Annual Report 2021

ANNUAL REPORT 2021 151 20. INTERESTS IN ASSOCIATES (CONTINUED) In prior years, the directors of the Company conducted a review of the Group’s interest in a listed associate with reference to its economic outlooks and assessed its recoverable amount, with reference to its value in use and fair value less costs of disposal. The recoverable amount was determined to be the then fair value less costs of disposal (where the fair value was valued based on quoted prices in active markets for the identical asset directly and categorised as level 1 of the fair value measurement hierarchy) and was less than the carrying amount of the Group’s interest in the said listed associate by HK$739 million. Accordingly, impairment loss of the same account was recognised in profit or loss in prior years. During the year ended 31 December 2021, upon dilution of the Group’s equity interest in the listed associate, the proportionated carrying amount of the interest in the listed associate was used in calculating the gain on deemed disposal. The management of the Group carried out an assessment as at 31 December 2021 and 2020 for whether there is any indication that the impairment loss recognised in prior years for the listed associate may no longer exist or may be decreased. The management of the Group concluded that the indications of impairment previously identified still existed as at 31 December 2021 and 2020, no reversal of impairment loss has been recognised. Deemed disposal of a subsidiary engaged in providing technology solutions In December 2020, the Company, CMPG and certain relevant parties entered into equity subscription and capital injection agreement (the “Injection Agreement”), pursuant to which the Company and CMPG agreed to waive any pre-emptive rights they might have in subscribing for any equity interests in China Merchants International Technology Company Limited (formerly known as “China Merchants Holdings (International) Information Technology Company Limited”, hereinafter referred to as “CMIT”), a non-wholly owned subsidiary of the Company. During the year ended 31 December 2021, with reference to the Injection Agreement, Dalian Port Container Development Co., Ltd. (“Dalian Port Container”), Dalian Port Jifa Logistics Co., Ltd. (“Dalian Port Jifa”) and Yingkou Port Group Co., Ltd. (“Yingkou Port Group”), each a fellow subsidiary of the Group, have made capital contribution to CMIT by way of equity interests in Dalian Port Net Co., Ltd. (49.63%-owned by Dalian Port Container and 29.40%-owned by Dalian Port Jifa) and Yingkou Gangxin Technology Co., Ltd., a wholly-owned subsidiary of Yingkou Port Group. The registered capital of CMIT increased from RMB50 million (equivalent to approximately HK$59 million) to RMB88 million (equivalent to approximately HK$104 million). Accordingly, the Company’s equity interest in CMIT was diluted from 76.84% to 43.74%, resulting in a gain on deemed disposal of HK$17 million, and ceased to be a subsidiary of the Company after the capital injection by the new subscribers. Hence, the investment in CMIT is accounted for as an interest in an associate as the directors consider the Group has significant influence over the investee. Deemed disposal of partial interest in an associate engaged in port operation in Dalian, the PRC In January 2021, the merger by absorption through share swap (the “Merger”) between Liaoning Port Co., Ltd. (“Liaoning Port”), a listed associate of the Group, and a related party and fundraising and connected transactions have been approved by the China Securities Regulatory Commission. Upon completion of the Merger in February 2021, Liaoning Port’s total share capital increased from RMB12,895 million (equivalent to approximately HK$15,322 million) to RMB22,623 million (equivalent to approximately HK$26,881 million). Accordingly, the Group’s equity interest in Liaoning Port was diluted from 21.05% to 12%, resulting in a gain on deemed disposal of HK$500 million. The investment in Liaoning Port continues to account for as an interest in an associate as there is no change in the directorship appointed by the Group and the directors consider the Group has significant influence over the investee.