Annual Report 2021

ANNUAL REPORT 2021 189 39. OBTAINING CONTROL OF A NON-WHOLLY OWNED SUBSIDIARY For the year ended 31 December 2020 In November 2020, a wholly-owned subsidiary of the Company and the other shareholders of Ningbo Daxie China Merchants International Terminals Co. Ltd. (“Daxie Port”) resolved by way of shareholders’ resolutions to establish the Budget Committee, and entered into a Cooperation Agreement with Ningbo Zhoushan Port Company Limited (“Ningbo Port”), a shareholder owned 35% interest of Daxie Port (the “Cooperation Agreement”). The Budget Committee shall comprise of three directors. Each of the shareholders of Daxie Port shall nominate one director to be a member of the Budget Committee, and the director nominated by the Group shall be the chairman. The Budget Committee is primarily responsible for approving Daxie Port’s annual business plan, annual financial budget and final accounts, and after-tax profit distribution plan. Any matters to be considered by the Budget Committee shall be approved by a two-thirds majority. Pursuant to the Cooperation Agreement, the Group and Ningbo Port will consult and communicate among themselves to reach consensus before exercising their shareholders’ rights, and exercise their rights in their capacities as the directors of Daxie Port in the relevant decision-making process at board meetings. If the parties to the Cooperation Agreement cannot reach consensus, the matter shall be decided in accordance with the opinion of the Group. No consideration is payable by either party under the Cooperation Agreement. Upon the completion of the Cooperation Agreement, the Group had over 50% of shareholders’ rights, which had the power to direct the relevant activities of Daxie Port, and obtained effective control over Daxie Port. Accordingly, the Group no longer recognised its investment in Daxie Port as interest in joint venture, and able to account for and consolidate Daxie Port as a subsidiary into the consolidated financial statements. Daxie Port is principally engaged in port and container terminal business in Ningbo, the PRC. Further details of the Daxie Port are set out below: Fair value of identifiable assets acquired and liabilities assumed: HK$’million Property, plant and equipment (note 16) 2,789 Right-of-use assets 1,428 Inventories 10 Debtors, deposits and prepayments 146 Other financial assets 21 Cash and bank balances 367 Bank and other borrowings (173) Deferred tax liabilities (485) Creditors and accruals (140) Taxation payable (16) Total identifiable net assets 3,947 Trade debtors acquired with a fair value of HK$64 million at the date of obtaining control were also the gross contractual amount and best estimate contractual cash flows at the date of obtaining control.