Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Announcement.

招商銀行股份有限公司

CHINA MERCHANTS BANK CO., LTD.

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

(Stock code: 03968) CONTINUING CONNECTED TRANSACTIONS REVISION OF EXISTING ANNUAL CAPS FOR 2016 AND 2017

Reference is made to an announcement of the Company dated 16 June 2015 in relation to the entering of the Business Co-operation Agreement with Anbang Insurance for a term of 3 years commencing on 1 January 2015.

As the Company expects that there will be substantial increase in the service fees for agency sales receivable from Anbang Insurance Group under the Business Co-operation Agreement for 2016 and 2017, the Board has decided to revise the existing caps of the service fees for the transactions contemplated under the Business Co-operation Agreement for the two financial years ending 31 December 2016 and 31 December 2017, respectively.

As at the date of this announcement, Anbang Property & Casualty directly held over 10% of the total issued shares of the Company, and is a substantial shareholder of the Company. Anbang Property & Casualty is one of the members of Anbang Insurance Group and is controlled by Anbang Insurance. Accordingly, Anbang Insurance Group is deemed as a connected person of the Company and the transactions between the Group and Anbang Insurance Group constitutes continuing connected transactions under the Hong Kong Listing Rules.

Since some of the applicable percentage ratios (other than the profit ratio) in relation to the revised annual cap of each of the financial year ending 31 December 2016 and 2017 at RMB1,500 million in respect of the service fees for agency sales receivable from Anbang Insurance Group under the Business Co-operation Agreement are more than 0.1% but less than 5%, the conduct of those transactions will accordingly constitute non-exempt continuing connected transactions of the Company which are subject to the reporting and announcement requirements, but are exempt from the independent shareholders' approval requirement under Chapter 14A of the Hong Kong Listing Rules.

BACKGROUND

Reference is made to an announcement of the Company dated 16 June 2015 in relation to the entering of the Business Co-operation Agreement with Anbang Insurance for a term of 3 years commencing on 1 January 2015.

As the Company expects that there will be substantial increase in the service fees for agency sales receivable from Anbang Insurance Group under the Business Co-operation Agreement for 2016 and 2017, the Board has decided to revise the existing caps of the service fees for the transactions contemplated under the Business Co-operation Agreement for the two financial years ending 31 December 2016 and 31 December 2017, respectively.

RELATIONSHIP BETWEEN THE PARTIES

As at the date of this announcement, Anbang Property & Casualty directly held over 10% of the total issued shares of the Company, and is a substantial shareholder of the Company. Anbang Property & Casualty is one of the members of Anbang Insurance Group and is controlled by Anbang Insurance. Accordingly, Anbang Insurance Group is deemed as a connected person of the Company and the transactions between the Group and Anbang Insurance Group constitute continuing connected transactions under the Hong Kong Listing Rules.

BUSINESS CO-OPERATION AGREEMENT

Pursuant to the Business Co-operation Agreement, the Group will provide Anbang Insurance Group with agency sales service, and will receive service fees for agency sales from Anbang Insurance Group. Members of the Group may, from time to time and as necessary, enter into separate implementation agreements with Anbang Insurance Group for each specific insurance product of Anbang Insurance Group. The terms of any such implementation agreement will be governed by the Business Co-operation Agreement and as such will not constitute new categories of continuing connected transactions.

The service fees for agency sales payable by Anbang Insurance Group will be on an arm's length basis and calculated on normal commercial terms, and shall be reached in accordance with the following principles:

  1. to follow the fee as prescribed by the PRC Government; or

  2. where there is no PRC Government prescribed fee but a Government guidance fee exists, to follow the Government guidance fee; or

  3. where there is neither a PRC Government prescribed fee nor a Government guidance fee, to follow the fees to be agreed between the parties based on arm's length negotiations. In any event, the service fees for agency sales shall be at rate(s) no less favourable than those offered to the independent third parties in the ordinary and usual course of business.

Payments of the service fees under the Business Co-operation Agreement will continue to be settled in arrears by way of transfer, or such other manners as agreed by the parties and in accordance with the agreed timing and manners as specified in the implementation agreements to be entered into between the Group and Anbang Insurance Group from time to time.

The transactions contemplated under the Business Co-operation Agreement will continue to be conducted on a non-exclusive basis, and the payment terms are basically settled according to the above pricing principles. Nonetheless, the Company will continue to conduct enquiry process by which the Company will seek quotations from other insurance product providers, or make reference to the terms of transactions with independent third parties for similar products and services to determine if the price and terms offered by Anbang Insurance Group are fair and reasonable and comparable to those offered by independent third parties.

REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS AND THE REVISION TO THE ANNUAL CAPS FOR 2016 AND 2017

The Group has been providing services for agency sales of insurance products to Anbang Insurance Group. The entering into the Business Co-operation Agreement facilitates, on the one hand, the regulation and supervision of the on-going connected transactions between the Group and Anbang Insurance Group. On the other, it lays a sound foundation for future business development, and boosts the cross-industry, cross-border cooperation of both parties going forward.

With continuing expansion of the business scale between the Group and Anbang Insurance Group, the Company expects that there will be substantial increase in the service fees for agency sales receivable from Anbang Insurance Group under the Business Co-operation Agreement for 2016 and 2017. As such, the Board has decided to revise the existing caps for the service fees for the transactions contemplated under the Business Co-operation Agreement for each of the two financial years ending 31 December 2016 and 31 December 2017 from RMB1,200 million to RMB1,500 million.

HISTORICAL AMOUNTS AND REVISED ANNUAL CAPS AND BASIS OF DETERMINATION

For each of the three years ended 31 December 2013, 2014 and 2015 and the six months ended 30 June 2016, the service fees for agency sales of insurance products paid to the Group by Anbang Insurance Group were approximately RMB701.73 million, RMB955.23 million, RMB906.84 million and RMB1,027.36 million (unaudited), respectively.

In determining the revised annual caps of the service fees for the transactions under the Business Co-operation Agreement for each of the financial years ending 31 December 2016 and 31 December 2017, the Company has taken into account a number of factors, including the continuing expansion of the business sale between the Group and Anbang Insurance Group, the Business Co-operation Agreement involves activities that may vary from year to year due to a number of external reasons, including the unexpected changes of the insurance markets, the decision on insurance product investment transactions is market-driven, largely determined by customers' decision on their investment and wealth management portfolio which is not within the Company's control, the current and projected operation conditions for the continuing connected transactions between the Group and Anbang Insurance Group, with reference to the prevailing market conditions, the domestic and international economic and financial situations and policies and guidelines for insurance business formulated by regulatory authorities, the underlying transaction volumes and the expected growth in service fees. Accordingly, the Board believes that it is reasonable to set the revised annual cap for each of the financial years ending 31 December 2016 and 31 December 2017 at RMB1,500 million, so as to allow more room for further expansion of the transaction amounts between the Group and Anbang Insurance Group, thus enabling the Company to take full benefit of the growth of the PRC economy and the insurance product investment markets, and to maximize the Company's revenue generated from such service fees.

BOARD CONFIRMATION

The Directors (including the independent non-executive Directors) of the Company consider that the Business Co-operation Agreement was entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (in accordance with the terms on arm's length negotiation or terms no less favourable than the terms offered by the Company to independent third parties); and that the relevant terms and the revised annual caps for each of the financial years ending 31 December 2016 and 31 December 2017 are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

The Directors of the Company have no interests in the Business Co-operation Agreement, therefore, none of the Directors was required to abstain from voting on the relevant resolutions. The relevant resolution was voted for and approved unanimously by all the Directors of the Company.

IMPLICATIONS UNDER HONG KONG LISTING RULES

Since some of the applicable percentage ratios (other than the profit ratio) in relation to the revised annual cap of each of the financial years ending 31 December 2016 and 2017 at RMB1,500 million in respect of the service fees for agency sales receivable from Anbang Insurance Group under the Business Co-operation Agreement are more than 0.1% but less than 5%, the conduct of those transactions will accordingly constitute non-exempt continuing connected transactions of the Company which are subject to the reporting and announcement requirements, but are exempt from the independent shareholders' approval requirement under Chapter 14A of the Hong Kong Listing Rules.

GENERAL INFORMATION RELATING TO THE COMPANY AND ANBANG INSURANCE

The Company is a joint stock company incorporated in the PRC with limited liability, the A Shares and the H Shares of which are listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, respectively. The Company provides customers with various wholesale and retail banking products and services, and maintains treasury businesses with proprietary purpose and on behalf of customers.

Anbang Insurance is one of the conglomerates in the insurance industry of China. As a comprehensive insurance group, Anbang Insurance is currently engaged in property insurance, life insurance, health insurance, asset management, policy sales, insurance brokerage and other relevant business.

Anbang Property & Casualty is a joint stock limited company incorporated in the PRC, and one of the members of Anbang Insurance Group. The business scope of Anbang Property & Casualty includes property damage insurance, liability insurance, credit insurance and guarantee insurance; short-term health insurance and accident insurance; reinsurance of the aforesaid businesses, etc.

China Merchants Bank Co. Ltd. published this content on 24 August 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 24 August 2016 15:44:04 UTC.

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