires February 2053 HPH Trust 935,225 Railway
Note: (1) This reflects the terms for which Pingyan Railway had received approval to operate, which included the ownership of the fixtures of the railway. However, the land on which Pingyan Railway is situated has different land use right expiry dates, the earliest being March 2041.
Equipment
Major container handling equipment that is in place at the Portfolio Container Terminals includes container quay cranes (which include Super Post Panamax Quay Cranes and Tandem-Lift Quay Cranes), rubber-tyred gantry cranes (which include electric rubber-tyred gantry cranes and hybrid rubber-tyred gantry cranes), trucks, tractors and forklifts.
River Ports
The River Ports Economic Benefits attributable to two PRC river ports located in Jiangmen and Nanhai, whose operations are complementary to the Portfolio Container Terminals, were assigned from HPH to HPH Trust. Between 49% to 61% of the throughput in these river ports was barged to Hong Kong in 2020.
The following table sets out the facilities available at the River Ports.
Jiangmen Nanhai Terminal Terminal Total area (ha) ...... 12 40 Multi-purpose berths ...... 12 5 Total berth length (m) ...... 623 420 Water Depth alongside (m) ...... 4.5 8 Multi-Purpose/General Cargo Quay Cranes and Mobile Cranes...... 12 4 Rail-Mounted Gantry Cranes...... 2 — Rubber-Tyred Gantry Cranes...... 2 6 2020 throughput (TEU in thousands)...... 213 329 HPH’s effective interest (%)...... 50.0 50.0
96 Jiangmen Terminal
Jiangmen Terminal lies close to the National-level Jiangmen New- and Hi-tech Industrial Development Zone on the Xijiang River, approximately 53 nautical miles upstream from Macau and 99 nautical miles from Hong Kong. It offers handling services for both container and general cargo.
Jiangmen Terminal has four warehouses with total area around 5,000 square metres. Jiangmen Terminal is also capable of handling reefer, using X-ray machines and CCTV systems to facilitate cargo inspection and on-site customs clearance at the terminal. Other services include local vessel agencies, on-dock container repair, cargo consolidation and off-dock warehousing. Additionally, Jiangmen Terminal provides regular feeder services to Hong Kong, Shenzhen and Nansha.
Nanhai Terminal
Nanhai Terminal commenced operations in 1994. It is located in the Sanshan Port Economic Development Zone, which is in the Nanhai Area of Foshan City, Guangdong Province. The terminal lies on the north bank of the Xijiang River, 84 nautical miles from Hong Kong.
Nanhai Terminal include import and export surveillance warehouse facilities, as well as container repairing. On-site customs, joint inspection services, and X-ray container inspection services are also provided within the terminal. Nanhai Terminal provides regular feeder services to Hong Kong, Shenzhen and Nansha.
Portfolio Ancillary Services
The Portfolio Ancillary Services consist of:
• APS;
• Hutchison Logistics; and
• SHICD.
APS is mainly engaged in port ancillary services, with shipping lines as major customers. Hutchison Logistics and SHICD are engaged in freight forwarding, supply chain management, warehousing and distribution services, with shippers and consignees.
APS
APS provides port ancillary services in Hong Kong and South China.
APS employs a team of over 200 staff members and offers a range of cargo-handling and related logistics services, including trucking, container storage, project and specialised cargo handling solutions and container freight station. It also provides marine feeder-shuttle services between Hong Kong and ports in the Pearl River Delta. In particular, APS currently runs feeder services between the Portfolio Container Terminals in Shenzhen, the PRC and Hong Kong.
In 2007, Shenzhen Leading Edge Port Services Co. Ltd. was established as a joint venture to provide shipping agency services. The joint venture partner is Unitrans Group Co., Ltd., which is a state-controlled enterprise of mixed ownership founded and invested by the Administration Service Bureau of Ministry of Transport of the People’s Republic of China, Penavico HQ (COSCO Logistics) and other shareholders.
97 Hutchison Logistics and SHICD
Hutchison Logistics serves customers seeking shipping and warehousing services not typically provided by port operators. Hutchison Logistics can meet shippers’ needs for goods storage both prior to shipping or delivery and arrange for the distribution of cargo.
SHICD provides value-added services. Located at Guanlan in Shenzhen’s Longhua District, SHICD operates a supervisory and bonded warehouse that facilitates imports and exports in the Pearl River Delta. The facility commenced operations in 1999.
Hutchison Logistics and SHICD together support the logistics and customs clearance needs of global buyers and shippers.
Safety and Environment
Environment
The operations of HIT, COSCO-HIT and ACT are in compliance with the health and safety regulations of Hong Kong. Periodic audits and self-assessment checks are conducted to ensure compliance.
HIT, COSCO-HIT and ACT promote the adoption of environmentally-friendly measures beyond the minimum requirements stipulated by relevant regulations. Most of their rubber-tyred gantry cranes have switched from industrial diesel oil to ultra-low sulphur diesel. To further reduce emissions, HIT introduced electric rubber-tyred gantry cranes and hybrid rubber-tyred gantry cranes in 2008, and COSCO-HIT and ACT in 2009. As at 31 December 2020, HIT has 81 hybrid rubber-tyred gantry cranes and 63 electric rubber-tyred gantry cranes and 12 electric hybrid rubber-tyred gantry cranes, representing 100% of the total rubber-tyred gantry cranes in operation at HIT. ACT has 30 hybrid rubber-tyred gantry cranes, representing 100% of the total rubber-tyred gantry cranes in operation while COSCO-HIT has 5 hybrid rubber-tyred gantry cranes and 22 electric rubber-tyred gantry cranes, representing 90.0% of the total rubber-tyred gantry cranes in operation.
Similar initiatives were undertaken at YICT. YICT completed a major power transmission emission reduction project in 2009. As at 31 December 2020, 34 hybrid rubber tyred gantry cranes and 202 electric rubber tyred gantry cranes, representing 100% of the total rubber tyred gantry cranes, are in operation in YICT. Direct carbon dioxide emissions per TEU in YICT for 2020 have been reduced by 46% as compared to 2009.
The Portfolio Container Terminals have also introduced measures to conserve electricity consumption, including the gradual replacement of high-pressure sodium floodlights on its rubber-tyred gantry cranes, quay cranes and light towers with energy-saving light emitting diode (“LED”) floodlights, deployment of a solar-powered water heater and replacing a number of internal vehicles with electric vehicles together with the installation of five units of chargers within HIT’s premises. Furthermore, for the past few years, YICT has been exploring LED application to replace conventional floodlights. As at 31 December 2020, the conventional floodlights of 190 units of its rubber-tyred gantry cranes were replaced with LED, and further conversion to be conducted in the future. Six 4 MVA mobile shore power systems covering 16 mega berths, have been in use to provide shore power for largest container vessels in the world.
HIT has received a number of awards in recognition of its environmental efforts, including Hong Kong Green Organisation Certification — Wastewise Certificate “Excellence Level” in 2018 and 2019, Certificate of Excellence — Sustainable Consumption Enterprise Award in 2018, 2017 Hong Kong Awards for Environmental Excellence — Transport and Logistics — Bronze Award, attaining ISO14001:2015 — environmental management system in 2017, CarbonCare Action Label 2016, the “3 Years+ EcoPioneer Companies” and “EcoChallenger” awards at the Bank of China Hong Kong Corporate Environmental Leadership Award presentation ceremony in 2016, “Silver Award, Green Management Award (Corporate)” at the Hong Kong Green Awards 2013 and “Asia Pacific Green Cargo Terminal Operator of the Year award” at the 2011 Frost & Sullivan Asia Pacific Green Excellence Awards presentation ceremony.
98 YICT has also received a number of awards, including China Ports and Harbors Association Awards (consecutively from 2003 to 2020), 13th Tien-Yow Jeme Civil Engineering Prize and Capability Maturity Model Integration(CMMI) III Award, National AAAAA Logistics Enterprise, Year 2019 Shenzhen Mayer Quality Award. In addition, YICT has maintained the ISO14001:2015 Environmental Management System Accreditation since 2012. YICT has passed ISO50001: 2011 Energy Management System certification since 2018.
In addition, YICT was also the first port facility in the PRC to deploy liquefied natural gas powered container trucks (“LNG Trucks”), introducing the first batch of 9 LNG Trucks in 2009. As at 31 December 2020, there were 272 LNG Trucks in operation. YICT was awarded “Technological Innovation with the Utilisation of LNG Tractors at the Terminal” by the China Ports Association Container Branch.
HPH Trust received “Eco Advocate Award” by the Asia Pacific Enterprise Cooperation, in recognition of its commitment to operating its businesses in an environmentally sustainable manner.
Safety
HIT’s, COSCO-HIT’s and ACT’s Occupational Safety and Health Management System (“OSHMS”) consists of policies, procedures and programs for the purpose of ensuring that operational activities are conducted in a manner that promotes comprehensive health and safety practices. The effectiveness of the OSHMS is regularly reviewed and audited by independent auditors. The robustness of HIT’s OSHMS is reaffirmed with the issuance of ISO 45001 certificate in 2019.
Furthermore, officers are equipped with speed laser detectors and alcoholic breath testers to ensure safe driving in the terminals. The Safety and Health Steering Committee are responsible for the introduction and regular review of safety policies to ensure HPH Trust’s compliance with the relevant legal requirements and that HPH Trust’s policies are in line with industry best practices.
Similarly, YICT is governed by an established safety standardisation system (“SSS”) that consists of policies, rules and procedures that are in compliance with the “Work Safety Law of the People’s Republic of China” and other relevant PRC legislative and legal requirements. The effectiveness and robustness of the SSS are regularly monitored by YICT Safety Production Management Committee and its five departmental sub-committees to ensure YICT’s adherence to good health and safety practices. In January 2020, the Ministry of Transport of China renewed YICT’s “Conformity to Standardised Safety Production of Terminal Eligible for Dangerous Cargo Handling Class I” certification. Furthermore, monitoring equipment such as speedometer and alcohol testers are in operation on-site together with CCTV monitoring devices that are installed in each main road and crossings as part of YICT’s traffic safety measures.
Legal Proceedings
Neither the Issuer nor any Guarantor nor any of HPH Trust’s subsidiaries is involved in any litigation or arbitration proceedings that if determined adversely to HPH Trust or any of its subsidiaries would, in the aggregate, have a material adverse effect on the consolidated financial position of HPH Trust and its subsidiaries (including the Issuer) taken as a whole, nor is the Issuer, any Guarantor or any of HPH Trust’s subsidiaries aware that any such proceedings are pending or threatened.
99 TAXATION
The following is a general description of certain tax considerations relating to the Notes and is based on law and relevant interpretations thereof in effect as at the date of this Offering Circular, all of which are subject to change, and does not constitute legal or taxation advice. It does not purport to be a complete analysis of all tax considerations relating to the Notes. Prospective holders of Notes who are in any doubt as to their tax position or who may be subject to tax in any jurisdiction are advised to consult their own professional advisers.
Foreign Account Tax Compliance Act Reporting and Withholding
Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a “foreign financial institution” may be required to withhold on certain payments it makes (“foreign passthru payments”) to persons that fail to meet certain certification, reporting, or related requirements. The Issuer may be a foreign financial institution for these purposes. A number of jurisdictions (including the jurisdiction of the Issuer) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA (“IGAs”), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, such withholding would not apply prior to the date that is two years after the date on which final regulations defining foreign passthru payments are published in U.S. Federal Register, and Notes characterised as debt (or which are not otherwise characterised as equity and have a fixed term) for U.S. federal tax purposes that are issued on or prior to the date that is six months after the date on which final regulations defining “foreign passthru payments” are filed with the U.S. Federal Register generally would be “grandfathered” for purposes of FATCA withholding unless materially modified after such date. However, if additional notes (see “Terms and Conditions — Further Issues”) that are not distinguishable from previously issued Notes are issued after the expiration of the grandfathering period and are subject to withholding under FATCA, then withholding agents may treat all Notes, including the Notes offered prior to the expiration of the grandfathering period, as subject to withholding under FATCA. Holders should consult their own tax advisors regarding how these rules may apply to their investment in the Notes. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments on the Notes, no person will be required to pay additional amounts as a result of the withholding.
Cayman Islands Taxation
The Cayman Islands currently has no exchange control restrictions and no income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax applicable to the Issuer or any holder of Notes. Accordingly, payment of principal of (including any premium) and interest on, and any transfer of, the Notes will not be subject to taxation in the Cayman Islands, no Cayman Islands withholding tax will be required on such payments to any holder of a Note and gains derived from the sale of Notes will not be subject to Cayman Islands capital gains tax. The Cayman Islands are not party to a double tax treaty with any country that is applicable to any payments made to or by the Issuer.
The Issuer has applied for and expects to receive an undertaking from the Financial Secretary of the Cayman Islands that, in accordance with Section 6 of the Tax Concessions Act (2018 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law that is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Issuer or its operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares, debentures or other obligations of the Issuer or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by the Issuer to its members or a payment of principal or interest or other sums due under a debenture or other obligation of the Issuer.
100 No stamp duties or similar taxes or charges are payable under the laws of the Cayman Islands in respect of the execution and issue of the Notes unless they are executed in or brought within (for example, for the purposes of enforcement) the jurisdiction of the Cayman Islands in which case stamp duty of 0.25% of the face amount thereof is payable on each Note up to a maximum of C.I.$250.00 unless stamp duty of C.I.$500.00 has been paid in respect of the certain issue of Notes.
Singapore Taxation
Interest and Other Payments
Subject to the following paragraphs, under Section 12(6) of the Income Tax Act, Chapter 134 of Singapore (“SITA”), the following payments are deemed to be derived from Singapore:
(a) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person tax resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore) or (ii) deductible against any income accruing in or derived from Singapore; or
(b) any income derived from loans where the funds provided by such loans are brought into or used in Singapore.
Such payments, where made to a person not known to the paying party to be a tax resident in Singapore, are generally subject to withholding tax in Singapore. The rate at which tax is to be withheld for such payments (other than those subject to the 15% final withholding tax described below) to non-tax resident persons (other than non-tax resident individuals) is currently 17%. The applicable rate for non-tax resident individuals is 22%. However, if the payment is derived by a person not tax resident in Singapore otherwise than from any trade, business, profession or vocation carried on or exercised by such person in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the payment is subject to a final withholding tax of 15%. The rate of 15% may be reduced by applicable tax treaties.
However, certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including:
(a) interest from debt securities derived on or after 1 January 2004;
(b) discount income (not including discount income arising from secondary trading) from debt securities derived on or after 17 February 2006; and
(c) prepayment fee, redemption premium and break cost from debt securities derived on or after 15 February 2007, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession in Singapore.
Capital Gains
Singapore does not impose tax on capital gains. However, there are no specific laws or regulations which deal with the characterisation of capital gains, and hence, gains arising from the disposal of the Notes may be construed to be of an income nature and subject to income tax, especially if they arise from activities which the Comptroller of Income Tax in Singapore would regard as the carrying on of a trade or business in Singapore.
101 In addition, holders of the Notes who apply or are required to apply Singapore Financial Reporting Standards (“FRS”) 39, FRS 109 or Singapore Financial Reporting Standards (International) 9 (Financial Instruments) (“SFRS(I) 9”) (as the case may be) for Singapore income tax purposes may be required to recognise gains or losses on the Notes, irrespective of disposal, in accordance with FRS 39, FRS 109 or SFRS(I) 9 (as the case may be), even though no sale or disposal of the Notes is made. Please see the section below on “Adoption of FRS 39, FRS 109 or SFRS(I) 9 for Singapore income tax purposes”.
Adoption of FRS 39, FRS 109 or SFRS(I) 9 for Singapore income tax purposes
Section 34A of the SITA provides for the tax treatment for financial instruments in accordance with FRS 39 (subject to certain exceptions and “opt-out” provisions) to taxpayers who are required to comply with FRS 39 for financial reporting purposes. The IRAS has also issued a circular entitled “Income Tax Implications Arising from the Adoption of FRS 39 — Financial Instruments: Recognition and Measurement”.
FRS 109 or SFRS(I) 9 (as the case may be) is mandatorily effective for annual periods beginning on or after 1 January 2018. Section 34AA of the SITA requires taxpayers who comply or who are required to comply with FRS 109 or SFRS(I) 9 for financial reporting purposes to calculate their profit, loss or expense for Singapore income tax purposes in respect of financial instruments in accordance with FRS 109 or SFRS(I) 9 (as the case may be), subject to certain exceptions. The IRAS has also issued a circular entitled “Income Tax: Income Tax Treatment Arising from Adoption of FRS 109 — Financial Instruments”.
Holders of the Notes who may be subject to the tax treatment under Sections 34A or 34AA of the SITA should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Notes.
The foregoing statements on Singapore taxation are general in nature and are based on certain aspects of current tax laws in Singapore and administrative guidelines and circulars issued by the MAS and/or the IRAS in force as of the date of this document and are subject to any changes in such laws, administrative guidelines or circulars, or the interpretation of those laws, guidelines or circulars, occurring after such date, which changes could be made on a retroactive basis. These laws, guidelines and circulars are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out herein. Neither these statements nor any other statements in this document are intended or are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or financial institutions in Singapore which have been granted the relevant Financial Sector Incentive tax incentive(s)) may be subject to special rules or tax rates. Prospective holders of the Notes are advised to consult their own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership of or disposal of the Notes, including, in particular, the effect of any foreign, state or local tax laws to which they are subject. It is emphasised that none of the Issuer, the Guarantor, the Lead Managers or any other person involved in the issuance of the Notes accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Notes.
Hong Kong Taxation
Withholding Tax
Under existing Hong Kong law, no withholding tax is payable in respect of payments of principal or interest on the Notes or in respect of any capital gains arising from the sale of the Notes.
102 Profits Tax
Hong Kong profits tax is charged on every person carrying on a trade, profession or business in Hong Kong in respect of assessable profits arising in or derived from Hong Kong from such trade, profession or business. Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong, “Inland Revenue Ordinance”) as it is currently applied, Hong Kong profits tax may be charged on revenue profits arising on the sale, disposal or redemption of the Notes where such sale, disposal or redemption is or forms part of a trade, profession or business carried on in Hong Kong. Interest on the Notes will be subject to Hong Kong profits tax where such interest is received by or accrued to:
(a) a financial institution (as defined in the Inland Revenue Ordinance) by way of interest which arises through or from the carrying on by the financial institution of its business in Hong Kong, notwithstanding that the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; or
(b) a corporation carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong; or
(c) a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong which interest is in respect of the funds of the trade, profession or business.
In relation to income that may arise from the Notes, Hong Kong is not party to any comprehensive double taxation agreement with Singapore or the United States.
Stamp Duty
No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Note.
The foregoing summary is of a general nature only and is based on Hong Kong law as of the date of this Offering Circular and is subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The foregoing summary does not purport to be a comprehensive description of all of the Hong Kong tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with the Hong Kong tax consequences applicable to all categories of investors, some of which may be subject to special rules. Prospective purchasers of the Notes should consult with their own professional tax advisors as to the particular consequences of holding the Notes which may affect them.
United States Taxation
The Notes will bear a legend to the following effect:
“Any United States person (as defined in the Internal Revenue Code) who holds this obligation will be subject to limitations under the United States income tax laws, including the limitation provided in Section 165(j) and 1287(a) of the Internal Revenue Code.”
103 SUBSCRIPTION AND SALE
Bank of China (Hong Kong) Limited, BOCI Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Mizuho Securities Asia Limited (the “Lead Managers”) have, pursuant to a Subscription Agreement (the “Subscription Agreement”) dated 16 March 2021, jointly and severally agreed to subscribe and pay for the Notes at the subscription price of 99.863 per cent. of the principal amount of Notes, less a commission set out in the Subscription Agreement. The Issuer and the Guarantors have agreed in the Subscription Agreement to indemnify and hold the Lead Managers harmless against certain liabilities incurred in connection with the issue of the Notes. The Subscription Agreement may be terminated in certain circumstances prior to payment to the Issuer.
United States
Each of the Lead Managers understands that the Notes and the Guarantees have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act.
Each of the Lead Managers has represented and agreed that it has offered and sold the Notes and the Guarantees, and agreed that it will offer, sell or deliver the Notes and the Guarantees (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date (as defined in the Subscription Agreement) (the “distribution compliance period”), only in accordance with Rule 903 of Regulation S under the Securities Act. Accordingly, neither it, its affiliates, nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts with respect to the Notes and the Guarantees, and it and they have complied and will comply with the offering restrictions requirement of Regulation S under the Securities Act. Each of the Lead Managers agreed that, at or prior to confirmation of sale of Notes and the Guarantees, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes and the Guarantees from or through it during the distribution compliance period a confirmation or notice to substantially the following effect:
“The securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of offering and the Closing Date (as defined in the Subscription Agreement), except in either case in accordance with Regulation S under the Securities Act. Terms used above have the meaning given to them by Regulation S under the Securities Act.”
Terms used in the above paragraphs have the meanings given to them by Regulation S under the Securities Act. In addition:
(a) except to the extent permitted under U.S. Treas. Reg. §1.163-5(c)(2)(i)(D) (the “D Rules”), each of the Lead Managers (x) has represented that it has not offered or sold, and agreed that during the restricted period it will not offer or sell, the Notes to a person who is within the United States or its possessions or to a United States person, and (y) represented that it has not delivered and agreed that it will not deliver within the United States or its possessions definitive Notes that are sold during the restricted period;
(b) each of the Lead Managers has represented that it has and agreed that throughout the restricted period it will have in effect procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Notes are aware that the Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules;
(c) if it is a United States person, each of the Lead Managers has represented that it is acquiring the Notes for purposes of resale in connection with their original issue and if it retains the Notes for its own account, it will only do so in accordance with the requirements of U.S. Treas. Reg. §1.163-5(c)(2)(i)(D)(6) or any successor provision in substantially the same form for purposes of Section 4701 of the U.S. Internal Revenue Code of 1986; and
104 (d) with respect to each affiliate that acquires from it Notes for the purpose of offering or selling such Notes during the restricted period, each of the Lead Managers either (x) repeated and confirmed the representations and agreements contained in sub-paragraphs (a), (b) and (c) above on its behalf or (y) agreed that it will obtain from such affiliate for the benefit of the Issuer the representations and agreements contained in sub-paragraphs (a), (b) and (c) above.
Terms used in the above paragraphs (a) to (d), unless otherwise defined, have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and the U.S. Treasury regulations thereunder, including the D Rules.
United Kingdom
Each Lead Manager has represented and agreed that:
(i) it has complied with, and will comply with, all applicable provisions of the Financial Services and Markets Act 2000 (the “FSMA”) with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom; and
(ii) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or the Guarantors.
Cayman Islands
Each Lead Manager has represented and agreed that it has not made and will not make (on behalf of the Issuer) any invitation directly or indirectly to the public in the Cayman Islands to subscribe for any Notes.
Hong Kong
Each Lead Manager has represented and agreed that:
(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance; and
(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, (whether in Hong Kong or elsewhere) any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning ascribed to it in the SFO and any rules made under the SFO.
105 The Netherlands
Each Lead Manager has represented and agreed that it will not make an offer of the Notes to the public in the Netherlands in reliance on Article 1(4) of Regulation (EU) 2017/1129 (the “Prospectus Regulation”) unless (i) such offer is made exclusively to persons or entities which are qualified investors as defined in the Dutch Financial Supervision Act or (ii) standard exemption wording is disclosed as required by Article 5:20(5) of the Dutch Financial Supervision Act, provided that no such offer of the Notes shall require the Issuer or any Lead Manager to publish a prospectus pursuant to the Prospectus Regulation or supplement a prospectus pursuant to the Prospectus Regulation.
Switzerland
Each Lead Manager acknowledges that (i) this Offering Circular is not intended to constitute an offer or solicitation to purchase or invest in the Notes (ii) the Notes may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act (“FinSA”) and no application has or will be made to admit the Notes to trading on any trading venue (exchange or multilateral trading facility) in Switzerland and (iii) neither this Offering Circular nor any other offering or marketing material relating to the Notes constitutes a prospectus pursuant to the FinSA, and neither this Offering Circular nor any other offering or marketing material relating to the Notes may be publicly distributed or otherwise made publicly available in Switzerland.
Each Lead Manager has represented and agreed that it has not and will not (i) publicly offer, sell or advertise the Notes directly or indirectly, in, into or from Switzerland and (ii) publicly distribute or otherwise make publicly available in Switzerland this Offering Circular nor any other offering or marketing material relating to the Notes or the offering thereof.
Italy
Each Lead Manager has agreed and acknowledged that that no application has been made or will be made by any person to obtain an authorisation from the Commissione Nazionale per le Società e la Borsa (“CONSOB”) for the public offering (offerta al pubblico) of the Notes in the Republic of Italy and that no Notes may be offered, sold, delivered or distributed nor any copy of this Offering Circular or any other document relating to the Notes may be distributed in the Republic of Italy. Accordingly, each Lead Manager has represented and agreed that it has not offered, sold, delivered, distributed or made available, and will not offer, sell, deliver, distribute or make available in the Republic of Italy any of the Notes nor any copy of this Offering Circular or any other documents relating to the Notes other than:
(a) to qualified investors (investitori qualificati), as defined pursuant to Article 2 of the Prospectus Regulation and any applicable provision of Legislative Decree No. 58 of 24 February 1998, as amended (the “Financial Services Act”) and/or Italian CONSOB regulations; or
(b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 1 of the Prospectus Regulation, Article 34-ter of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time, and the applicable Italian laws.
Each Lead Manager has further agreed that any offer, sale or delivery of the Notes or distribution of copies of this Offering Circular or any other document relating to the Notes in the Republic of Italy under paragraph (a) or (b) above must:
(i) be made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 20307 of 15 February 2018 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the “Banking Act”);
(ii) comply with any other applicable laws and regulations or requirement imposed by CONSOB, the Bank of Italy (including the reporting requirements, where applicable, pursuant to Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time) and/or any other Italian authority.
106 Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”). Accordingly, each Lead Manager has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.
Singapore
Each Lead Manager has acknowledged that this Offering Circular has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Lead Manager has represented and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase, and will not offer or sell the Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute this Offering Circular or any other document or material in connection with the offer or sale or invitation for subscription or purchase of the Notes, whether directly or indirectly, to any person in Singapore other than (a) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 274 of the SFA, (b) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018, or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:
(1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; or
(2) where no consideration is or will be given for the transfer; or
(3) where the transfer is by operation of law; or
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
107 General
No action has been taken by the Issuer, the Guarantors or any of the Lead Managers that would, or is intended to, permit a public offer of the Notes in any country or jurisdiction where any such action for that purpose is required. Accordingly, each of the Lead Managers has undertaken that it will not, directly or indirectly, offer or sell any Notes or distribute or publish any offering circular, prospectus, memorandum, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of Notes by it will be made on the same terms.
Other Banking or Commercial Relationships
Certain of the Lead Managers, their subsidiaries, holding companies and other subsidiaries of such holding companies (the “Relevant Parties”) have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services for the Issuer, the Guarantors and/or their Relevant Parties in the ordinary course of business. They may have received, or may in the future receive, customary fees and commissions for these transactions. Certain of the Lead Managers and their Relevant Parties may have positions, deal or make markets in the Notes, related derivatives and reference obligations, including (but not limited to) entering into hedging strategies on behalf of the Issuer, the Guarantors and their respective Relevant Parties or as principal in order to manage their exposure, their general market risk, or other trading activities.
In addition, in the ordinary course of their business activities, the Lead Managers and their Relevant Parties may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer, the Guarantors or their respective Relevant Parties. Certain of the Lead Managers or their Relevant Parties may have a lending relationship with the Issuer, the Guarantors and/or their Relevant Parties and may routinely hedge their credit exposure to the Issuer, the Guarantors and/or their Relevant Parties consistent with their customary risk management policies. Such Lead Managers and their Relevant Parties may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes. Any such positions could adversely affect future trading prices of the Notes. The Lead Managers and their Relevant Parties may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
108 GENERAL INFORMATION
1. The Notes have been accepted for clearance through Euroclear and Clearstream. The ISIN for the Notes is XS2318334120 and the Common Code is 231833412.
2. Application will be made to the SGX-ST for the listing and quotation of the Notes on the Official List of the SGX-ST but an application may instead be made to another stock exchange which is: (a) a member of the World Federation of Exchanges; or (b) located in a state that is a member of the Organisation for Economic Co-operation and Development, for permission to deal in and the listing of the Notes. However no assurance is made that the application to the SGX-ST or such other stock exchange will be approved. The settlement of the Notes is not conditional on obtaining listing. In connection with such application, each of the Issuer and the Guarantors will use endeavours considered in its sole opinion to be reasonable to it to obtain the listing as promptly as practicable after the Closing Date (if not already obtained). The Issuer may elect to apply for a de-listing of the Notes from any stock exchange or markets of such stock exchange on which they are traded because the maintenance of such listing is or would be, in the opinion of the Issuer, unduly burdensome, including, without limitation, any requirement on the Issuer or a Guarantor to provide financial statements prepared in accordance with, or reconcile financial statements to, accounting principles or standards other than HKFRS in which event the Issuer will use endeavours considered in its sole opinion to be reasonable to it to seek a replacement listing of such Notes on any section of any stock exchange on which they are traded or another stock exchange which is: (a) a member of the World Federation of Exchanges; or (b) located in a state that is a member of the Organisation for Economic Co-operation and Development, provided that obtaining or maintaining a listing on such section or such stock exchange would not be, in the opinion of the Issuer, unduly burdensome including, without limitation, any requirement on the Issuer or a Guarantor to provide financial statements prepared in accordance with, or reconcile financial statements to, accounting principles or standards other than HKFRS. In the event that no listing is obtained or maintained which satisfies the foregoing requirements, the Issuer will use endeavours considered in its sole opinion to be reasonable to it to obtain a replacement listing elsewhere.
The Notes will be traded in a minimum board lot size of US$200,000 for so long as any of the Notes are listed on the SGX-ST and the rules of that exchange so require.
For so long as any of the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer will appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that any of the Global Notes is exchanged for definitive Notes. In addition, in the event that any of the Global Notes is exchanged for definitive Notes, an announcement of such exchange will be made by the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying agent in Singapore.
3. Each of the Issuer and the Guarantors have obtained all necessary consents, approvals and authorisations as may be required in connection with the issue and performance of the Notes, except as disclosed in this Offering Circular. The issue of the Notes was approved by resolutions of the Issuer passed on 15 March 2021, the giving of the Singapore Guarantee by the Singapore Guarantor was authorised by resolutions of the Singapore Guarantor (in its capacity as trustee-manager of HPH Trust) passed on 15 March 2021, and the giving of the Hong Kong Guarantee by the Hong Kong Guarantor was authorised by resolutions of the Hong Kong Guarantor passed on 15 March 2021.
4. Except as disclosed in this Offering Circular, there has been no material adverse change in the financial position or prospects of HPH Trust since 31 December 2020 and there has been no material adverse change in the financial position or prospects of the Issuer since its date of incorporation.
109 5. Other than as referred to elsewhere in this Offering Circular, neither the Issuer nor any Guarantor nor any of HPH Trust’s subsidiaries is involved in any litigation or arbitration proceedings that if determined adversely to HPH Trust or any of its subsidiaries would, in the aggregate, have a material adverse effect on the consolidated financial position of HPH Trust and its subsidiaries (including the Issuer) taken as a whole, nor is the Issuer, any Guarantor or any of HPH Trust’s subsidiaries aware that any such proceedings are pending or threatened.
6. The Issuer has not audited or published, and does not propose to audit or publish, any of its accounts since it is not required to do so under Cayman Islands law. The Issuer is, however, required to keep such accounts and records as are necessary to give a true and fair view of the Issuer’s affairs and to explain its transactions.
7. Under the Listing Manual, HPH Trust is required to announce its half-yearly and full-year financial statements as soon as the figures are available, but in any event not later than 60 days after the relevant financial period for full-year financial statements and not later than 45 days after the relevant period for half-yearly financial statements. In addition, HPH Trust is required to issue its annual report to its Unitholders and the SGX-ST at least 14 days before the date of its annual general meeting. For so long as any of the Notes remains outstanding, copies of HPH Trust’s annual report and financial statements may be obtained at the office of the Fiscal Agent. HPH Trust does not publish full non-consolidated annual financial statements. HPH Trust does publish non- consolidated annual statements of financial position and certain notes thereto. HPH Trust does not publish audited interim consolidated nor non-consolidated financial statements.
8. The following contracts have been or will be entered into in relation to the issue of the Notes:
(a) the Subscription Agreement dated 16 March 2021 between the Issuer, the Guarantors, and the Lead Managers;
(b) the Agency Agreement dated on or about the Closing Date between the Issuer, the Guarantors, and the Fiscal Agent;
(c) the Singapore Guarantee dated on or about the Closing Date entered into by the Singapore Guarantor;
(d) the Hong Kong Guarantee dated on or about the Closing Date entered into by the Hong Kong Guarantor;
(e) the Temporary Global Note and the Permanent Global Note.
9. Copies of the following documents may be inspected during usual business hours on any weekday (Saturdays, Sundays and holidays excepted) at the registered office of the trustee-manager of HPH Trust (initially being the Singapore Guarantor):
(a) the Memorandum and Articles of Association of the Issuer;
(b) the Memorandum and Articles of Association of the Singapore Guarantor;
(c) the Memorandum and Articles of Association of the Hong Kong Guarantor;
(d) the Trust Deed;
(e) the Agency Agreement (in execution form after the Closing Date);
(f) the Guarantees (in execution form after the Closing Date); and
(g) the documents referred to in the section entitled “Documents Incorporated by Reference”.
110 GLOSSARY OF CERTAIN TERMS
Automated Grounding : A system that helps yard planners identify the most System appropriate areas for the temporary storage of each container yard based on its designated vessel, weight class and port of discharge
CCTV : Closed circuit television
CSI : Container Security Initiative, a series of measures adopted by US customs authorities to commence security screening on container cargo entering or transiting through the US (such as identifying high risk containers in foreign ports before they are loaded on vessels destined at or transited through the US)
C-TPAT : Customs-Trade Partnership Against Terrorism, a voluntary supply chain security programme led by US customs authorities and focused on improving the security of private companies’ supply chains with respect to terrorism
Customer Plus : A system that offers a web-based and real-time communication channel between HIT and its customers
Deep-water container port : Any port that has the ability to accommodate a fully laden vessel with a capacity in excess of 8,000 TEU
Electric rubber-tyred gantry : Electric powered rubber-tyred gantry cranes cranes
Electronic Data Interchange : A system that supports and integrates the exchange of System information between the Portfolio Container Terminals and its customers, from the submission of vessel arrival schedules to the eventual bill processing
External Trucks : Trucks that transport containers in and out of the terminals
Hybrid rubber-tyred gantry : Hybrid powered rubber-tyred gantry cranes cranes
Guider : A system that facilitates the vessel discharge and loading planning process
Internal Trucks : Trucks that operate within the terminals
ISPS : International Ship & Port Facility Security Code
LNG Trucks : Liquefied natural gas-powered container trucks
Mega-vessels : A vessel with a capacity in excess of 8,000 TEU
111 nGen : The Next Generation Terminal Management System, HPH’s proprietary, scalable, and customer-oriented terminal management system that streamlines port processes, improves the efficiency of port operations and enhances information exchange with shipping lines by integrating with their systems
O&D : Origin and destination
OMS : Operations Monitoring System, which is a system that monitors yard operations including inventory distribution and container movement status
Super Post Panamax Quay : A container crane that is able to load and unload vessels that Cranes are 22 container rows wide or more
Tandem-Lift Quay Cranes : A container crane that is able to load and unload multiple containers simultaneously
TEU : Twenty-foot equivalent unit, based on the dimensions of a cargo container 20 feet long by 8 feet wide by 8 feet 6 inches high, with a maximum load of 24 tonnes
Throughput : A measure of container handling activity. The two main categories of throughput are O&D, which is also often referred to as import and export, and transshipment. Every container shipped by sea is by definition an export container at the origination terminal and an import container at the destination terminal. A container that is transferred from one ship to another at some point during the journey is said to be transshipped, which gives rise to transshipment throughput at an intermediate terminal somewhere between the load terminal and the discharge terminal. Throughput includes the handling of imports, exports, empty containers and transshipments
Water Depth Alongside : The quay side depth of the terminal where vessels will berth
Yard Planners : Persons who are in charge of identifying the appropriate areas in the terminal for the storage of containers
YesInfo : An information technology platform that offers a web-based real-time communication channel with YICT, the shipping lines customers, customs, shipping lines’ agent and transportation companies
112 REGISTERED OFFICE OF REGISTERED OFFICE OF REGISTERED OFFICE OF THE ISSUER THE HONG KONG THE SINGAPORE GUARANTOR GUARANTOR
HPHT Finance (21) Limited HPHT Limited Hutchison Port Holdings PO Box 309, Ugland House Terminal 4 Trust acting through Grand Cayman, KY1-1104 Container Port Road South its trustee-manager, Cayman Islands Kwai Chung Hutchison Port Holdings New Territories, Hong Kong Management Pte. Limited 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623
FISCAL AGENT AND PRINCIPAL PAYING AGENT
The Bank of New York Mellon, London Branch One Canada Square London E14 5AL United Kingdom
LEGAL ADVISERS TO THE GUARANTORS AND THE ISSUER
as to Cayman Islands law as to English and as to Singapore law Hong Kong law Maples and Calder Linklaters Singapore Pte. Ltd. (Hong Kong) LLP Linklaters One George Street 26th Floor Central Plaza 11/F Alexandra House #17-01 18 Harbour Road Chater Road Singapore 049145 Wanchai Central Hong Kong Hong Kong
LEGAL ADVISER TO THE LEAD MANAGERS
as to English and Hong Kong law
Allen & Overy 9th Floor, Three Exchange Square Central Hong Kong
INDEPENDENT AUDITOR SINGAPORE LISTING AGENT
PricewaterhouseCoopers LLP Linklaters Singapore Pte. Ltd. 7 Straits View Marina One One George Street East Tower Level 12 #17-01 Singapore 018936 Singapore 049145