China Merchants Port : CONNECTED TRANSACTION - EXTENSION OF LOAN FACILITY TO KHOR AMBADO FREE ZONE COMPANY FZCO

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

(Stock Code: 00144)

CONNECTED TRANSACTION

EXTENSION OF LOAN FACILITY TO KHOR AMBADO

FREE ZONE COMPANY FZCO

SUMMARY

Reference is made to the announcement of the Company dated 17 August 2017 in relation to the CMP Loan Agreement, pursuant to which the Company agreed to grant the CMP Loan Facility of up to US$150 million (equivalent to approximately HK$1,170 million) to the Djibouti Asset Company.

On 9 November 2018, the Company and the Djibouti Asset Company entered into the Deed of Extension to the CMP Loan Agreement to amend the terms of the CMP Loan Agreement and to extend the CMP Loan Facility for a further 6-month period.

The Djibouti Asset Company is an associate of CMG, the ultimate holding company of the Company, and therefore a connected person of the Company. Accordingly, the transaction contemplated under the Deed of Extension to the CMP Loan Agreement constitutes a connected transaction of the Company.

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

• 1. BACKGROUND

  Reference is made to the announcement of the Company dated 17 August 2017 in relation to the CMP Loan Agreement, pursuant to which the Company agreed to grant the CMP Loan Facility of up to US$150 million (equivalent to approximately HK$1,170 million) to the Djibouti Asset Company. As discussed in the same announcement, the Djibouti Asset Company had applied all the funds under the CMP Loan Facility to support further financing to PDSA under the DAC Loan Facility.

  The initial term of the CMP Loan Agreement will expire on 9 November 2018. Pursuant to the terms of the CMP Loan Agreement, the CMP Loan Facility shall be extendable for subsequent periods of one year each if the parties are able to agree to do so in writing by no later than two months prior to the expiry of the term provided that the aggregate term shall not exceed 10 years. As a result of negotiations between the parties, on 9 November 2018, the Company and the Djibouti Asset Company entered into the Deed of Extension to the CMP Loan Agreement to amend the terms of the CMP Loan Agreement and to extend the CMP Loan Facility for a further 6-month period. The relevant parties have also on the same date entered into the Deed of Extension to the DAC Loan Agreement to extend the DAC Loan Facility for a further 6-month period.

• 2. THE DEED OF EXTENSION TO THE CMP LOAN AGREEMENT

  Pursuant to the Deed of Extension to the CMP Loan Agreement, the term of the CMP Loan Facility shall be extended for a further 6-month period and expire on 8 May 2019 and the Company has the overriding right at any time to require immediate payment and/or require cash collateralisation of all or any sums actually or contingently outstanding.

  All other terms and conditions under the CMP Loan Facility shall remain the same as disclosed in the announcement of the Company dated 17 August 2017. The key terms of the CMP Loan Facility are reproduced below:

  Parties: (1) Company, as the lender

  • (2) Djibouti Asset Company, as the borrowerPrincipal amount:

US$150 million (equivalent to approximately HK$1,170 million)

Purpose

Djibouti Asset Company shall apply all amounts borrowed by it under the CMP Loan Agreement for the purpose of granting the DAC Loan Facility to PDSA.

Term:

(i)the term of the CMP Loan Facility shall expire on 8 May 2019; and

(ii) extendable for periods of one year each if agreed by the Company and the Djibouti Asset Company provided that the aggregate term shall not exceed 10 years from the utilisation date.

Interest rate:

An amount equal to the higher of the following amounts:

(i) 5% per annum of the outstanding amount under the CMP Loan Facility; and

(ii) 50% of the interest payable by PDSA to the

Djibouti Asset Company pursuant to the DAC Loan Agreement for that relevant year

Repayment:

The Djibouti Asset Company shall repay the outstanding amount of the loan upon the expiry of the term of the CMP Loan Facility, subject to any request from the Company to require immediate payment and/or require cash collateralisation of all or any sums actually or contingently outstanding amount from the Djibouti Asset Company

Security:

The CMP Loan Facility is secured by a share pledge over 15.3% of the issued shares of PDSA held by Great Horn.

3. REASONS FOR THE TRANSACTION

The core business of the Group includes port and port-related business. As disclosed in the announcement of the Company dated 17 August 2017, the Djibouti Asset Company shall apply the funds under the CMP Loan Facility to support further financing to PDSA under the DAC Loan Facility. To support the operation and development of PDSA, the Company agreed to grant the CMP Loan Facility to the Djibouti Asset Company. In September 2018, the Djibouti government nationalised a majority shareholding of DCT, a key and materialasset of PDSA. As a result, the interest chargeable under the CMP Loan Agreement, being a reference to the dividend receivable by PDSA, is rendered indeterminable and the value of the shares in PDSA pledged in favour of the Company under the share pledge may be reduced. As a result, the Company and the Djibouti Asset Company entered into the Deed of Extension to the CMP Loan Facility and the Djibouti Asset Company and PDSA entered into the Deed of Extension to the DAC Loan Facility to extend the CMP Loan Facility and the DAC Loan Facility, respectively, for a further 6-month period, during which, the parties shall agree on a settlement plan to resolve issues arising out of the nationalisation including the adjustment of the formulae of calculating the interest rate under the CMP Loan Agreement and the DAC Loan Agreement and the supplementation of additional security package in securing the CMP Loan Facility.

Pursuant to the Deed of Extension to the DAC Loan Agreement, the term of the DAC Loan Facility shall be extended for a further 6-month period and expire on 8 May 2019 and the Djibouti Asset Company has the overriding right at any time to require immediate payment and/or require cash collateralisation of all or any sums actually or contingently outstanding.

All other terms and conditions under the DAC Loan Facility shall remain the same as disclosed in the announcement of the Company dated 17 August 2017. The key terms of the DAC Loan Facility are reproduced below:

Parties: (1) Djibouti Asset Company, as the lender

• (2) PDSA, as the borrower

• (3) DPFZA, as the guarantor

Principal amount:

US$150 million (equivalent to approximately HK$1,170 million)

Purpose

PDSA shall apply all amounts borrowed under the DAC Loan Facility towards development, upgrading and operation of its facilities and assets in Djibouti.

Term:

(i)the term of the CMP Loan Facility shall expire on 8 May 2019; and

(ii) extendable for a period of one year each if agreed by the Djibouti Asset Company, PDSA and DPFZA provided that the aggregate term shall not exceed 10 years.

Interest rate:

An amount equal to the higher of the following amounts:

• (iii) 5% per annum of the outstanding amount under the DAC Loan Facility; and

• (iv) an amount that is equal to 20% x 90% x the net profit of PDSA of the preceding financial yearRepayment:

PDSA shall repay the principal upon the expiry of the term of the DAC Loan Facility, subject to any request from the Djibouti Asset Company to require immediate payment and/or require cash collateralisation of all or any sums actually or contingently outstanding amount from PDSA

The terms of the Deed of Extension to the CMP Loan Facility were arrived at between the Company and the Djibouti Asset Company after arm's length negotiations and were determined based on the intention of the Company and the Djibouti Asset Company to resolve the issues arising out of the nationalization of DCT as soon as possible, while protecting the Company's interest under the CMP Loan Agreement.

Taking into account of the above, the Directors, including the independent non-executive Directors, are of the view that, whilst the entering into of the Deed of Extension to the CMP Loan Facility is not in the ordinary and usual course of business of the Group, the Deed of Extension to the CMP Loan Facility has been entered into on normal commercial terms and that the terms of the Deed of Extension to the CMP Loan Facility are fair and reasonable and in the interests of the Company and its shareholders as a whole.

None of the Directors have a material interest in the Deed of Extension to the CMP Loan Facility nor are they required to abstain from voting in the relevant board resolution.

4. GENERAL INFORMATION

The Djibouti Asset Company is a free zone limited liability company incorporated in Djibouti established for the purpose of investing in and financing the development rights to develop commercial and infrastructure projects within the Djibouti International Free Trade Zone. The Djibouti Asset Company is owned as to 30% by the Asset Joint Venture (in which the Company has a 40% interest with the remaining 60% held by associates of CMG) and as to 60% and 10% by Great Horn and PDA, respectively.