Annual Report 2021

CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED 152 Notes to the Consolidated Financial Statements For the year ended 31 December 2021 20. INTERESTS IN ASSOCIATES (CONTINUED) Deemed disposal of partial interest in an associate engaged in port operation in Dalian, the PRC (continued) In November 2021, the additional shares issued (“Private Placement”) have been registered in the Shanghai Branch of China Securities Depository and Clearing Corporation Limited. The additional shares issued are shares with trading moratorium and a lock-up period of 6 months. An additional of 1,363,636,363 shares were issued to the 8 independent third parties. Upon completion of the Private Placement, Liaoning Port’s total share capital increased from RMB22,623 million (equivalent to approximately HK$26,881 million) to RMB23,987 million (equivalent to approximately HK$29,167 million). Accordingly, the Group’s equity interest in Liaoning Port was diluted from 12% to 11.32%, resulting in a gain on deemed disposal of HK$18 million. The investment in Liaoning Port continues to account for as an interest in an associate as there is no change in directorship appointed by the Group and the directors consider the Group has significant influence over the investee. Deemed disposal of partial interest in an associate engaged in port operation in Shanghai, the PRC In July 2021, Shanghai International Port (Group) Co., Ltd. (“SIPG”), a listed associate of the Group, approved a share award scheme to its employees (“SIPG Share Award Scheme”). An additional of 105,005,100 shares have been registered in the Shanghai Branch of China Securities Depository and Clearing Corporation Limited. The additional shares issued are shares with trading moratorium and a lock-up period ranging from 3 years to 5 years. Upon completion of the SIPG Share Award Scheme, SIPG’s total share capital increased from RMB23,174 million (equivalent to approximately HK$28,382 million) to RMB23,279 million (equivalent to approximately HK$28,510 million). Accordingly, the Group’s equity interest in SIPG was diluted from 26.77% to 26.64%, resulting in a loss on deemed disposal of HK$64 million. The investment in SIPG continues to account for as an interest in an associate as there is no change in directorship appointed by the Group and the directors consider the Group has significant influence over the investee. Subscription of Mandatory Convertible Bonds issued by and loan to Terminal Link SAS (“Terminal Link”) In November 2019, the Company entered into a memorandum of agreement with an existing shareholder who indirectly holds 51% of Terminal Link, pursuant to which the Company proposed to subscribe for the mandatory convertible bonds (“Mandatory Convertible Bonds”) issued by, and to grant a term loan with a 8-year repayment term and 6% interest rate per annum (“Term Loan”) to, Terminal Link for a total amount of US$468 million and US$500 million, respectively (equivalent to approximately HK$3,644 million and HK$3,894 million, respectively) to finance the proposed acquisition by Terminal Link of interests in a portfolio of ten terminals owned by the third party and its affiliates (“Proposed Acquisition”). During the year ended 31 December 2020, the initial closing of the Proposed Acquisition with respect to eight of these target terminals was completed. The Group completed the subscription of the corresponding amount of the Mandatory Convertible Bonds and granted the corresponding amount of the Term Loan amounting to US$394 million and US$421 million, respectively (equivalent to approximately HK$3,055 million and HK$3,264 million, respectively). Mandatory Convertible Bonds amounted to HK$3,055 million was accounted for as interests in associates and the Term Loan amounted to HK$3,264 million was accounted for as advance to associates and was included in other financial assets.