China Merchants Port : CONNECTED TRANSACTION - SUPPLEMENTAL SHAREHOLDERS AGREEMENT IN RELATION TO THE ASSET JOINT VENTURE FOR INVESTM...

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

(Stock Code: 00144)

CONNECTED TRANSACTION

SUPPLEMENTAL SHAREHOLDERS AGREEMENT IN RELATION TO THE

ASSET JOINT VENTURE FOR INVESTMENTS IN DJIBOUTI

SUMMARY

Reference is made to the announcement of the Company dated 17 August 2017 and 9 November 2018 in relation to the CMP Loan Agreement and the Deed of Extension to the CMP Loan Agreement, pursuant to which the Company agreed to grant and extend the CMP Loan Facility of up to US$150 million (equivalent to approximately HK$1,170 million) to the Djibouti Asset Company. Pursuant to the Deed of Extension to the CMP Loan Agreement, the term of the CMP Loan Facility has been extended for a further 6-month period and will expire on 8 May 2019.

In light of the expiry of the CMP Loan Facility on 8 May 2019, in order to fund the repayment of CMP Loan Facility by the Djibouti Asset Company, the Asset Joint Venture agreed to provide the Shareholder Loan to the Djibouti Asset Company, of which the Shareholder Loan will be partially funded by the Capital Increase to be contributed by the Company, CMI and Cheer Signal in accordance with their respective shareholdings in the Asset Joint Venture. Accordingly, on 29 April 2019, the Company, CMI, Cheer Signal and Asset Joint Venture entered into the Supplemental Shareholders Agreement in relation to the Asset Joint Venture to set out the terms of the Capital Increase.

The parties agreed that the share capital of the Asset Joint Venture shall be increased to US$144,810,000 (equivalent to approximately HK$1,129,518,000) by issuing and allotting 84,750,000 shares of the Asset Joint Venture to the parties in accordance with their respective shareholdings in the Asset Joint Venture. Accordingly, the Company, CMI and Cheer Signal agreed to contribute US$33,900,000 (equivalent to approximately HK$264,420,000), US$33,900,000 (equivalent to approximately HK$264,420,000) and US$16,950,000 (equivalent to approximately HK$132,210,000), respectively into the Asset Joint Venture. Upon the completion of the Capital Increase, the share capital of the Asset Joint Venture

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shall comprise 144,810,000 shares of which, the Company, CMI and Cheer Signal shall hold 57,924,000, 57,924,000 and 28,962,000 shares, respectively.

Each of CMI, Cheer Signal and the Asset Joint Venture is an associate of CMG, the ultimate holding company of the Company, and therefore connected persons of the Company. Accordingly, the Supplemental Shareholders Agreement constitutes a connected transaction of the Company under the Listing Rules.

Since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the commitment by the Company under the Supplemental Shareholders Agreement exceed 0.1% but are below 5%, the transaction 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 and 9 November 2018 in relation to the CMP Loan Agreement and the Deed of Extension to the CMP Loan Agreement, pursuant to which the Company agreed to grant and extend the CMP Loan Facility of up to US$150 million (equivalent to approximately HK$1,170 million) to the Djibouti Asset Company. As disclosed in the same announcements, 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.

Pursuant to the Deed of Extension to the CMP Loan Agreement, the term of the CMP Loan Facility has been extended for a further 6-month period and will expire on 8 May 2019. The relevant parties have also entered into the Deed of Extension to the DAC Loan Agreement to extend the DAC Loan Facility for a further 6-month period.

In light of the expiry of the CMP Loan Facility on 8 May 2019, in order to fund the repayment by the Djibouti Asset Company, the Asset Joint Venture agreed to provide the Shareholder Loan to the Djibouti Asset Company, of which the Shareholder Loan will be partially funded by the Capital Increase to be contributed by the Company, CMI and Cheer Signal in accordance with their respective shareholdings in the Asset Joint Venture. Accordingly, on 29 April 2019, the Company, CMI, Cheer Signal and Asset Joint Venture entered into the Supplemental Shareholders Agreement in relation to the Asset Joint Venture to set out the terms of the Capital Increase.

As of the date of this announcement, the Company, CMI and Cheer Signal have a 40%, 40% and 20% interest in the Asset Joint Venture, respectively and the Asset Joint Venture has a 30% interest in the Djibouti Asset Company with the remaining interest held by Great Horn and PDA as to 60% and 10%, respectively.

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2.SUPPLEMENTAL SHAREHOLDERS AGREEMENT

The key terms of the Supplemental Shareholders Agreement are set out below:

Date:	29 April 2019
Parties:	(1) the Company
	(2) CMI
	(3) Cheer Signal
	(4) Asset Joint Venture
Capital Increase:	The parties agreed that the share capital of the Asset
	Joint Venture shall be increased to US$144,810,000
	(equivalent to approximately HK$1,129,518,000) by
	issuing and allotting 84,750,000 shares of the Asset
	Joint Venture to the parties in accordance with their
	respective shareholdings in the Asset Joint Venture.
	Accordingly, the Company, CMI and Cheer Signal
	agreed to contribute US$33,900,000 (equivalent to
	approximately	HK$264,420,000),	US$33,900,000
	(equivalent to approximately HK$264,420,000) and
	US$16,950,000	(equivalent	to	approximately
	HK$132,210,000), respectively into the Asset Joint
	Venture. Upon the completion of the Capital Increase,
	the share capital of the Asset Joint Venture shall
	comprise 144,810,000 shares of which, the Company,
	CMI and Cheer Signal shall hold 57,924,000,
	57,924,000 and 28,962,000 shares, respectively.

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 9 November 2018, in September 2018, the Djibouti government nationalised a majority shareholding of DCT, a key and material asset 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 is reduced. As a result, the

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Company and the Djibouti Asset Company agreed on a settlement plan to resolve issues arising out of the nationalisation including the repayment of the CMP Loan Agreement by the Djibouti Asset Company and the granting of the Shareholder Loan by the Asset Joint Venture on a fixed interest rate with the supplementation of a new security package.

The Capital Increase will fund the Shareholder Loan which in turn facilitates the repayment of the CMP Loan Facility, resulting an increase of working capital for the Company. In addition, according to the terms of the Shareholder Loan to be granted by the Asset Joint Venture to the Djibouti Asset Company, Great Horn will enter into a share pledge to grant a first ranking charge over 60% of the total issued shares in the Djibouti Asset Company in favour of the Asset Joint Venture and DPFZA will enter into a guarantee agreement in favour of the Asset Joint Venture to guarantee Djibouti Asset Company's obligations in relation to the Shareholder Loan.

The key terms of the Shareholder Loan are set out below:

Parties:	(1) Asset Joint Venture, as the lender
	(2) Djibouti Asset Company, as the borrower
Principal amount:	US$114,750,000	(equivalent	to	approximately
	HK$895,050,000)
Purpose	Djibouti Asset Company shall apply all amounts
	borrowed under the Shareholder Loan towards the
	development, construction and operation of the Djibouti
	International Free Trade Zone (including the repayment
	of the CMP Loan Facility).
Term:	(i) the term of the Shareholder Loan shall be 3 years;
	and (ii) extendable of one year each if agreed by the
	Asset Joint Venture and the Djibouti Asset Company
	provided that the aggregate term shall not exceed 10
	years.
Interest rate:	5% per annum

The terms of the Supplemental Shareholders Agreement were determined after arm's length negotiation between the parties. The total contribution to be made under the Capital Increase was determined with reference to the Shareholder Loan to be provided by the Asset Joint Venture to the Djibouti Asset Company

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which was determined by the amount Djibouti Asset Company is required to repay the CMP Loan Facility. The Capital Increase in the Asset Joint Venture will be made in cash and the contribution to be made by the Company will be funded by internal resources of the Group.

Taking into account of the above, the Directors, including the independent non-executive Directors, are of the view that the Supplemental Shareholders Agreement has been entered into on normal commercial terms and that the terms of the Supplemental Shareholders Agreement are fair and reasonable and in the interests of the Company and its shareholders as a whole.

4.GENERAL INFORMATION

Cheer Signal is a company incorporated in Hong Kong and its principal activities are construction, development and operation of communities, industrial zone and cruise industries. Cheer Signal is a wholly-owned subsidiary of China Merchants Shekou Industrial Zone Company Limited (招商局蛇口工業區有限公司), an indirect subsidiary of CMG, the ultimate holding company of the Company.

CMI is a company incorporated in Hong Kong and a subsidiary of CMG, the ultimate holding company of the Company. CMI's principal activities are management of CMG's certain assets and international investment.

The Asset Joint Venture is a company incorporated in Hong Kong and formed by the Company, China Merchants Investment Development Company Limited and Cheer Signal for the purpose of investment into the Djibouti Asset Company. The interest in the Asset Joint Venture held by China Merchants Investment Development Company Limited was later transferred to CMI. As of the date of this announcement, the Asset Joint Venture is owned as to 40% by the Company, 40% of CMI and 20% by Cheer Signal.

Profit attributable to the Asset Joint Venture

The net profits (before and after tax) attributable to the Asset Joint Venture were HK$2,220,642 and HK$15,792,554 for the year ended 31 December 2017 and 2018, respectively.

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