1st page proof
01 Mar 2013
Annual Report 2012
Hongkong Land Holdings Limited
Hongkong Land’s retail portfolio located in
the heart of Hong Kong’s Central District is
one of the world’s most prestigious shopping
destinations (front cover).
hong kong
macau
beiJing, china
serenade
one central
indonesia
Wangfujing site
beiJing, china
cbd site
chongQing, china
Jakarta land – Wisma metropolitan i & ii and Wtc i
Jakarta land – Wtc ii
central Park
maple Place
bamboo grove
indonesia
vietnam
chongQing, china
bsd city*
63 lý thái tô’
central building
landmark Riverside
yorkville south
yorkville north*
thailand
cambodia
chengdu, china
shenyang, china
gaysorn
central mansions
embassy site
We city
Park life
one capitol
* this rendering is for reference only, subject to change and government approval
contents
Corporate Overview
Corporate Information
Highlights
Chairman’s Statement
Chief Executive’s Review
Financial Review
Directors’ Profiles
Financial Statements
Independent Auditors’ Report
Five Year Summary
Responsibility Statement
Corporate Governance
Principal Risks and Uncertainties
Shareholder Information
Offices
Report of the Valuers
Major Property Portfolio
1
2
3
4
6
12
18
20
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64
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66
70
71
72
73
74
is one of Asia’s leading property
investment, management and development groups. Founded in
Hong Kong in 1889, Hongkong Land’s business is built on
partnership, integrity and excellence.
In Hong Kong, the Group owns and manages some 450,000 sq. m.
(five million sq. ft) of prime commercial space that defines the
heart of the Central Business District. In Singapore, it has been
instrumental in the creation of the city-state’s new Central
Business District at Marina Bay with the expansion of its joint
venture portfolio of new developments. Hongkong Land’s
properties in these and other Asian centres are recognised as
market leaders and house the world’s foremost financial, business
and luxury retail names.
Hongkong Land develops premium residential properties in a
number of cities in the region, principally in China and Singapore
where its subsidiary, MCL Land, is a significant developer.
Hongkong Land Holdings Limited is incorporated in Bermuda.
It has a premium listing on the London Stock Exchange, and
secondary listings in Bermuda and Singapore. The Group’s assets
and investments are managed from Hong Kong by Hongkong
Land Limited. Hongkong Land is a member of the Jardine
Matheson Group.
PB
Hongkong Land
Annual Report 2012 1
Corporate Information
Directors
Hongkong Land Limited
Directors
Ben Keswick Chairman
Y.K. Pang Chief Executive
R.M.J. Chow
R. Garman
Mark Greenberg
Adam Keswick
D.P. Lamb
N. Leung
James Riley
J.A. Robinson
Giles White
John R. Witt Chief Financial Officer
R. Wong
Corporate Secretary
N.M. McNamara
Simon Keswick Chairman
Ben Keswick Managing Director
Y.K. Pang Chief Executive
Charles Allen-Jones
Mark Greenberg
Jenkin Hui
Adam Keswick
Sir Henry Keswick
Lord Leach of Fairford
Dr Richard Lee
Anthony Nightingale
Lord Powell of Bayswater, KCMG
Lord Sassoon, Kt
James Watkins
Percy Weatherall
John R. Witt
Michael Wei Kuo Wu
Company Secretary and
Registered Office
John C. Lang
Jardine House
33-35 Reid Street
Hamilton
Bermuda
2
Hongkong Land
Highlights
• Good results in mixed markets
• Positive reversions in Hong Kong
• Higher contribution from residential operations
• Final dividend up 10% at US¢11.00
Results
Underlying profit attributable to shareholders*
Profit attributable to shareholders
Shareholders’ funds
Net debt
Underlying earnings per share*
Earnings per share
Dividends per share
Net asset value per share
2012
US$m
2011
US$m
Change
%
777
703
1,439
5,306
26,148
24,739
3,273
2,359
US¢
US¢
33.14
30.29
11
(73 )
6
39
%
9
61.36
228.48
(73 )
17.00
16.00
US$
US$
11.11
10.58
6
%
5
* The Group uses ‘underlying profit attributable to shareholders’ in its internal financial reporting to distinguish between ongoing business performance and
non-trading items, as more fully described in Note 1 to the financial statements. Management considers this to be a key measure which provides
additional information to enhance understanding of the Group’s underlying business performance.
Annual Report 2012 3
Chairman’s Statement
Overview
Group Review
Hongkong Land performed well during the year
despite the effects on the region of the prevailing
global economic uncertainty. Rental reversions in
the Group’s prime Hong Kong Central office portfolio
remained positive overall as the market was supported
by a lack of new supply. The contribution from the
Group’s Singapore commercial portfolio rose due to
improved rents and the completion of the final office
tower at Marina Bay Financial Centre. The contribution
from residential development activities was higher
than originally anticipated with two Singapore projects
completing and further unit sales in Hong Kong.
Performance
In 2012, underlying profit attributable to shareholders
rose 11% to US$777 million. Underlying earnings per
share were up by 9%, reflecting the larger number
of issued shares due to the conversion of convertible
bonds during the year.
Including the net gains of US$662 million resulting
from higher independent valuations of the Group’s
investment property interests, the profit attributable
to shareholders for the year was US$1,439 million.
This compares with US$5,306 million in 2011, which
included a net gain of US$4,603 million arising
from revaluations. The net asset value per share
at 31st December 2012 was US$11.11 compared
with US$10.58 at the end of 2011.
The Directors are recommending a final dividend of
US¢11.00 per share for 2012, providing a total dividend
for the year of US¢17.00 per share compared with
US¢16.00 per share for 2011.
Commercial Property
Leasing demand was relatively weak in both
Hong Kong and Singapore during the year, particularly
in the financial services sector. The effects were,
however, tempered by the limited vacancy within
the Group’s buildings. In the Hong Kong Central office
portfolio, vacancy was 3.4% at the year end, while
the retail portfolio remained fully let. As a result,
rental reversions continued to be generally positive
with improvements in both the average office and
retail rents.
In Singapore, the office portfolio was fully leased, with
the exception of the third tower at Marina Bay Financial
Centre, which was almost 80% let by the end of
the year. The Group’s 50%-owned office portfolio
in Jakarta was 94% let.
In mainland China, the Group’s commercial
development projects are progressing well.
Construction has commenced at the prime Wangfujing
site in Beijing, which will be developed as a luxury
retail complex including a Mandarin Oriental hotel.
During the year, the Group acquired a 30% interest
in a site on which a Grade A office building of some
120,000 sq. m. will be developed in the CBD Core
Area of the Chaoyang District of Beijing.
Residential Developments
The Group’s residential operations performed well.
In Hong Kong, 20 units of the Serenade were handed
over to buyers while the four remaining units at
The Sail were sold. In Macau, 12 units were handed
over to buyers at One Central. In Singapore, two fully
4
Hongkong Land
pre-sold projects, D’Mira and 50%-owned Parvis,
were completed and a site for future development
was acquired in August 2012 for approximately
US$300 million. In January 2013, a further site was
secured for approximately US$350 million.
I will be stepping down as Chairman of the Company
after the Annual General Meeting on 15th May 2013.
I will remain as a non-executive Director. I am pleased
to advise that Ben Keswick will be succeeding me
as Chairman.
Outlook
While office leasing demand remains subdued,
the Group’s Hong Kong portfolio will continue to
benefit in 2013 from limited new supply as well
as strong demand for luxury retail space. Three
residential projects are due for completion in
Singapore, including the Marina Bay Suites
development. The Group remains well positioned
with its outstanding assets, strong reputation and
wide experience of regional markets.
Simon Keswick
Chairman
7th March 2013
In mainland China, the Group benefited from continuing
sales completions at Maple Place in Beijing and
at its 50%-owned joint venture, Bamboo Grove,
in Chongqing. Sales also continued at other Group
projects in Chongqing, Chengdu and Shenyang.
Hongkong Land entered the Indonesian residential
market in 2012 with a 49% interest in a joint venture
that will develop a prime residential community on
a 68 hectare site southwest of central Jakarta.
Financing
The Group’s financial position remained strong with
net debt of US$3.3 billion at the end of 2012,
compared with US$2.4 billion at the end of 2011.
The increase was due to site acquisition costs for
the Beijing commercial projects and residential site
payments. Gearing at the end of the year was 13%,
compared with 10% at the end of 2011.
People
Our staff continued to provide high levels of
professionalism. We are grateful to them for their
enthusiasm, hard work and commitment in providing
excellent property management services to our
customers and in the development of our commercial
and residential activities throughout the region.
We were pleased to welcome to the Board Michael Wu
in December 2012 and Lord Sassoon in January 2013.
Annual Report 2012 5
Chief Executive’s Review
Hongkong Land performed ahead of expectations
in 2012, supported by higher earnings from its
commercial property interests and a good contribution
from its residential property business. Given the
uncertain economic environment, our results reflect
well on the strength and resilience of our business
model and strategy.
Business Model and Strategy
While the Group’s Central portfolio in Hong Kong
remains its most significant investment, the completion
of the final office tower at Marina Bay Financial
Centre in Singapore has provided Hongkong Land
with a second important source of commercial
property earnings and future capital appreciation.
Our objective is to continue to grow the Group’s
investment portfolio of exceptional properties,
which is well demonstrated by the acquisition
in 2011 of the Wangfujing site in Beijing and
by the acquisition last year of a 30% interest
in a central Beijing office project.
At the same time, we continue to expand our
residential business. In China, our attributable
interest in the combined total developable area of
our projects totals some 4.8 million sq. m. of which
only 0.5 million sq. m. have been developed and sold.
In Singapore, our wholly-owned subsidiary, MCL Land
continues to perform well and acquire sites for future
development. In Indonesia, we entered a 49%-owned
joint venture to develop a residential site within
BSD City, one of Jakarta’s largest satellite townships,
our first residential project in the country.
Hong Kong’s Central Portfolio
The Group’s most significant investment is its prime
portfolio in the heart of Hong Kong’s Central district
of some 450,000 sq. m. of Grade A office and luxury
retail space. The location of this portfolio and its size
provides a strong competitive position for the Group.
Continued focus on the returns from this portfolio is
fundamental to our ongoing success. While demand
for this space depends on overall economic conditions,
the tenor of the lease arrangements provides some
protection against market volatility.
We continue to manage our 12 Grade A office and
retail buildings as a large, integrated mixed-use
development and look for opportunities to improve
their value, such as the redevelopment of The Forum
in Exchange Square from ancillary retail premises
into an office building. At the same time, significant
enhancements will be made to the surrounding
Exchange Square Plaza.
2008
44% Banks and other financial services
23% Legal
9% Accounting
4% Property
3% Trading
5% Governments
12% Others
2012
35% Banks and other financial services
30% Legal
8% Accounting
6% Property
3% Trading
5% Governments
13% Others
Central portfolio tenant profile
by area occupied
6
Hongkong Land
Annual Report 2012 7
Top five office tenants (in alphabetical order)
Top five retail tenants (in alphabetical order)
in 2012
BNP Paribas
JPMorgan
KPMG
PricewaterhouseCoopers
Securities and Futures Commission
in 2012
Dickson Concepts
Giorgio Armani
Gucci
Louis Vuitton
Richemont Group
Retail space in the Central portfolio now totals
55,000 sq. m. and our objective is to ensure that
this continues to be viewed as the most exclusive
shopping and dining destination in Hong Kong.
In turn, this contributes significantly to the prestige
and convenience of the office space, which increases
its attractiveness for premium tenants. The restaurants
across the portfolio, which have been accorded a total
of nine Michelin stars, are performing well and are
attracting customers to Central throughout the day
and in the evenings.
Our intention is to continue to upgrade the portfolio,
ensuring it remains the most prestigious within Hong
Kong. At the same time, we will seek to grow our
rentals over the long term, recognising the desirability
of both the quality of space and of service which it is
Hongkong Land’s mandate to provide to each tenant.
Commercial Property Investments in Asia
Over the past few years, the Group has extended
its commercial property interests outside Hong Kong.
Expansion has been assisted by both the Group’s
strong financial position and its reputation for quality.
To date, the principal focus has been in Singapore
where the Group now has attributable interests of
166,000 sq. m. (including its share of properties held
through joint ventures). This is principally premium
Grade A office space. The intention is also to expand
the Group’s portfolio in Jakarta which currently consists
of 140,000 sq. m. of prime office space. This is held
by a 50%-owned joint venture. In Beijing, two new
projects are now underway.
We continue to look for attractive high-quality
commercial projects throughout Asia which will offer
development profits as well as long-term investments
to be held for rental yield and capital appreciation.
In general, our performance in these markets depends
on the levels of demand for and supply of commercial
space, both of which are influenced by the overall
economic environment.
Residential Developments
Based on the Group’s experience in Greater China
and Southeast Asia, a strong and profitable residential
business has been established focusing on premium
properties. While the capital invested in this activity
is significantly smaller than our commercial business,
the residential projects enhance the Group’s overall
profits and returns on capital.
Annual returns from residential developments fluctuate
due to the nature of the projects and the accounting
policy of only recognising profits on sold units at
completion. Demand is also dependent on overall
economic conditions, which can be significantly
affected by government policies. Ongoing land
acquisitions are necessary to continue to build this
income stream over the longer term.
6
Hongkong Land
Annual Report 2012 7
Chief Executive’s Review
Review of Commercial Property
Hong Kong
Leasing activity was relatively subdued in 2012
as demand from the financial services sector was
weaker. As a result, market rents for Grade A office
space decreased. Financial institutions, law firms
and accounting firms comprise some 75% of the
office space in our portfolio. Nonetheless, the Group
achieved largely positive reversions on expiring leases
or those coming due for rent review as the market
was well supported by the limited new supply.
In addition, no large tenants reduced significantly
their space requirements. The average rent in 2012
was HK$90.3 per sq. ft, the highest Hongkong Land
has achieved, compared with HK$87.0 per sq. ft in
2011. Vacancy at the end of 2012 was 3.4% compared
with 2.0% at the end of 2011, which was exceptionally
low. This compares favourably to the vacancy across
the entire Grade A Central market of some 4.5% as
at 31st December 2012.
Demand for retail space in Hong Kong remained strong
and there was a limited new supply of high quality
space. During 2012, Hongkong Land announced its
new LANDMARK brand which encompasses all of
the Group’s luxury retail space in Central, comprising
Landmark Atrium, Prince’s Building, Alexandra House
and Chater House. LANDMARK, with some 210 stores
and restaurants, is one of the largest luxury shopping
destinations on Hong Kong Island. The launch was
accompanied by a significant conventional and social
media campaign, targeting both the local and the
important mainland China visitor market. Ensuring
LANDMARK is the most prestigious retail centre in
the region both for shoppers and brand owners is
a key objective for us.
The average retail rent was HK$170.7 per sq. ft,
an 11% increase over the 2011 average of HK$153.8
per sq. ft, adjusted to exclude The Forum building
at Exchange Square now under redevelopment. The
portfolio at the end of 2012 remained fully occupied.
Central portfolio
at 31st December 2012
Office
Retail
Capital value (US$m)
17,558
4,569 *
Gross revenue (US$m)
607
206 *
Equivalent yield (%)
– One and Two Exchange Square
– Landmark Atrium
Average unexpired term
of leases (years)
Area subject to renewal/review
in 2013 (%)
* includes hotel
4.00
4.50
3.7
2.5
22
33
The value of the combined portfolio at 31st December
2012, based on independent valuations, was
US$22.1 billion compared with US$21.7 billion
a year earlier.
Singapore
There was also much less office leasing activity
in Singapore compared with prior years, although
our portfolio continued to perform well. Financial
institutions, law firms and accounting firms account
for some 85% of total leasable area within the
portfolio. The office portfolio was fully leased with
the exception of Tower 3 of Marina Bay Financial
Centre, which was completed in the first half of the
year. Excluding Tower 3, the average rent across the
office portfolio in 2012 was S$8.9 per sq. ft compared
with S$8.6 per sq. ft in the previous year.
At the end of 2012, Tower 3 was 78% let compared
with 65% pre-let at the end of 2011. This increase
was achieved despite the weaker demand and the
competition from other new office buildings.
Vacancy across the Group’s Singapore portfolio,
including its one-third interest in Tower 3 at the end
of 2012 was 5.6% compared with 9.2% at the end
of 2011. This compares favourably to the vacancy
across the entire Grade A CBD market of 8.4%
as at 31st December 2012.
8
Hongkong Land
Annual Report 2012 9
Other Commercial Property Investments
In 2012, the Group took a 30% interest in a consortium
that will develop a prime Grade A office building of
some 120,000 sq. m. in the CBD Core Area of Beijing’s
Chaoyang District. Construction is beginning on the
Group’s project in Wangfujing located in the heart
of Beijing. This mixed-use project will be developed
into the city’s most prestigious shopping and dining
destination, and will include a Mandarin Oriental hotel.
The Group’s 47%-owned joint venture project in
Macau, One Central, continued to benefit from growing
retail sales, thereby increasing its contribution to Group
results. With its 20,000 sq. m. of luxury retail space,
One Central is regarded as the preeminent shopping
destination in the Territory. Occupancy at the end
of 2012 was 95%, up from 93% a year earlier with
2012 revenues increasing by 34%. Mandarin Oriental,
Macau, the 213-room hotel which is seamlessly
connected to the retail areas of One Central, continues
to consolidate its position as one of the market’s most
exclusive hotels.
In Jakarta, a fourth tower was completed by the
Group’s 50%-owned joint venture, Jakarta Land,
which is now 92% let. While rents remain low
compared with other markets, they have increased
significantly over the past two years. At 31st December
2012, vacancy across the portfolio was only 6%,
including the new tower. The average gross rent
in 2012 was US$20.6 per sq. m. compared with
US$18.2 per sq. m. in 2011, the increase due in part
to the higher rents of the newly completed tower.
In Phnom Penh, Cambodia, planning has advanced for
the development of one of the prime sites acquired in
2011 as a high quality office and retail complex.
The Group’s other commercial investment properties
in Hanoi, Bangkok and Bermuda continued to
perform satisfactorily.
Review of Residential Property
Results from the Group’s residential property activities
were ahead of our original expectations due to higher
than anticipated sales at two residential projects in
Hong Kong, Serenade and The Sail, and the completion
of two projects in Singapore, with the second, D’Mira,
ahead of the original timing.
2012 was also an active year for sales launches.
In Singapore, MCL Land launched its 679-unit Ripple
Bay development, which was 96% sold at the year
end. In mainland China, the Group’s attributable
interest in contracted sales across our six development
projects was US$429 million in 2012, compared
with US$160 million in the prior year. Despite the
satisfactory sales performance, overall demand
remained adversely affected by various government
measures designed to dampen sentiment.
(cid:23)(cid:24)
(cid:23)(cid:22)
(cid:30)
(cid:28)
(cid:26)
(cid:24)
(cid:22)
10.84
10.85
11.18
11.64
8.52
6.33
4.69
4.83
4.04
3.78
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Central portfolio average office effective rent (US$/sq. ft per month)
8
Hongkong Land
Annual Report 2012 9
Chief Executive’s Review
Hong Kong
A further 20 units were handed over to buyers at
the Group’s 97-unit Serenade project, compared with
23 units in 2011. At the end of the year, there were
18 units remaining for sale, in addition to three units
whose sales are scheduled for completion in 2013.
The remaining four units of the 95-unit The Sail
development were also sold in 2012, compared
to only one unit in 2011.
Macau
In Macau, 12 units were handed over to buyers at
the Group’s One Central joint venture development,
including eight Residences at Mandarin Oriental,
adjoining the hotel. This compares to 82 units in
2011. At the end of the year, there were three units
remaining for sale in addition to ten units which are
scheduled for completion over the next 18 months.
Singapore
Two projects were completed in 2012, Parvis, a 248-unit
development held through a 50%-owned joint venture,
and D’Mira, a 100%-owned, 65-unit development.
In 2011, the only project completed in Singapore
was the 180-unit Peak@Balmeg development.
In 2013, three projects are scheduled for completion.
These developments include MCL Land’s The Estuary
with 608 units and Este Villa with 121 freehold
townhouses, both of which are 100% pre-sold. In
addition, the 221-unit Marina Bay Suites development,
which has been 87% pre-sold, will be completed. This
is one-third owned by Hongkong Land and is the final
residential component of the Marina Bay Financial
Centre complex.
In 2014, two projects are scheduled for completion,
Uber 388 with 95 units and Terrasse with 414 units.
At the end of 2012, these projects had been 86% and
100% pre-sold, respectively. In 2015, the 96% pre-sold
Ripple Bay project with 679 units will be completed.
In addition, the Group has four other projects that
have not yet been launched for sale which will provide
1,500 units with a total area of 130,000 sq. m. This
includes the two sites in Jurong which were acquired
in August 2012 for some US$300 million and in January
2013 for some US$350 million.
Mainland China
The Group’s residential business was active in four
cities across mainland China. These are long-term
projects of different product types that are being
developed in phases over time. While conditions in
2012 remained challenging due to various government
measures to dampen the residential property market,
sales at our various projects have been encouraging.
In the longer term, we believe that these projects are
well positioned to meet market demand and should
produce strong earnings for the Group.
Chongqing, the largest city in western China, is where
the Group’s most significant residential developments
are located. These consist of four projects, being
Bamboo Grove, Landmark Riverside, Yorkville South
and the adjacent Yorkville North, a large site which
was acquired in December 2011.
At Bamboo Grove, the Group’s 50%-owned joint
venture with Longfor Properties, a total of 1,289 units
were completed and handed over to buyers in 2012
with a combined developable area of 184,000 sq. m.
This was more than expected as in addition to the
high-rise apartments in Phase 4B which were sold,
the low-rise apartments in Phase 5A were completed
ahead of time and handed over to buyers. In 2011,
sales were recognised on 1,384 units covering
195,000 sq. m.
The townhouses of Phase 3C and the high-rise
apartments of Phase 5B which have been 63%
and 74% pre-sold, respectively, are scheduled for
completion in 2013.
When completed, Bamboo Grove will comprise some
1.5 million sq. m. of mainly residential space, of which
766,000 sq. m. have already been developed and sold
while 282,000 sq. m. are now under construction.
Landmark Riverside at Dan Zishi is the Group’s second
project in Chongqing. It is a 50%-owned joint venture
with China Merchants Group, which will consist of
approximately 1.5 million sq. m. of residential and
some prime retail space built over a 34 hectare site
in phases. A total of 1,249 high-rise apartments are
being constructed in Phase 1 of the project, of which
56% have been pre-sold. The first units are scheduled
to be handed over to buyers at the end of 2013.
10
Hongkong Land
Annual Report 2012 11
Outlook
The year ahead looks generally positive but significant
challenges remain in the overall trading environment.
Longer term, Hongkong Land’s strong financial and
competitive position will enable it to benefit from its
existing commercial and residential property interests,
as well as to capitalise on opportunities that are
expected to become available as the region’s
development continues apace.
In 2013, in addition to solid returns from our existing
commercial property interests, we expect an increased
contribution from our Singapore residential business
due to the anticipated completion of three projects.
The results in China will continue to benefit from
sales completions at Bamboo Grove and Maple Place,
while in 2014 and beyond the Group should begin to
see more significant profits from the residential sites
it has acquired over the past few years. The scale of
these profits will be significantly affected by selling
conditions over the next 18 months which remain
difficult to predict.
Meanwhile, we will remain focused on providing
excellent service to our office and retail tenants and
on ensuring a high quality product for our residential
buyers. This is the foundation on which the Group’s
long-term competitive position is built.
Y.K. Pang
Chief Executive
7th March 2013
Yorkville South is the Group’s third project in
Chongqing and is wholly-owned. The development
is at Zhaomushan, near the core of the Two-River New
Area. This wholly-owned project consists of a site of
almost 39 hectares for mainly residential development
with a small portion of retail. The total developable
area of approximately 880,000 sq. m. is also being
developed in phases. In 2012, construction continued
on the 324 townhouses of Phase 1, which are targeted
for completion in 2013. These have been 73% pre-sold.
Yorkville North is a 52 hectare site acquired in late 2011
and is the Group’s fourth project in the city. It will
be a premium residential development with some
commercial components with a total gross floor area
of some one million sq. m. Site preparations are
underway for a phased development.
In Chengdu, construction is now underway at the
19 hectare site owned in a 50%-joint venture with
KWG Property Holding Group. It is a mixed-use
residential and commercial project with a developable
area of approximately 900,000 sq. m. Phase 1 of the
development will consist of 1,300 high-rise apartments,
with the first completions due in 2014. 53% of the
383 units launched for sale have been pre-sold.
In Shenyang, construction continued at two of our
50%-owned residential projects in the city, which
are located to the north and south of the Central
Business District. At One Capitol, Phase 1A, consisting
of 236 townhouses and low-rise apartments, was
completed in 2012 and 85% of the units were handed
over to buyers. At Park Life, the 140 townhouses and
234 low-rise apartments of Phases 2A and 2B were
completed, and 67% of the units were handed over
to buyers.
In Beijing, at the Group’s 90%-owned Maple Place
project, 13 additional units were handed over to
buyers. A further 98 units are available for future sale.
These consist of villas, townhouses and apartments
with a total area of 23,000 sq. m. Most of the units are
currently leased but our intention remains to refurbish
and sell these units.
At Central Park, our 40%-owned joint venture with the
Vantone Group continues to hold 72 apartments which
are being operated as serviced apartments.
10
Hongkong Land
Annual Report 2012 11
Financial Review
Accounting Policies
The accounting policies are consistent with those of
the previous year. The Directors continue to review the
appropriateness of the accounting policies adopted by
the Group with regard to developments in International
Financial Reporting Standards.
Results
Underlying Profit
The Group’s underlying profit attributable to
shareholders in 2012 was US$777 million (or US¢33.14
on an earnings per share basis). This result can be
analysed between the contribution from Commercial
Property, the contribution from Residential Property
and unallocated expenses, which include corporate
costs, net financing charges and tax. Each of these
items includes the Group’s share of results from its
joint ventures.
2012
US$m
2011
US$m
820
301
758
289
(339 )
(5 )
(338 )
(6 )
Commercial property
Residential property
Corporate costs, net financing
charges and tax
Non-controlling interests
Underlying profit attributable
to shareholders
777
703
Underlying earnings per share
33.14
30.29
US¢
US¢
In 2012, the contribution from Commercial Property
increased by 8% to US$820 million. Rental revenues
from the Group’s Hong Kong portfolio increased by 7%
as the average rent per square foot for both the office
and retail space rose due to positive rental reversions.
The contribution from the Group’s commercial property
investments in Singapore increased by 14% compared
to the prior year. This was due to higher average rents
and a modest contribution from the third tower of
Marina Bay Financial Centre, which was completed
in the first half of 2012.
The contribution from Residential Property
was US$301 million, a 4% increase from 2011.
In Singapore, two projects were completed during
the year. Both D’Mira (65 units) and the 50%-owned
joint venture project, Parvis (248 units) had been
entirely pre-sold prior to completion. In addition,
the Group benefited from an US$8 million reversal
of a writedown in respect of its Uber 388 project
following successful pre-sales. In 2011, there was
a US$44 million reversal of writedowns. The Group
continues to carry writedowns of approximately
US$99 million which were originally made in 2008
in respect of development sites owned by MCL Land,
its wholly-owned Singapore residential developer.
In Hong Kong, profits were also derived from the sale
of 20 apartments which were handed over to buyers at
the 97-unit Serenade development as well as the final
four units at The Sail. In Macau, the Group benefited
from its share of the profit from 12 units which were
handed over to buyers at the residential component of
One Central, Macau. In mainland China, profits were
principally generated from sales at the 90%-owned
Maple Place in Beijing (13 units), the 50%-owned
Bamboo Grove development in Chongqing (1,289 units)
and the 50% joint venture in Shenyang (451 units).
In 2011, the contribution from Residential Property
of US$289 million arose from the completion of
MCL Land’s 180-unit Peak@Balmeg development in
Singapore which had been 100% pre-sold, the sale of
23 apartments at Serenade in Hong Kong and 82 units
at One Central in Macau as well as ongoing sales at
Bamboo Grove and Maple Place in mainland China.
Net financing charges in 2012, including the Group’s
share of net financing charges within joint ventures,
remained steady at US$96 million compared to
US$97 million in 2011. The average interest rate on
Group borrowings was 2.7% in 2012, compared to 2.6%
in 2011. The average interest rate on Group deposits
was 0.8% in 2012, compared with 0.5% in 2011.
12
Hongkong Land
Annual Report 2012 13
The Group’s underlying tax charge, including
the Group’s share of joint ventures, decreased to
US$183 million from US$190 million in 2011 as the
Group’s effective tax rate was 16.4% compared with
16.8% in 2011.
Non-trading Gains
In 2012, the Group had non-trading gains of
US$0.7 billion compared with US$4.6 billion in 2011.
These arose on revaluations of the Group’s investment
properties, including its share of joint ventures,
which were performed at 31st December 2012 by
independent valuers.
The most significant increase in valuations came
from the Group’s Central portfolio in Hong Kong.
This increased in value by 2% to US$22.1 billion from
US$21.7 billion in 2011. This was due to rising retail
rents which enhanced the value of the retail portfolio.
In respect of the office space, market rental rates
decreased but this was largely offset by a compression
in capitalisation rates, or equivalent yields, with the
value of the office portfolio falling only marginally.
Outside Hong Kong, the Group benefited from higher
valuations of its commercial properties held in joint
ventures, particularly in Macau and Jakarta.
Cash Flows
The Group’s consolidated cash flows are summarised as follows:
Operating activities
Operating profit, excluding non-trading items
Net interest paid
Tax paid
Dividends received from joint ventures
Purchase of sites for residential development
Other
Investing activities
Major renovations capex
Funding of joint ventures
Loan repayments from joint ventures
Development expenditure – Wangfujing site, China
Other
– Phnom Penh properties, Cambodia
Financing activities
Dividends paid by the Company
Net drawdown/(repayment) of borrowings
Other
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1st January
Cash and cash equivalents at 31st December
2012
US$m
2011
US$m
800
(34 )
(148 )
140
(791 )
332
299
(48 )
(349 )
58
(498 )
(2 )
(7 )
(846 )
(374 )
914
21
561
14
967
981
832
(57 )
(118 )
58
(373 )
(6 )
336
(51 )
(257 )
111
–
(34 )
(4 )
(235 )
(371 )
(125 )
(4 )
(500 )
(399 )
1,366
967
12
Hongkong Land
Annual Report 2012 13
Financial Review
Cash flows from operating activities in 2012 were
US$299 million, compared with US$336 million
in 2011. The Group’s operating profit from its
subsidiaries, excluding non-trading items, was
US$800 million, US$32 million lower than in 2011.
This was largely due to lower residential profits in
the Group’s subsidiaries as Parvis, one of MCL Land’s
two projects to complete in the year, was undertaken
through a 50% joint venture. Net interest paid of
US$34 million was US$23 million lower than in 2011
while tax paid of US$148 million was US$30 million
higher than in the prior year principally as a result of
timing differences. Dividends received from joint
ventures were US$140 million, following the
completion of residential projects at One Central
Macau and Parvis. Payments for residential
development sites included US$489 million for the
Yorkville North site in Chongqing and US$302 million
for the Jurong Gateway site in Singapore. Other
operating cashflows principally included residential
sales proceeds received by the Group’s subsidiaries
in Singapore and China, partially offset by project
construction payments.
Under investing activities in 2012, the Group had
outlays of US$846 million, up from US$235 million in
2011. Capital expenditure of US$48 million related to
major renovations, principally in respect of the Hong
Kong Central portfolio. Funding of the Group’s joint
venture projects totalled US$349 million. This included
US$112 million for the Group’s 30% interest in the site
on which a Grade A office development will be built
in Beijing, US$129 million for the Group’s 50%-owned
joint venture residential project in Chengdu principally
for site acquisition costs and further payments to
finance construction at other joint venture residential
developments in China and at Marina Bay Financial
Centre in Singapore. Also, under investing activities,
the Group received US$58 million of loan repayments
from joint ventures, including US$36 million from
One Central. This compared to total repayments of
US$111 million in 2011, principally from One Central
and Bamboo Grove.
The Group made payments of US$498 million for
the Wangfujing site in Beijing, on which a luxury retail
centre is being developed. In 2011, US$34 million was
paid to acquire four sites in Phnom Penh, Cambodia.
Under financing activities, the Company paid dividends
of US$374 million, being the 2011 final dividend of
US¢10.00 and the 2012 interim dividend of US¢6.00.
Also, the Group had a net drawdown of borrowings
of US$914 million to finance its capital expenditure.
The Group’s year end cash and cash equivalents
totalled US$981 million, compared with US$967 million
in 2011.
At 31st December 2012, the Group’s net debt
was US$3.3 billion, up from US$2.4 billion at the
beginning of the year. The increase was principally
due to payments for residential sites in Chongqing
and Singapore and for the two commercial sites
in Beijing, including the Group’s 30% interest in
the CBD office project.
Dividends
The Board is recommending an increased final
dividend of US¢11.00 per share for 2012 that will
increase the total annual dividend to US¢17.00 per
share, an increase of 6% over 2011. The final dividend
will be payable on 22nd May 2013, subject to approval
at the Annual General Meeting to be held on 15th May
2013, to shareholders on the register of members at
the close of business on 22nd March 2013. No scrip
alternative is being offered in respect of the dividend.
14
Hongkong Land
Annual Report 2012 15
Treasury Policy
The Group manages its treasury activities within
established risk management objectives and policies
using a variety of techniques and instruments. The
main objectives are to manage exchange, interest rate
and liquidity risks and to provide a degree of certainty
in respect of costs. The investment of the Group’s
cash balances is managed so as to minimise risk while
seeking to enhance yield.
The Group’s Treasury operations are managed as
cost centres and are not permitted to undertake
speculative transactions unrelated to underlying
financial exposures. Appropriate credit guidelines
are in place to manage counterparty credit risk.
When economically sensible to do so, borrowings are
taken in local currencies to hedge foreign currency
exposures on investments. A portion of borrowings
is denominated in fixed rates. Adequate headroom
in committed facilities is maintained to facilitate
the Group’s capacity to pursue new investment
opportunities and to provide some protection against
market uncertainties.
Funding
The Group is well financed with strong liquidity. Net
gearing was 13% at 31st December 2012 up from
10% at 31st December 2011. The increase in gearing
was principally due to significant land payments made
in 2012. Interest cover, calculated as the underlying
operating profits, including the Group’s share of joint
ventures’ operating profits, divided by net financing
charges including the Group’s share of joint ventures’
net financing charges, was strong at 11.0 times,
compared with 10.3 times in 2011.
Year-end debt summary*
US$ convertible bonds
(cid:25)(cid:22)(cid:22)(cid:22)(cid:22)
US$ bonds/notes
US$ bank loans
(cid:24)(cid:27)(cid:22)(cid:22)(cid:22)
HK$ bonds/notes
(cid:24)(cid:22)(cid:22)(cid:22)(cid:22)
HK$ bank loans
S$ bonds/notes
(cid:23)(cid:27)(cid:22)(cid:22)(cid:22)
S$ bank loans
(cid:23)(cid:22)(cid:22)(cid:22)(cid:22)
Gross debt
(cid:27)(cid:22)(cid:22)(cid:22)
Cash
2012
US$m
2011
US$m
–
1,643
–
929
543
475
665
4,255
982
57
1,151
–
609
673
446
391
3,327
968
(cid:22)
Net debt
3,273
2,359
* Before currency swaps
19%
16%
12%
10%
13%
2008
2009
2010
2011
2012
Net debt
Equity
Net debt as a percentage of equity
14
Hongkong Land
Annual Report 2012 15
Financial Review
Both Moody’s and Standard & Poor’s have maintained
their credit ratings of Hongkong Land Holdings Limited
at A3 and A- respectively.
During the year, the Group issued US$837 million
of Notes under its Guaranteed Medium Term Note
Programme, with maturities ranging from 10 to
20 years. In addition, a total of US$880 million in
bank debt was raised. This included US$642 million
in bilateral loan facilities, signed with a number of
banks to refinance partially a syndicated facility of
HK$7.5 billion due in June 2013 and a project loan
facility of US$238 million for a residential project in
Singapore. A total of US$57 million of convertible
bonds were converted into equity during 2012, with
the remaining US$1 million of bonds redeemed
at maturity. In 2011, US$336 million of convertible
bonds were converted into equity.
The average tenor of the Group’s debt was 6.9 years
at 31st December 2012, compared with 6.8 years at
the end of 2011. Approximately 47% of the Group’s
borrowings were at floating rates and the remaining
53% were covered by interest rate hedges with
major credit worthy financial institutions and fixed
rate borrowings.
At 31st December 2012, the Group had total
committed lines of approximately US$6.7 billion.
Of these lines, 55% were sourced from banks with
the remaining 45% from the capital markets. At the
end of 2012, the Group had drawn US$4.3 billion
of these lines leaving US$2.4 billion of committed,
but unused facilities. Adding the Group’s year-end
cash balances, the Group had overall liquidity at
31st December 2012 of US$3.4 billion, up from
US$2.9 billion at the end of 2011.
(cid:25)(cid:27)(cid:22)(cid:22)
(cid:25)(cid:22)(cid:22)(cid:22)
(cid:24)(cid:27)(cid:22)(cid:22)
(cid:24)(cid:22)(cid:22)(cid:22)
(cid:23)(cid:27)(cid:22)(cid:22)
Interest
rate
Currency
Maturity
(cid:23)(cid:22)(cid:22)(cid:22)
53% Fixed
47% Floating
(cid:27)(cid:22)(cid:22)
(cid:22)
70% HK$
30% S$
53% >5 years
21% 2-5 years
17% 1-2 years
9% <1 year
Debt profile at 31st December 2012
3,054
1,251
1,050
950
392
2013
2014
2015
2016
2017
& beyond
Committed facility maturity
at 31st December 2012 (US$m)
16
Hongkong Land
Annual Report 2012 17
Gross Assets
The Group’s gross assets, including its share of joint
ventures, (excluding cash balances) is analysed below,
by activity and by location.
89% Commercial
11% Residential
89% Commercial
11% Residential
By activity
75% Hong Kong
8% Mainland China
15% Southeast Asia
2% Macau
By location
Principal Risks and Uncertainties
A review of the principal risks and uncertainties facing
the Group is set out on page 70.
John R. Witt
Chief Financial Officer
75% Hong Kong
7th March 2013
15% Southeast Asia
8% Mainland China
2% Macau
16
Hongkong Land
Annual Report 2012 17
Directors’ Profiles
Simon Keswick Chairman
Mr Simon Keswick has been a Director of the Group’s
holding company since 1983. He was Chairman from
1983 to 1988 and was subsequently re-appointed in 1989.
He joined the Jardine Matheson group in 1962 and is
also chairman of Dairy Farm and Mandarin Oriental, and
a director of Jardine Lloyd Thompson, Jardine Matheson
and Jardine Strategic.
Ben Keswick* Managing Director
Mr Ben Keswick joined the Board as Managing Director
in April 2012. He has held a number of executive
positions since joining the Jardine Matheson group in
1998, including finance director and then chief executive
officer of Jardine Pacific between 2003 and 2007 and,
thereafter, group managing director of Jardine Cycle &
Carriage until March 2012. He has an MBA from INSEAD.
Mr Keswick is chairman of Jardine Matheson Limited
and Jardine Cycle & Carriage, and a commissioner of
Astra and United Tractors. He is also managing director
of Dairy Farm, Jardine Matheson, Jardine Strategic and
Mandarin Oriental, and a director of Jardine Pacific and
Jardine Motors.
Y.K. Pang* Chief Executive
Mr Pang joined the Board and was appointed Chief
Executive of the Group in 2007. He previously held
a number of senior executive positions in the Jardine
Matheson group, which he joined in 1984. He is a director
of Jardine Matheson Limited, Jardine Matheson and
Jardine Matheson (China) Limited. He is also chairman
of the Employers’ Federation of Hong Kong and
deputy chairman of the Hong Kong General Chamber
of Commerce.
John R. Witt* Chief Financial Officer
Mr Witt joined the Board as Chief Financial Officer in
2010. He is a Chartered Accountant and has an MBA from
INSEAD. He has been with the Jardine Matheson group
since 1993 during which time he has held a number of
senior finance positions. Most recently, he was the chief
financial officer of Mandarin Oriental.
Charles Allen-Jones
Mr Allen-Jones joined the Board in 2001. He was formerly
senior partner of Linklaters, where he had been a partner
for 33 years until 2001. Mr Allen-Jones is a non-executive
director of Jardine Strategic and Caledonia Investments
and vice chairman of the Council of the Royal College
of Art.
Mark Greenberg
Mr Greenberg joined the Board in 2006. He is group
strategy director of Jardine Matheson. He had previously
spent 16 years in investment banking with Dresdner
Kleinwort Wasserstein in London. He is also a director
of Jardine Matheson Limited, Dairy Farm, Jardine Cycle
& Carriage and Mandarin Oriental, and a commissioner
of Astra and Bank Permata.
Jenkin Hui
Mr Hui joined the Board in 1994 and is a director of
Jardine Matheson, Jardine Strategic, Central Development
and a number of property and investment companies.
Adam Keswick
Mr Adam Keswick joined the Board in April 2012. He is
deputy managing director of Jardine Matheson, chairman
of Jardine Pacific, and chairman and chief executive of
Jardine Motors. He has held a number of executive
positions since joining the Jardine Matheson group
from N M Rothschild & Sons in 2001, including group
strategy director and, thereafter, group managing director
of Jardine Cycle & Carriage between 2003 and 2007.
Mr Keswick is also deputy chairman of Jardine Matheson
Limited, and a director of Dairy Farm, Jardine Strategic
and Mandarin Oriental.
Sir Henry Keswick
Sir Henry first served on the Board of the Group’s holding
company between 1970 and 1975 and was re-appointed
a Director in 1988. He is chairman of Jardine Matheson,
having first joined the group in 1961, and is also chairman
of Jardine Strategic. He is a director of Dairy Farm and
Mandarin Oriental. He is also vice chairman of the Hong
Kong Association.
* Executive Director
18
Hongkong Land
Annual Report 2012 19
Lord Leach of Fairford
Lord Leach has been a Director of the Group’s holding
company since 1985. He is deputy chairman of
Jardine Lloyd Thompson, and a director of Dairy Farm,
Jardine Matheson, Jardine Strategic and Mandarin
Oriental. He is also a member of the supervisory board
of Paris Orléans. He joined the Jardine Matheson group
in 1983 after a career in banking and merchant banking.
Dr Richard Lee
Dr Lee joined the Board in 2003. Dr Lee’s principal
business interests are in the manufacturing of textiles
and apparel in Southeast Asia, and he is the honorary
chairman of TAL Apparel. He is also a director of Jardine
Matheson and Mandarin Oriental.
Anthony Nightingale
Mr Nightingale joined the Board in 2006 and was
Managing Director of the Company from 2006 to March
2012. He is also a director of Dairy Farm, Jardine Cycle &
Carriage, Jardine Matheson, Jardine Strategic, Mandarin
Oriental and Schindler, and a commissioner of Astra.
Mr Nightingale also acts as an adviser for certain
companies outside the Group and holds a number
of senior public appointments, including acting as
a non-official member of the Commission on Strategic
Development, a Hong Kong representative to the Asia
Pacific Economic Cooperation (APEC) Business Advisory
Council and a member of the UK ASEAN Business Council
Advisory Panel. He is an Honorary Professor of the School
of Business of the Hong Kong Baptist University.
Lord Powell of Bayswater, KCMG
Lord Powell rejoined the Board in 2008, having first served
as a Director between 1992 and 2000. He was previously
Private Secretary and adviser on foreign affairs and
defence to British Prime Ministers, Baroness Thatcher
and Rt Hon John Major. He is a director of Caterpillar,
LVMH Moët Hennessy Louis Vuitton, Matheson & Co,
Mandarin Oriental, Capital Generation Partners, Textron
Corporation, Schindler Holding, Northern Trust Global
Services and Magna Holdings. He is co-chairman of the
UK Government’s Asia Task Force and was previously
president of the China-Britain Business Council and
chairman of the Singapore-British Business Council.
Lord Sassoon, Kt
Lord Sassoon joined the Board in January 2013. He began
his career at KPMG, before joining SG Warburg (later UBS
Warburg) in 1985. From 2002 to 2006 he was in the
Treasury in the United Kingdom as a civil servant, where
he had responsibility for financial services and enterprise
policy. Following this, he chaired the Financial Action Task
Force; and conducted a review of the UK’s system of
financial regulation. From 2010 to 2013 Lord Sassoon was
the first Commercial Secretary to the Treasury and acted
as the Government’s Front Bench Treasury spokesman in
the House of Lords. He is a director of Dairy Farm, Jardine
Matheson and Mandarin Oriental.
James Watkins
Mr Watkins joined the Board in 2009. He was a director
and group general counsel of Jardine Matheson from
1997 to 2003. Mr Watkins qualified as a solicitor in 1969
and was formerly a partner of Linklaters. He is also a
director of Advanced Semiconductor Manufacturing
Corporation, Asia Satellite Telecommunications Holdings,
Global Sources, IL&FS India Realty Fund II, Jardine Cycle
& Carriage and Mandarin Oriental.
Percy Weatherall
Mr Weatherall joined the Board in 1994 and was
Managing Director from 2000 to 2006. He first joined
the Jardine Matheson group in 1976 and retired from
executive office in 2006. He is also a director of Dairy
Farm, Jardine Matheson, Jardine Strategic and Mandarin
Oriental. He is chairman of Corney & Barrow and the Nith
District Salmon Fishery Board.
Michael Wei Kuo Wu
Mr Wu joined the Board in December 2012. He is
chairman and managing director of Maxim’s Caterers
in Hong Kong. He is also a non-executive director of
Hang Seng Bank, a council member of the Hong Kong
University of Science and Technology and a member of
the court of the University of Hong Kong.
18
Hongkong Land
Annual Report 2012 19
Consolidated Profit and Loss Account
for the year ended 31st December 2012
Underlying
business
performance
Note
US$m
2012
Non-
trading
items
US$m
Underlying
business
performance
US$m
Total
US$m
2011
Non-
trading
items
US$m
Total
US$m
Revenue
Net operating costs
Change in fair value of investment properties
Asset disposals
Operating profit
Net financing charges
– financing charges
– financing income
Share of results of associates and joint ventures
– before change in fair value of
investment properties
5
6
11
11
7
8
– change in fair value of investment properties
11
1,114.8
(314.5 )
800.3
–
–
–
–
–
306.4
1.6
1,114.8
(314.5 )
1,223.7
(392.0 )
800.3
306.4
1.6
831.7
–
–
–
–
–
1,223.7
(392.0 )
831.7
4,382.7
4,382.7
–
–
800.3
308.0
1,108.3
831.7
4,382.7
5,214.4
(98.8 )
37.9
(60.9 )
–
–
–
(98.8 )
37.9
(60.9 )
(99.7 )
33.2
(66.5 )
–
–
–
(99.7 )
33.2
(66.5 )
165.8
(0.1 )
–
360.8
165.7
360.8
76.3
–
(17.0 )
238.7
59.3
238.7
165.8
360.7
526.5
76.3
221.7
298.0
Profit before tax
Tax
Profit after tax
Attributable to:
905.2
(124.4 )
668.7
0.6
1,573.9
(123.8 )
841.5
4,604.4
5,445.9
(133.6 )
(0.9 )
(134.5 )
9
780.8
669.3
1,450.1
707.9
4,603.5
5,311.4
Shareholders of the Company
Non-controlling interests
777.0
661.5
3.8
7.8
1,438.5
11.6
703.4
4,603.0
5,306.4
4.5
0.5
5.0
780.8
669.3
1,450.1
707.9
4,603.5
5,311.4
US¢
US¢
US¢
US¢
Earnings per share
– basic
– diluted
10
33.14
33.14
61.36
61.36
30.29
30.22
228.48
227.13
20
Hongkong Land
Annual Report 2012 21
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2012
Profit for the year
Revaluation of other investments
Net actuarial loss on employee benefit plans
Net exchange translation differences
Cash flow hedges
– net gain/(loss) arising during the year
– transfer to profit and loss
Note
14
Share of other comprehensive income of associates and joint ventures
Tax relating to components of other comprehensive income
9
Other comprehensive income for the year
2012
US$m
2011
US$m
1,450.1
5,311.4
33.9
(1.1 )
146.1
7.6
4.0
11.6
97.1
(2.0 )
285.6
(10.7 )
(4.6 )
36.9
(1.2 )
5.8
4.6
2.8
(0.2 )
28.8
Total comprehensive income for the year
1,735.7
5,340.2
Attributable to:
Shareholders of the Company
Non-controlling interests
1,723.7
12.0
5,335.2
5.0
1,735.7
5,340.2
20
Hongkong Land
Annual Report 2012 21
Consolidated Balance Sheet
at 31st December 2012
Net operating assets
Tangible assets
Investment properties
Associates and joint ventures
Other investments
Non-current debtors
Deferred tax assets
Pension assets
Non-current assets
Properties for sale
Current debtors
Current tax assets
Bank balances
Current assets
Current creditors
Current borrowings
Current tax liabilities
Current liabilities
Net current assets
Long-term borrowings
Deferred tax liabilities
Non-current creditors
Total equity
Share capital
Revenue and other reserves
Shareholders’ funds
Non-controlling interests
Approved by the Board of Directors on 7th March 2013
Ben Keswick
Y.K. Pang
Directors
Note
2012
US$m
2011
US$m
12
13
14
18
15
16
17
18
19
20
21
21
15
20
22
5.6
23,493.7
4,270.4
82.6
68.4
5.2
5.5
5.3
22,529.9
3,551.8
48.6
72.0
5.5
6.4
27,931.4
26,219.5
2,513.4
351.0
7.1
982.1
1,521.2
313.5
1.5
967.9
3,853.6
2,804.1
(1,142.6 )
(364.5 )
(59.8 )
(1,566.9 )
2,286.7
(3,891.0 )
(66.4 )
(76.3 )
(746.3 )
(58.0 )
(82.5 )
(886.8 )
1,917.3
(3,269.2 )
(59.4 )
(44.4 )
26,184.4
24,763.8
235.3
25,912.4
26,147.7
36.7
233.8
24,504.7
24,738.5
25.3
26,184.4
24,763.8
22
Hongkong Land
Annual Report 2012 23
Consolidated Statement of Changes in Equity
for the year ended 31st December 2012
Attributable to shareholders of the Company
Attributable
to non-
Share
capital premium
US$m
US$m
Share Revenue
reserves
US$m
Capital Hedging Exchange
reserves
reserves
US$m
US$m
reserves
US$m
controlling
interests
US$m
Total
US$m
Total
equity
US$m
Note
2012
At 1st January
Total comprehensive income
Dividends paid by the
Company
Dividends paid to
non-controlling
shareholders
Unclaimed dividends forfeited
Issue of shares
Transfer
23
233.8
315.8 23,881.1
–
–
–
–
1.5
–
–
1,471.5
–
(375.1 )
–
–
54.2
–
–
4.9
–
1.5
1.5
–
–
–
–
–
(1.5 )
(13.7 )
320.0 24,738.5
25.3 24,763.8
7.8
244.4
1,723.7
12.0
1,735.7
–
–
–
–
–
–
(375.1 )
–
(375.1 )
–
–
–
–
–
4.9
55.7
–
(0.6 )
–
–
–
(0.6 )
4.9
55.7
–
At 31st December
235.3
370.0 24,983.9
–
(5.9 )
564.4 26,147.7
36.7 26,184.4
2011
At 1st January
Total comprehensive income
Dividends paid by the
Company
Dividends paid to
non-controlling
shareholders
Issue of shares
Transfer
23
225.1
5.3 18,900.7
62.5
(16.2 )
279.2 19,456.6
20.9 19,477.5
–
–
–
8.7
–
–
5,291.9
–
(372.5 )
–
310.5
–
–
–
–
–
–
–
61.0
(61.0 )
2.5
40.8
5,335.2
5.0
5,340.2
–
–
–
–
–
(372.5 )
–
(372.5 )
–
–
–
–
(0.6 )
319.2
–
–
–
(0.6 )
319.2
–
At 31st December
233.8
315.8 23,881.1
1.5
(13.7 )
320.0 24,738.5
25.3 24,763.8
The comprehensive income included in revenue reserves comprises profit attributable to shareholders of US$1,438.5 million
(2011: US$5,306.4 million), fair value gain on other investments of US$33.9 million (2011: loss of US$10.7 million) and net actuarial
loss on employee benefit plans of US$0.9 million (2011: US$3.8 million). Cumulative fair value gain on other investments and net
actuarial loss on employee benefit plans amounted to US$42.7 million (2011: US$8.8 million) and US$3.9 million (2011: US$3.0 million),
respectively.
22
Hongkong Land
Annual Report 2012 23
Note
6
6
24
24
Consolidated Cash Flow Statement
for the year ended 31st December 2012
Operating activities
Operating profit
Depreciation
Reversal of writedowns on properties for sale
Change in fair value of investment properties
Asset disposals
Increase in properties for sale
Decrease/(increase) in debtors
Increase in creditors
Interest received
Interest and other financing charges paid
Tax paid
Dividends from associates and joint ventures
Cash flows from operating activities
Investing activities
Major renovations expenditure
Developments capital expenditure
Investments in and loans to associates and joint ventures
Deposit for a joint venture
Disposal of an investment property
Cash flows from investing activities
Financing activities
Drawdown of borrowings
Repayment of borrowings
Contribution from/(repayment to) non-controlling shareholders
Dividends paid by the Company
Dividends paid to non-controlling shareholders
Cash flows from financing activities
Effect of exchange rate changes
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1st January
Cash and cash equivalents at 31st December
24
2012
US$m
2011
US$m
1,108.3
2.1
(7.5 )
(306.4 )
(1.6 )
(907.6 )
72.7
380.7
37.4
(71.7 )
(147.4 )
139.7
298.7
(47.8 )
(515.0 )
(179.0 )
(112.1 )
8.3
(845.6 )
1,550.1
(635.9 )
22.1
(374.3 )
(0.6 )
561.4
(0.2 )
14.3
966.7
981.0
5,214.4
1.7
(44.2 )
(4,382.7 )
–
(298.8 )
(70.7 )
33.2
35.8
(93.0 )
(117.4 )
58.0
336.3
(50.8 )
(38.3 )
(146.2 )
–
–
(235.3 )
1,068.1
(1,193.4 )
(6.1 )
(370.9 )
(0.6 )
(502.9 )
2.9
(399.0 )
1,365.7
966.7
24
Hongkong Land
Annual Report 2012 PB
1 Principal Accounting Policies
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards, including
International Accounting Standards and Interpretations adopted by the International Accounting Standards Board. The financial
statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.
Amendments to IFRS 7 ‘Financial Instruments: Transfers of Financial Assets’ became effective in current accounting period
and are relevant to the Group’s operations. The amendments promote transparency in the reporting of such transfer transactions
and improve users’ understanding of the risk exposures relating to transfer of financial assets and the effect of those risks on
an entity’s financial position particularly those involving securitisation of financial assets. The adoption of these amendments
does not have a material impact on the Group’s accounting policies and disclosures.
The following standards and amendments which are effective after 2012, are relevant to the Group’s operations and
yet to be adopted
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
Amendments to IFRS 7
Amendments to IFRSs 10, 11 and 12
Amendments to IAS 1
IAS 19 (amended 2011)
IAS 27 (2011)
IAS 28 (2011)
Amendments to IAS 32
Annual Improvements to IFRS
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair value Measurement
Disclosures – Offsetting Financial Assets and Financial Liabilities
Consolidated Financial Statements, Joint Arrangements and
Disclosure of Interests in Other Entities: Transition Guidance
Presentation of Items of Other Comprehensive Income
Employee Benefits
Separate Financial Statements
Investments in Associates and Joint Ventures
Offsetting Financial Assets and Financial Liabilities
2009 – 2011 Cycle
The Group is currently assessing the impact of these new standards and amendments but expects their adoption will not have
a material effect on the consolidated profit and loss account and balance sheet.
IFRS 9 ‘Financial Instruments’ (effective from 1st January 2015) is the first standard issued as part of a wider project to replace
IAS 39. IFRS 9 (2009) retains but simplifies the mixed measurement model and establishes two primary measurement categories
for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge
accounting continues to apply. IFRS 9 (2010) adds the requirements related to the classification and measurement of financial
liabilities, and derecognition of financial assets and liabilities, to the version issued in November 2009. It also includes those
paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embedded in a contract that contains
a host that is not a financial asset, as well as the requirements of IFRIC 9 ‘Remeasurement of Embedded Derivatives’. The Group
will apply the standard from 1st January 2015.
IFRS 10 ‘Consolidated Financial Statements’ (effective 1st January 2013) replaces SIC Interpretation 12 ‘Consolidation – Special
Purpose Entities’ and most of IAS 27 ‘Consolidated and Separate Financial Statements’. It contains a new single consolidation
model that identifies control as the basis for consolidation for all types of entities. It provides a definition of control that comprises
the elements of power over an investee; exposure of rights to variable returns from an investees; and ability to use power to
affect the reporting entity’s returns. The Group will apply the standard from 1st January 2013.
IFRS 11 ‘Joint Arrangements’ replaces IAS 31 ‘Interests in Joint Ventures’ and SIC 13 ‘Jointly Controlled Entities – Non Monetary
Contributions by Venturers’. Under IFRS 11, joint arrangements are classified as either joint operations (whereby the parties that
have joint control have rights to the assets and obligations for the liabilities of the joint arrangements) or joint ventures (whereby
the parties that have joint control have rights to the net assets of the joint arrangements). Joint operations are accounted for
by showing the party’s interest in the assets, liabilities, revenue and expenses, and/or its relative share of jointly controlled
assets, liabilities, revenue and expenses, if any. Accounting for joint ventures is now covered by IAS 28 (2011) as proportionate
consolidation is no longer permitted. The Group will apply the standard from 1st January 2013.
IFRS 12 ‘Disclosure of Interests in Other Entities’ (effective 1st January 2013) requires entities to disclose information that helps
financial statements readers to evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries,
associates, joint arrangements and unconsolidated structured entities. Disclosure required includes significant judgements and
assumptions made in determining whether an entity controls, jointly controls, significantly influences or has some other interest
in other entities. The Group will apply the standard from 1st January 2013.
PB
Hongkong Land
Annual Report 2012 25
Notes to the Financial Statements
1 Principal Accounting Policies continued
Basis of preparation continued
IFRS 13 ‘Fair Value Measurement’ (effective 1st January 2013) requires entities to disclose information about the valuation
techniques and inputs used to measure fair value, as well as information about the uncertainty inherent in fair value
measurements. The standard applies to both financial and non-financial items measured at fair value. Fair value is now
defined as ‘the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date’ (i.e. an exit price). The Group will apply the standard from 1st January 2013.
Amendments to IFRS 7 ‘Disclosures – Offsetting Financial Assets and Financial Liabilities’ focus on disclosures of quantitative
information about recognised financial instruments that are offset in the balance sheet, as well as those recognised financial
instruments that are subject to master netting or similar arrangements irrespective of whether they are offset. The Group will
adopt the amendments from 1st January 2013.
Amendments to IFRSs 10, 11 and 12 on transition guidance provide additional transition relief to IFRSs 10, 11 and 12, limiting
the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related
to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for
periods before IFRS 12 is first applied. The Group will adopt the amendments from 1st January 2013.
Amendments to IAS 1 ‘Presentation of Items of Other Comprehensive Income’ (effective 1st July 2012) improve the consistency
and clarity of the presentation of items of other comprehensive income. The amendments require entities to separate items
presented in other comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in
the future. Items that will not be recycled − such as actuarial gains or losses on defined benefit pension plans − will be presented
separately from items that may be recycled in the future − such as deferred gains and losses on cash flow hedges. The amounts
of tax related to the two groups are required to be allocated on the same basis. The Group will adopt the amendments from
1st January 2013.
IAS 19 (amended 2011) ‘Employee Benefits’ (effective 1st January 2013) requires the assumed return on plan assets recognised
in the profit and loss to be the same as the rate used to discount the defined benefit obligation. It also requires actuarial gains
and losses to be recognised immediately in other comprehensive income and past service costs immediately in profit or loss.
Additional disclosures are required to present the characteristics of benefit plans, the amount recognised in the financial
statements, and the risks arising from defined benefit plans and multi-employer plans. The Group will apply the amended
standard from 1st January 2013.
IAS 27 (2011) ‘Separate Financial Statements’ (effective 1st January 2013) supersedes IAS 27 (2008) and prescribes the
accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares
separate financial statements. There will be no impact on the consolidated financial statements as the changes only affect the
separate financial statements of the investing entity.
IAS 28 (2011) ‘Investments in Associates and Joint Ventures’ (effective 1st January 2013) supersedes IAS 28 (2008) and
prescribes the accounting for investments in associates and joint ventures and sets out the requirements for the application
of the equity method when accounting for investments in associates and joint ventures. The adoption of this standard is not
expected to have any material impact on the results of the Group as the Group is already following the standard.
Amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’ (effective 1st January 2014) are made to the
application guidance in IAS 32 and clarify some of the requirements for offsetting financial assets and financial liabilities on
the balance sheet. The Group will adopt the amendments from 1st January 2014.
Annual improvements to IFRSs 2009 – 2011 Cycle comprise a number of non-urgent but necessary amendments to IFRSs.
The amendments which are relevant to the Group’s operations include the following:
Amendment to IAS 1 ‘Presentation of Financial Statements’ clarifies the disclosure requirements for comparative information
when an entity provides a third balance sheet either as required by IAS 8, ‘Accounting policies, changes in accounting estimates
and errors’; or voluntarily. When an entity produces an additional balance sheet as required by IAS 8, the balance sheet should
be as at the date of the beginning of the preceding period – that is, the opening position. No notes are required to support this
balance sheet. When management provides additional comparative information voluntarily – for example, profit and loss account,
balance sheet – it should present the supporting notes to these additional statements. The Group will adopt the amendment from
1st January 2013.
26
Hongkong Land
Annual Report 2012 27
Notes to the Financial Statements 1 Principal Accounting Policies continued
Basis of preparation continued
Amendment to IAS 16 ‘Property, Plant and Equipment’ clarifies that spare parts and servicing equipment are classified as
property, plant and equipment rather than inventory when they meet the definition of property, plant and equipment. The previous
wording of IAS 16 indicated that servicing equipment should be classified as inventory, even if it was used for more than one
period. Following the amendment, this equipment used for more than one period is classified as property, plant and equipment.
The Group will adopt the amendment from 1st January 2013.
Amendment to IAS 32 ‘Financial Instruments: Presentation’ clarifies that income tax related to profit distributions is recognised
in the profit and loss account, and income tax related to the costs of equity transactions is recognised in equity. Prior to the
amendment, IAS 32 was ambiguous as to whether the tax effects of distributions and the tax effects of equity transactions
should be accounted for in the profit and loss account or in equity. The Group will adopt the amendment from 1st January 2013.
Amendment to IAS 34 ‘Interim Financial Reporting’ clarifies the disclosure requirements for segment assets and liabilities in
interim financial statements. A measure of total assets and liabilities is required for an operating segment in interim financial
statements if such information is regularly provided to the chief operating decision makers and there has been a material change
in those measures since the last annual financial statements. The Group will adopt the amendment from 1st January 2013.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with the economic
environments of the locations in which they operate. The functional currency of the Company is United States dollars. The
consolidated financial statements are presented in United States dollars.
The Group’s reportable segments are set out in Note 4.
Basis of consolidation
i) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and the Group’s
interests in associates and joint ventures.
ii) Subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The purchase
method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition includes
the fair value at the acquisition date of any contingent consideration. In a business combination achieved in stages, the Group
remeasures its previously held interest in the acquiree at its acquisition-date fair value and recognised the resulting gain or
loss in profit and loss. Changes in a parent’s ownership interest in a subsidiary that do not result in the loss of control are
accounted for as equity transactions. When control over a previous subsidiary is lost, any remaining interest in the entity
is remeasured at fair value and the resulting gain or loss is recognised in profit and loss.
All material intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group
companies have been eliminated. The cost of and related income arising from shares held in the Company by subsidiaries
are eliminated from shareholders’ funds and non-controlling interests, and profit respectively.
iii) Associates are entities, not being subsidiaries or joint ventures, over which the Group exercises significant influence.
Joint ventures are entities which the Group jointly controls with one or more other venturers. Associates and joint ventures
are included on the equity basis of accounting.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates are
recognised in the consolidated financial statements only to the extent of unrelated investor’s interests in the associates.
iv) Non-controlling interests represent the proportion of the results and net assets of subsidiaries and their associates and
joint ventures not attributable to the Group.
v) The results of subsidiaries, associates and joint ventures are included or excluded from their effective dates of acquisition
or disposal respectively. The results of entities other than subsidiaries, associates and joint ventures are included to the
extent of dividends received when the right to receive such dividend is established.
26
Hongkong Land
Annual Report 2012 27
1 Principal Accounting Policies continued
Foreign currencies
Transactions in foreign currencies are accounted for at the exchange rates ruling at the transaction dates.
Assets and liabilities of subsidiaries, associates and joint ventures, together with all other monetary assets and liabilities
expressed in foreign currencies, are translated into United States dollars at the rates of exchange ruling at the year end. Results
expressed in foreign currencies are translated into United States dollars at the average rates of exchange ruling during the year,
which approximate the exchange rates at the dates of the transactions.
Exchange differences arising from the retranslation of the net investment in foreign subsidiaries, associates and joint ventures,
and of financial instruments which are designated as hedges of such investments, are recognised in other comprehensive
income and accumulated in equity under exchange reserves. On the disposal of these investments, such exchange differences
are recognised in profit and loss. Exchange differences on available-for-sale investments are recognised in other comprehensive
income as part of the gains and losses arising from changes in their fair value. Exchange differences relating to changes in the
amortised cost of monetary securities classified as available-for-sale and all other exchange differences are recognised in profit
and loss.
Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1st January 2003 are treated as assets and
liabilities of the foreign entity and translated into United States dollars at the rate of exchange ruling at the year end.
Impairment of non-financial assets
Assets that have indefinite useful lives are not subject to amortisation and are tested for impairment annually and whenever there
is an indication that the assets may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of assessing
impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows. Cash-generating units
or groups of cash-generating units to which goodwill has been allocated are tested for impairment annually and whenever there
is an indication that the units may be impaired. An impairment loss is recognised for the amount by which the carrying amount
of the asset exceeds its recoverable amount, which is the higher of an asset’s fair value less costs to sell and value in use.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment annually.
Intangible assets
Goodwill represents the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the acquisition-date fair value of any previously held equity interest in the acquiree over the acquisition-date fair
value of the Group’s share of the net identifiable assets acquired. Non-controlling interests are measured at their proportionate
share of the net identifiable assets at the acquisition date. If the cost of acquisition is less than the fair value of the net assets
acquired, the difference is recognised directly in profit and loss. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates and joint ventures is included in investment in associates and joint ventures.
Goodwill is allocated to cash-generating units or groups of cash-generating units for the purpose of impairment testing and
is carried at cost less accumulated impairment loss.
The profit or loss on disposal of subsidiaries, associates and joint ventures is stated after deducting the carrying amount of
goodwill relating to the entity sold.
Tangible fixed assets and depreciation
Depreciation of tangible fixed assets is calculated on the straight line basis to allocate the cost or valuation of each asset to
its residual value over its estimated useful life. The residual values and useful lives are reviewed at each balance sheet date.
The estimated useful lives are as follows:
Furniture, equipment and motor vehicles
3 – 10 years
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognised by reference to their carrying amount.
28
Hongkong Land
Annual Report 2012 29
Notes to the Financial Statements 1 Principal Accounting Policies continued
Investment properties
Properties including those under operating leases which are held for long-term rental yields or capital gains are classified and
accounted for as investment properties, but the business model does not necessarily envisage that the properties will be held
for their entire useful life. Investment properties are carried at fair value, representing estimated open market value determined
annually by independent qualified valuers who have recent experience in the location and category of the investment property
being valued. The market value of each property is calculated on the discounted net rental income allowing for reversionary
potential. Changes in fair value are recognised in profit and loss.
Investments
i)
Investments are classified by management as available for sale or held to maturity on initial recognition. Available-for-sale
investments are shown at fair value. Gains and losses arising from changes in the fair value are recognised in other
comprehensive income and accumulated in equity. On the disposal of an investment or when an investment is determined
to be impaired, the cumulative gain or loss previously deferred in equity is recognised in profit and loss. Held-to-maturity
investments are shown at amortised cost. Investments are classified under non-current assets unless they are expected
to be realised within twelve months after the balance sheet date.
ii) At each balance sheet date, the Group assesses whether there is objective evidence that an investment is impaired.
In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired.
iii) All purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to
purchase or sell the investment.
Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on a straight
line basis over the period of the lease. When a lease is terminated before the lease period has expired, any payment required to
be made to the lessor by way of penalty is recognised as an expense in the year in which termination takes place.
Properties for sale
Properties for sale, which comprise land and buildings held for resale, are stated at the lower of cost and net realisable value.
The cost of properties for sale comprises land cost, and construction and other development costs.
Debtors
Debtors, excluding derivative financial instruments, are measured at amortised cost except where the effect of discounting would
be immaterial. Provision for impairment is established when there is objective evidence that the outstanding amounts will not be
collected. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation,
and default or delinquency in payments are considered indicators that the debtor is impaired. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recognised in arriving at operating profit. When
a debtor is uncollectible, it is written off against the allowance account. Subsequent recoveries of amount previously written off
are credited to profit and loss.
Debtors with maturities greater than twelve months after the balance sheet date are classified under non-current assets.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial institutions,
and bank and cash balances, net of bank overdrafts. In the balance sheet, bank overdrafts are included in current borrowings.
28
Hongkong Land
Annual Report 2012 29
1 Principal Accounting Policies continued
Provisions
Provisions are recognised when the Group has present legal or constructive obligations as a result of past events, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligations, and a reliable estimate of
the amount of the obligations can be made.
Borrowings and borrowing costs
Borrowings are initially recognised at fair value, net of transaction costs incurred. In subsequent periods, borrowings are stated
at amortised cost using the effective interest method.
Borrowing costs relating to major development projects are capitalised until the asset is substantially completed. Capitalised
borrowing costs are included as part of the cost of the asset. All other borrowing costs are expensed as incurred.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least twelve months after the balance sheet date.
Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit and loss, except to the extent that
it relates to items recognised in other comprehensive income or direct in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet
date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and
liabilities and their carrying values. Deferred tax is determined using tax rates and laws that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax
liability is settled.
Provision for deferred tax is made on the revaluation of certain non-current assets and, in relation to acquisitions, on the difference
between the fair value of the net assets acquired and their tax base. Deferred tax is provided on temporary differences associated
with investments in subsidiaries, associates and joint ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax
assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit
will be available against which the unused tax losses can be utilised.
Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in trustee
administered funds.
Pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under this method,
the costs of providing pensions are charged to profit and loss spreading the regular cost over the service lives of employees in
accordance with the advice of qualified actuaries, who carry out a full valuation of major plans every year. The pension obligations
are measured as the present value of the estimated future cash outflows by reference to market yields on high quality corporate
bonds which have terms to maturity approximating the terms of the related liability. Plan assets are measured at fair value.
Actuarial gains and losses are recognised in other comprehensive income in the year in which they occur.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year to which
they relate.
Non-current assets held for sale
Non-current assets are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to
sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use. Once classified
as held for sale, the assets are no longer amortised or depreciated.
30
Hongkong Land
Annual Report 2012 31
Notes to the Financial Statements 1 Principal Accounting Policies continued
Derivative financial instruments
The Group only enters into derivative financial instruments in order to hedge underlying exposures. Derivative financial instruments
are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair
value. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged. The Group
designates certain derivatives as a hedge of the fair value of a recognised asset or liability (fair value hedge), or a hedge of a
forecast transaction or of the foreign currency risk on a firm commitment (cash flow hedge), or a hedge of a net investment in
a foreign entity.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective, are
recognised in profit and loss, along with any changes in the fair value of the hedged asset or liability that is attributable to the
hedged risk. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
the cumulative adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised
to profit and loss over the residual period to maturity.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective, are
recognised in other comprehensive income and accumulated in equity under hedging reserves. Changes in the fair value relating
to the ineffective portion is recognised immediately in profit and loss. Where the forecast transaction or firm commitment
results in the recognition of a non-financial asset or of a non-financial liability, the gains and losses previously deferred in
hedging reserves are transferred from hedging reserves and included in the initial measurement of the cost of the asset or
liability. Otherwise, amounts deferred in hedging reserves are transferred to profit and loss in the same periods during which
the hedged firm commitment or forecast transaction affects profit and loss. When a hedging instrument expires or is sold, or
when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in hedging reserves at that
time remains in the hedging reserves and is recognised when the committed or forecast transaction ultimately is recognised in
profit and loss. When a committed or forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in hedging reserves is immediately transferred to profit and loss.
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies, do not
qualify for hedge accounting under the specific rules in IAS 39. Changes in the fair value of any derivative instruments that do not
qualify for hedge accounting under IAS 39 are recognised immediately in profit and loss.
Hedges of net investments in foreign entities are accounted for on a similar basis to that used for cash flow hedges. Any gain or
loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and
accumulated in exchange reserves; the gain or loss relating to the ineffective portion is recognised immediately in profit and loss.
The fair value of derivatives which are designated and qualify as effective hedges are classified as non-current assets or liabilities
if the remaining maturities of the hedged assets or liabilities are greater than twelve months after the balance sheet date.
Non-trading items
Non-trading items are separately identified to provide greater understanding of the Group’s underlying business performance.
Items classified as non-trading items include fair value gains or losses on revaluation of investment properties; gains and losses
arising from the sale of businesses, investments and investment properties; impairment of non-depreciable intangible assets and
other investments; provisions for the closure of businesses; acquisition-related costs in business combinations; and other credits
and charges of a non-recurring nature that require inclusion in order to provide additional insight into underlying business
performance.
Earnings per share
Basic earnings per share are calculated on profit attributable to shareholders and on the weighted average number of shares in
issue during the year. For the purpose of calculating diluted earnings per share, profit attributable to shareholders is adjusted for
the effects of the conversion of dilutive potential ordinary shares, and the weighted average number of shares is adjusted for
the number of shares which are deemed to be issued on the conversion of convertible bonds into ordinary shares.
Dividends
Dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date.
30
Hongkong Land
Annual Report 2012 31
1 Principal Accounting Policies continued
Revenue recognition
Revenue is measured at the fair value of the consideration received and receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of discounts and sales related taxes.
i) Revenue from sale of properties is recognised on the transfer of significant risks and rewards of ownership, which generally
coincides with the time when the properties are delivered to customers.
ii) Receipts under operating leases are accounted for on an accrual basis over the lease terms.
iii) Revenue from rendering of services is recognised when services are performed, provided that the amount can be
measured reliably.
iv) Dividend income is recognised when the right to receive payment is established.
v)
Interest income is recognised on a time proportion basis taking into account the principal amounts outstanding and the
interest rates applicable.
2
Financial Risk Management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and
price risk), credit risk and liquidity risk.
The Group’s treasury function co-ordinates, under the direction of the Board of Hongkong Land Limited, financial risk management
policies and their implementation on a group-wide basis. The Group’s treasury policies are designed to manage the financial
impact of fluctuations in interest rates and foreign exchange rates and to minimise the Group’s financial risks. The Group uses
derivative financial instruments, principally interest rate swaps, cross-currency swaps and forward foreign exchange contracts as
appropriate for hedging transactions and managing the Group’s assets and liabilities in accordance with the Group’s financial risk
management policies. Financial derivative contracts are executed between third party banks and the Group entity that is directly
exposed to the risk being hedged. Certain derivative transactions, while providing effective economic hedges under the Group’s
risk management policies, do not qualify for hedge accounting under the specific rules in IAS 39. Changes in the fair value of
any derivative instruments that do not qualify for hedge accounting under IAS 39 are recognised immediately in profit and loss
account. It is the Group’s policy not to enter into derivative transactions for speculative purposes. The notional amounts and fair
values of derivative financial instruments at 31st December 2012 are disclosed in Note 25.
i) Market risk
Foreign exchange risk
Entities within the Group are exposed to foreign exchange risk from future commercial transactions, net investments
in foreign operations and net monetary assets and liabilities that are denominated in a currency that is not the entity’s
functional currency.
Entities in the Group use cross-currency swaps and forward foreign exchange contracts in a consistent manner to hedge
firm and anticipated foreign exchange commitments and manage their foreign exchange risk arising from future commercial
transactions. The Group does not usually hedge its net investments in foreign operations except in circumstances where
there is a material exposure arising from a currency that is anticipated to be volatile and the hedging is cost effective. Group
companies are required to manage their foreign exchange risk against their functional currency. Foreign currency borrowings
are swapped into the entity’s functional currency using cross-currency swaps except where the foreign currency borrowings
are repaid with cash flows generated in the same foreign currency. The purpose of these hedges is to mitigate the impact of
movements in foreign exchange rates on assets and liabilities and the profit and loss account of the Group.
Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that
is not the functional currency. At 31st December 2012, there are no significant monetary balances held by group companies
that are denominated in a non-functional currency. Differences resulting from the translation of financial statements into the
Group’s presentation currency are not taken into consideration.
Since the Group manages the interdependencies between foreign exchange risk and interest rate risk of foreign currency
borrowings using cross-currency swaps, the sensitivity analysis on financial impacts arising from cross-currency swaps is
included in the sensitivity assessment on interest rates under the interest rate risk section.
32
Hongkong Land
Annual Report 2012 33
Notes to the Financial Statements 2
Financial Risk Management continued
Financial risk factors continued
i) Market risk continued
Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. These
exposures are managed by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities by fixed
rate borrowings, and through the use of derivative financial instruments such as interest rate swaps. The Group monitors
interest rate exposure on a monthly basis by currency and business unit, taking into consideration proposed financing and
hedging arrangements. The Group’s guideline is to maintain 40% to 60% of its gross borrowings in fixed rate instruments.
At 31st December 2012, the Group’s interest rate hedge was 53% (2011: 52%) with an average tenor of nine years
(2011: nine years). The interest rate profile of the Group’s borrowings after taking into account hedging transactions are
set out in Note 21.
Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising from variable rate
financial instruments. Borrowings at floating rates therefore expose the Group to cash flow interest rate risk. The Group
manages this risk by using forward rate agreements to a maturity of one year, and by entering into interest rate swaps for
a maturity of generally up to five years or longer to match the maturity of the underlying exposure. Forward rate agreements
and interest rate swaps have the economic effect of converting borrowings from floating rate to fixed rate.
Fair value interest rate risk is the risk that the value of a financial asset or liability and derivative financial instrument will
fluctuate because of changes in market interest rates. The Group manages its fair value interest rate risk by entering into
interest rate swaps which have the economic effect of converting borrowings from fixed rate to floating rate, to maintain
the Group’s fixed rate instruments to within the Group’s guideline.
At 31st December 2012, if interest rates had been 100 basis points higher/lower with all other variables held constant,
the Group’s profit after tax would have been US$8 million (2011: US$5 million) higher/lower, and hedging reserve would
have been US$83 million (2011: US$54 million) higher/lower as a result of fair value changes to cash flow hedges. The
sensitivity analysis has been determined assuming that the change in interest rates had occurred at the balance sheet
date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments
in existence at that date. The 100 basis point increase or decrease represents management’s assessment of a reasonably
possible change in those interest rates which have the most impact on the Group, specifically the United States, Hong Kong
and Singapore rates, over the period until the next annual balance sheet date. In the case of effective fair value hedges,
changes in fair value of the hedged item caused by interest rate movements balance out in profit and loss account against
changes in the fair value of the hedging instruments. Changes in market interest rates affect the interest income or expense
of non-derivative variable-interest financial instruments, the interest payments of which are not designated as hedged items
of cash flow hedges against interest rate risks. As a consequence, they are included in the calculation of profit after tax
sensitivities. Changes in the market interest rate of financial instruments that were designated as hedging instruments in
a cash flow hedge to hedge payment fluctuations resulting from interest rate movements affect the hedging reserves and
are therefore taken into consideration in the equity-related sensitivity calculations.
Price risk
The Group is exposed to securities price risk because of listed investments which are available for sale and held by the Group
at fair value. Gains and losses arising from changes in the fair value of available-for-sale investments are recognised in other
comprehensive income. The performance of the Group’s listed and unlisted available-for-sale investments are monitored
regularly, together with an assessment of their relevance to the Group’s long term strategic plans. Details of the Group’s
available-for-sale investments are contained in Note 14.
Available-for-sale investments are unhedged. At 31st December 2012, if the price of listed and unlisted available-for-sale
investments had been 25% higher/lower with all other variables held constant, total equity would have been US$21 million
(2011: US$12 million) higher/lower. The sensitivity analysis has been determined based on a reasonable expectation of
possible valuation volatility over the next twelve months.
32
Hongkong Land
Annual Report 2012 33
2
Financial Risk Management continued
Financial risk factors continued
ii) Credit risk
The Group’s credit risk is primarily attributable to deposits with banks, credit exposures to customers and derivative financial
instruments with a positive fair value. The Group has credit policies in place and the exposures to these credit risks are
monitored on an ongoing basis.
The Group manages its deposits with banks and financial institutions and transactions involving derivative financial
instruments by monitoring credit ratings and capital adequacy ratios of counterparties, and limiting the aggregate risk to
any individual counterparty. The utilisation of credit limits is regularly monitored. At 31st December 2012, 95% (2011: 90%)
of deposits and balances with banks and financial institutions were made to institutions with credit ratings of no less than
A3 and 5% (2011: 10%) with credit rating at Baa3 (Moody’s). Similarly transactions involving derivative financial instruments
are with banks with sound credit ratings and capital adequacy ratios. In developing countries it may be necessary to
deposit money with banks that have a lower credit rating, however the Group only enters into derivative transactions
with counterparties which have credit ratings of at least investment grade. Management does not expect any counterparty
to fail to meet its obligations.
In respect of credit exposures to customers, the Group has policies in place to ensure that investment properties are let
principally to corporate companies with appropriate credit history, and rental deposits in the form of cash or bank guarantee
are usually received from tenants. The Group receives progress payments from sales of residential properties to individual
customers prior to the completion of transactions. In the event of default by customers, the Group undertakes legal
proceedings to recover the property. Amounts due from associates and joint ventures are generally supported by the
underlying assets.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after
deducting any impairment allowance.
iii) Liquidity risk
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources, maintaining sufficient
cash and marketable securities, and ensuring the availability of funding from an adequate amount of committed credit facilities
and the ability to close out market positions. The Group's ability to fund its existing and prospective debt requirements is
managed by maintaining diversified funding sources with adequate committed funding lines from high quality lenders, and by
monitoring rolling short-term forecasts of the Group’s cash and gross debt on the basis of expected cash flows. In addition
long-term cash flows are projected to assist with the Group’s long-term debt financing plans.
At 31st December 2012, total committed and uncommitted borrowing facilities amounted to US$6,909 million
(2011: US$5,459 million) of which US$4,255 million (2011: US$3,327 million) was drawn down. Undrawn committed
facilities, in the form of revolving credit and term loan facilities, totalled US$2,496 million (2011: US$1,934 million).
34
Hongkong Land
Annual Report 2012 35
Notes to the Financial Statements 2
Financial Risk Management continued
Financial risk factors continued
iii) Liquidity risk continued
The table below analyses the Group’s non-derivative financial liabilities, net-settled derivative financial liabilities and
gross-settled financial instruments into relevant maturity groupings based on the remaining period at the balance sheet
date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities
are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual
undiscounted cash flows.
Within
one year
US$m
Between
one and
two years
US$m
Between
two and
three years
US$m
Between
three and
four years
US$m
Between
four and
five years
US$m
Total
Beyond undiscounted
cash flow
US$m
five years
US$m
507.8
328.2
841.5
59.7
416.3
41.4
631.9
16.3
135.4
2,845.1
5,378.0
14.7
51.9
512.2
3.6
1.5
–
–
–
–
5.1
80.8
(50.4 )
562.3
(549.7 )
53.2
(44.8 )
53.2
(44.8 )
53.2
(44.8 )
1,553.1
(1,526.5 )
2,355.8
(2,261.0 )
166.5
307.2
784.9
38.6
610.2
49.2
358.9
20.4
365.6
10.6
1,846.8
20.7
4,132.9
446.7
5.7
3.5
1.5
–
–
–
10.7
60.5
(29.3 )
60.5
(29.3 )
542.0
(527.5 )
33.0
(23.8 )
33.0
(23.8 )
1,001.7
(936.2 )
1,730.7
(1,569.9 )
At 31st December 2012
Borrowings
Creditors
Net settled derivative
financial instruments
Gross settled derivative
financial instruments
– inflow
– outflow
At 31st December 2011
Borrowings
Creditors
Net settled derivative
financial instruments
Gross settled derivative
financial instruments
– inflow
– outflow
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern whilst seeking
to maximise benefits to shareholders and other stakeholders. Capital is equity as shown in the consolidated balance sheet plus
net debt.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder
returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected
profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, purchase
Group shares, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the Group’s consolidated gearing ratio and consolidated interest cover. The gearing
ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings less bank balances. Interest cover
is calculated as underlying operating profit including the Group’s share of operating profit within associates and joint ventures
divided by net financing charges including the Group’s share of net financing charges within associates and joint ventures. The
Group does not have a defined gearing or interest cover benchmark or range.
The ratios at 31st December 2011 and 2012 are as follows:
Gearing ratio (%)
Interest cover (times)
2012
13
11
2011
10
10
34
Hongkong Land
Annual Report 2012 35
2
Financial Risk Management continued
Fair value estimation
i) Financial instruments that are measured at fair value
For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value measurements
are disclosed by level of the following fair value measurement hierarchy:
a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (‘quoted prices in active markets’)
The fair value of listed securities, which are classified as available-for-sale, is based on quoted prices in active markets
at the balance sheet date. The quoted market price used for listed investments held by the Group is the current bid price.
b)
c)
Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly
(‘observable current market transactions’)
The fair values of all interest rate swaps and forward foreign exchange contracts have been determined using rates
quoted by the Group’s bankers at the balance sheet date which are calculated by reference to market interest rates and
foreign exchange rates.
Inputs for the asset or liability that are not based on observable market data (‘unobservable inputs’)
The fair value of unlisted securities, which are classified as available-for-sale, is determined using valuation techniques
by reference to observable current market transactions or the market prices of the underlying investments with certain
degree of entity specific estimates.
The table below analyses financial instruments carried at fair value, by the levels in the fair value measurement hierarchy.
2012
Assets
Available-for-sale financial assets
– listed securities
– unlisted securities
Derivative financial instruments
Liabilities
Derivative financial instruments
2011
Assets
Available-for-sale financial assets
– listed securities
– unlisted securities
Derivative financial instruments
Liabilities
Derivative financial instruments
Quoted
prices in
active
markets
US$m
80.5
–
80.5
–
80.5
Observable
current
market Unobservable
transactions
US$m
inputs
US$m
Total
US$m
–
–
–
50.8
50.8
–
2.1
2.1
–
2.1
80.5
2.1
82.6
50.8
133.4
–
(24.5 )
–
(24.5 )
46.5
–
46.5
–
46.5
–
–
–
70.0
70.0
–
2.1
2.1
–
2.1
46.5
2.1
48.6
70.0
118.6
–
(22.0 )
–
(22.0 )
36
Hongkong Land
Annual Report 2012 37
Notes to the Financial Statements
2
Financial Risk Management continued
Fair value estimation continued
ii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank balances, current creditors and current borrowings are assumed to approximate their
carrying amounts due to the short-term maturities of these assets and liabilities.
The fair values of long-term borrowings are based on market prices or are estimated using the expected future payments
discounted at market interest rates.
Financial instruments by category
Loans
and
receivables
US$m
Derivatives
US$m
Available-
for-sale
US$m
–
125.7
982.1
1,107.8
–
–
–
–
137.1
967.9
1,105.0
–
–
–
–
50.8
–
50.8
–
(24.5 )
(24.5 )
–
70.0
–
70.0
–
(22.0 )
(22.0 )
82.6
–
–
82.6
–
–
–
48.6
–
–
48.6
–
–
–
Other
financial
liabilities at
amortised
cost
US$m
–
–
–
–
Total
carrying
amount
US$m
82.6
176.5
982.1
Fair
value
US$m
82.6
176.5
982.1
1,241.2
1,241.2
(4,255.5 )
(4,255.5 )
(4,334.0 )
(512.2 )
(536.7 )
(536.7 )
(4,767.7 )
(4,792.2 )
(4,870.7 )
–
–
–
–
48.6
207.1
967.9
48.6
207.1
967.9
1,223.6
1,223.6
(3,327.2 )
(3,327.2 )
(3,359.1 )
(446.7 )
(468.7 )
(468.7 )
(3,773.9 )
(3,795.9 )
(3,827.8 )
2012
Other investments
Debtors
Bank balances
Borrowings
Creditors excluding
non-financial liabilities
2011
Other investments
Debtors
Bank balances
Borrowings
Creditors excluding
non-financial liabilities
36
Hongkong Land
Annual Report 2012 37
3 Critical Accounting Estimates and Judgements
Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect
on the carrying amounts of assets and liabilities are discussed below.
Acquisition of subsidiaries, associates and joint ventures
The initial accounting on the acquisition of subsidiaries, associates and joint ventures involves identifying and determining the
fair values to be assigned to the identifiable assets, liabilities and contingent liabilities of the acquired entities. The fair values of
leasehold land, tangible assets and investment properties are determined by independent valuers by reference to market prices
or present value of expected net cash flows from the assets. Any changes in the assumptions used and estimates made in
determining the fair values, and management’s ability to measure reliably the contingent liabilities of the acquired entity will
impact the carrying amount of these assets and liabilities.
Investment properties
The fair values of investment properties are determined by independent valuers on an open market for existing use basis
calculated on the discounted net income allowing for reversionary potential. Capitalisation rates in the range of 3.50% to 4.45%
for office (2011: 3.75% to 4.85%) and 4.50% to 5.75% for retail (2011: 4.50% to 5.75%) are used in the fair value determination.
Considerations have been given to assumptions that are mainly based on market conditions existing at the balance sheet date and
appropriate capitalisation rates. These estimates are regularly compared to actual market data and actual transactions entered into
by the Group.
Impairment of assets
The Group tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment. Other
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset
exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based on the higher
of its fair value less costs to sell and its value-in-use, calculated on the basis of management’s assumptions and estimates.
Changing the key assumptions, including the discount rates or the growth rate assumptions in the cash flow projections,
could materially affect the value-in-use calculations.
In determining when an available-for-sale equity investment is impaired, significant judgement is required. In making this
judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less
than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and
sector performance, changes in technology and operational and financial cash flows.
38
Hongkong Land
Annual Report 2012 39
Notes to the Financial Statements 3 Critical Accounting Estimates and Judgements continued
Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
Provision of deferred tax follows the way management expects to recover or settle the carrying amount of the related assets or
liabilities, which the management may expect to recover through use, sale or combination of both. Accordingly, deferred tax will
be calculated at income tax rate, capital gains tax rate or combination of both. There is a rebuttable presumption in International
Financial Reporting Standards that investment properties measured at fair value are recovered through sale. Thus, deferred tax
on revaluation of investment properties held by the Group are calculated at the capital gains tax rate.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s expectation of future
taxable profit that will be available against which the tax losses can be utilised. The outcome of their actual utilisation may
be different.
Pension obligations
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using
a number of assumptions. The assumptions used in determining the net cost/income for pensions include the expected long-term
rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions will impact the carrying
amount of pension obligations.
The expected return on plan assets assumption is determined on a uniform basis, taking into consideration long-term historical
returns, asset allocation and future estimates of long-term investment returns.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to
determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In
determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of
the related pension liability.
Other key assumptions for pension obligations are based in part on current market conditions.
Non-trading items
The Group uses underlying business performance in its internal financial reporting to distinguish between the underlying profits
and non-trading items. The identification of non-trading items requires judgement by management, but follows the consistent
methodology as set out in the Group’s accounting policies.
38
Hongkong Land
Annual Report 2012 39
4 Segmental Information
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed
by the executive Directors of the Company for the purpose of resource allocation and performance assessment. The Group has
two operating segments, namely Commercial property and Residential property. No operating segments have been aggregated
to form the reportable segments. Set out below is an analysis of the Group’s underlying profit, net debt and total equity by
reportable segment. Certain comparative figures have been reclassified to align with the latest basis of internal reports.
2012
Commercial Residential
property
US$m
property Corporate
US$m
US$m
2011
Commercial Residential
property
US$m
property
US$m
Total
US$m
Corporate
US$m
Total
US$m
Revenue
Net operating costs
Share of operating profit of
855.9
258.9
–
(136.0 )
(118.7 )
(59.8 )
1,114.8
(314.5 )
804.2
419.5
–
1,223.7
(131.1 )
(210.4 )
(50.5 )
(392.0 )
associates and joint ventures
100.5
160.3
–
260.8
85.0
79.6
–
164.6
Underlying operating profit
820.4
300.5
(59.8 )
1,061.1
758.1
288.7
(50.5)
996.3
Net financing charges
– subsidiaries
– share of associates and
joint ventures
Tax
– subsidiaries
– share of associates and
joint ventures
Non–controlling interests
– subsidiaries
– share of associates and
joint ventures
Underlying profit attributable
to shareholders
Non–trading items:
– change in fair value of
investment properties
– asset disposals/
(impairment provisions)
(60.9 )
(35.3 )
(96.2 )
(124.4 )
(58.8 )
(183.2 )
(3.8 )
(0.9 )
(4.7 )
777.0
660.0
1.5
661.5
Profit attributable to shareholders
1,438.5
(66.5 )
(30.4 )
(96.9 )
(133.6 )
(56.5 )
(190.1 )
(4.5 )
(1.4 )
(5.9 )
703.4
4,620.0
(17.0 )
4,603.0
5,306.4
40
Hongkong Land
Annual Report 2012 41
Notes to the Financial Statements
4 Segmental Information continued
By geographical location
Greater China
Southeast Asia and others
Corporate, net financing charges and tax
By business
2012
Commercial property
Residential property
Unallocated assets and liabilities
2011
Commercial property
Residential property
Unallocated assets and liabilities
By geographical location
2012
Greater China
Southeast Asia and others
Unallocated assets and liabilities
2011
Greater China
Southeast Asia and others
Unallocated assets and liabilities
Revenue
2012
US$m
2011
US$m
Underlying
operating profit
2012
US$m
2011
US$m
Underlying profit
attributable to
shareholders
2012
US$m
2011
US$m
999.7
115.1
–
937.6
286.1
–
885.6
235.3
(59.8 )
825.1
221.7
(50.5 )
879.8
233.7
(336.5 )
817.7
220.2
(334.5 )
1,114.8
1,223.7
1,061.1
996.3
777.0
703.4
Segment assets
Investment Properties
properties
for sale
US$m
US$m
Unallocated
Total
Segment assets and assets and
liabilities
liabilities
liabilities
US$m
US$m
US$m
Others
US$m
26,946.4
–
288.0
3,681.7
–
–
436.8
372.8
–
(530.4 )
(1,432.4 )
–
– 26,852.8
2,910.1
–
(3,578.5 )
(3,578.5 )
27,234.4
3,681.7
809.6
(1,962.8 )
(3,578.5 ) 26,184.4
25,473.0
281.9
–
–
2,527.7
–
299.9
259.5
–
(450.7 )
(958.5 )
– 25,322.2
–
2,110.6
–
(2,669.0 )
(2,669.0 )
25,754.9
2,527.7
559.4
(1,409.2 )
(2,669.0 ) 24,763.8
23,285.0
2,147.5
3,949.4
1,534.2
–
–
555.0
254.6
–
(986.5 )
(976.3 )
–
– 25,001.0
4,761.9
–
(3,578.5 )
(3,578.5 )
27,234.4
3,681.7
809.6
(1,962.8 )
(3,578.5 ) 26,184.4
22,274.2
3,480.7
–
1,358.1
1,169.6
–
413.6
145.8
–
(698.2 )
(711.0 )
– 23,347.7
–
4,085.1
–
(2,669.0 )
(2,669.0 )
25,754.9
2,527.7
559.4
(1,409.2 )
(2,669.0 ) 24,763.8
Unallocated assets and liabilities include tax assets and liabilities, bank balances and borrowings.
40
Hongkong Land
Annual Report 2012 41
5 Revenue
Rental income
Service income
Sales of properties
2012
US$m
745.5
117.2
252.1
2011
US$m
700.3
110.9
412.5
1,114.8
1,223.7
Service income includes service and management charges and hospitality service income.
Total contingent rents included in rental income amounted to US$12.9 million (2011: US$12.5 million).
The future minimum rental payments receivable under non-cancellable leases
are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
Generally the Group’s operating leases are for terms of three years or more.
6 Net Operating Costs
Cost of sales
Other income
Administrative expenses
The following credits/(charges) are included in net operating costs:
Cost of properties for sale recognised as expense
Operating expenses arising from investment properties
Reversal of writedowns on properties for sale
Depreciation of tangible assets
Staff costs
– salaries and benefits in kind
– defined contribution pension plan
– defined benefit pension plan (see Note 16)
Auditors’ remuneration
– audit
– non-audit services
The number of employees at 31st December 2012 was 1,347 (2011: 1,257).
42
Hongkong Land
2012
US$m
701.0
503.8
410.5
59.4
2011
US$m
633.4
481.5
479.1
79.1
1,674.7
1,673.1
2012
US$m
(234.6 )
4.9
(84.8 )
(314.5 )
(102.0 )
(140.1 )
7.5
(2.1 )
(85.5 )
(2.8 )
(0.1 )
(88.4 )
(1.3 )
(0.2 )
(1.5 )
2011
US$m
(320.2 )
4.0
(75.8 )
(392.0 )
(229.3 )
(135.1 )
44.2
(1.7 )
(68.7 )
(2.6 )
0.1
(71.2 )
(1.1 )
(0.2 )
(1.3 )
Annual Report 2012 43
Notes to the Financial Statements
7 Net Financing Charges
Interest expenses
– bank loans and overdrafts
– other borrowings
Total interest expenses
Interest capitalised
Commitment and other fees
Financing charges
Financing income
2012
US$m
(16.3 )
(84.6 )
(100.9 )
11.8
(89.1 )
(9.7 )
(98.8 )
37.9
(60.9 )
Financing charges and financing income are stated after taking into account hedging gains or losses.
8 Share of Results of Associates and Joint Ventures
By business
Commercial property
Residential property
Underlying business performance
Non-trading items:
Change in fair value of investment properties (net of deferred tax)
– Commercial property
– Residential property
Asset impairment provisions, reversals and disposals
2012
US$m
58.2
107.6
165.8
357.7
3.1
360.8
(0.1 )
360.7
526.5
The share of revenue of associates and joint ventures was US$683.5 million (2011: US$386.0 million).
2011
US$m
(13.7 )
(69.0 )
(82.7 )
0.3
(82.4 )
(17.3 )
(99.7 )
33.2
(66.5 )
2011
US$m
46.5
29.8
76.3
235.8
2.9
238.7
(17.0 )
221.7
298.0
42
Hongkong Land
Annual Report 2012 43
9 Tax
Tax charged to profit and loss is analysed as follows:
Current tax
Deferred tax
– changes in fair value of investment properties
– other temporary differences
Reconciliation between tax expense and tax at applicable tax rate:
Tax at applicable tax rate
Change in fair value of investment properties not taxable in determining
taxable profit
Expenses not deductible in determining taxable profit
Income not subject to tax
Utilisation of previously unrecognised tax losses
Over/(under)provision in prior years
Losses not recognised
Deferred tax assets written off
Deferred tax liabilities written back
Withholding tax
Land appreciation tax in mainland China
Tax relating to components of other comprehensive income is analysed as follows:
Actuarial valuation of employee benefit plans
Cash flow hedges
2012
US$m
(118.4 )
0.6
(6.0 )
(5.4 )
2011
US$m
(128.6 )
(0.9 )
(5.0 )
(5.9 )
(123.8 )
(134.5 )
(174.2 )
51.6
(10.4 )
13.5
–
3.3
(2.2 )
–
–
(0.7 )
(4.7 )
(851.5 )
722.2
(8.5 )
17.0
0.3
(3.1 )
(0.8 )
(1.2 )
0.3
(5.9 )
(3.3 )
(123.8 )
(134.5 )
0.2
(2.2 )
(2.0 )
0.8
(1.0 )
(0.2 )
The applicable tax rate for the year of 16.4% (2011: 16.5%) represents the weighted average of the rates of taxation prevailing in
the territories in which the Group operates. The decrease in the applicable tax rate was caused by a change in the geographic mix
of the Group’s profits.
The Group has no tax payable in the United Kingdom (2011: Nil).
Share of tax charge of associates and joint ventures of US$89.8 million (2011: US$61.8 million) is included in share of results of
associates and joint ventures.
44
Hongkong Land
Annual Report 2012 45
Notes to the Financial Statements
10 Earnings per Share
Basic earnings per share is calculated on profit attributable to shareholders of US$1,438.5 million (2011: US$5,306.4 million) and
on the weighted average number of 2,344.5 million (2011: 2,322.5 million) shares in issue during the year.
In 2011, diluted earnings per share was calculated on profit attributable to shareholders of US$5,309.5 million, which was after
adjusting for the effects of the conversion of convertible bonds, and on the weighted average number of 2,337.6 million shares in
issue during the year. The weighted average number of shares for basic and diluted earnings per share is reconciled as follows:
Weighted average number of shares in issue
Adjustment for shares to be issued on conversion of convertible bonds
Weighted average number of shares for diluted earnings per share calculation
Ordinary shares in millions
2012
2,344.5
–
2,344.5
2011
2,322.5
15.1
2,337.6
Earnings per share is additionally calculated based on underlying profit attributable to shareholders. A reconciliation of earnings is
set out below:
Underlying profit attributable to shareholders
Non-trading items (see Note 11)
2012
Basic
earnings
per share
US¢
Diluted
earnings
per share
US¢
2011
Basic
earnings
per share
US¢
Diluted
earnings
per share
US¢
US$m
33.14
33.14
703.4
30.29
30.22
4,603.0
US$m
777.0
661.5
Profit attributable to shareholders
1,438.5
61.36
5,306.4
228.48
Interest expense on convertible bonds (net of tax)
–
3.1
Profit for calculation of diluted earnings per share
1,438.5
61.36
5,309.5
227.13
11 Non-trading Items
An analysis of non-trading items after interest, tax and non-controlling interests is set out below:
Change in fair value of investment properties
Deferred tax on change in fair value of investment properties
Share of change in fair value of investment properties of associates and
joint ventures (net of deferred tax)
Asset disposals
Share of asset disposals/impairment provisions of associates and
joint ventures
Non-controlling interests
2012
US$m
306.4
0.6
360.8
1.6
(0.1 )
(7.8 )
2011
US$m
4,382.7
(0.9 )
238.7
–
(17.0 )
(0.5 )
661.5
4,603.0
44
Hongkong Land
Annual Report 2012 45
12 Investment Properties
2012
At 1st January
Exchange differences
Additions
Disposals
Net increase in fair value
At 31st December
2011
At 1st January
Exchange differences
Additions
Net increase in fair value
At 31st December
Freehold
properties
US$m
Leasehold
properties
US$m
Total
US$m
51.0
0.5
2.4
–
1.6
55.5
13.0
(0.4 )
33.5
4.9
51.0
22,478.9
22,529.9
98.8
562.3
(6.6 )
304.8
99.3
564.7
(6.6 )
306.4
23,438.2
23,493.7
18,023.0
28.5
49.6
4,377.8
18,036.0
28.1
83.1
4,382.7
22,478.9
22,529.9
The fair value of the Group’s investment properties at 31st December 2012 has been determined on the basis of valuations
carried out by independent valuers not related to the Group. The Group employed Jones Lang LaSalle to value its commercial
investment properties in Hong Kong, Singapore, Vietnam and Cambodia which are either freehold or held under leases with
unexpired lease terms of more than 20 years. The valuations, which conform to the International Valuation Standards issued
by the International Valuation Standards Committee and the HKIS Valuation Standards on Properties issued by the Hong Kong
Institute of Surveyors, were arrived at by reference to the net income, allowing for reversionary potential, of each property.
The Report of the Valuers is set out on page 73.
46
Hongkong Land
Annual Report 2012 47
Notes to the Financial Statements
13 Associates and Joint Ventures
By business
Commercial property
Residential property
Share of attributable net assets
Movements of associates and joint ventures for the year:
At 1st January
Exchange differences
Share of results after tax and non-controlling interests
Share of other comprehensive income after tax and non-controlling interests
Dividends received and receivable
Net acquisitions and increases in attributable interests
Others
At 31st December
The Group’s share of assets, liabilities, capital commitments and contingent
liabilities of associates and joint ventures is summarised below:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Non-controlling interests
Capital commitments
Contingent liabilities
2012
US$m
3,232.9
1,037.5
4,270.4
3,551.8
58.3
526.5
97.1
(142.9 )
179.0
0.6
4,270.4
3,895.7
2,028.0
(795.4 )
(698.9 )
(159.0 )
4,270.4
0.7
49.2
2011
US$m
2,687.3
864.5
3,551.8
3,177.7
(14.2 )
298.0
2.8
(56.3 )
146.2
(2.4 )
3,551.8
3,306.2
1,547.1
(592.5 )
(660.6 )
(48.4 )
3,551.8
55.6
64.8
46
Hongkong Land
Annual Report 2012 47
14 Other Investments
Listed securities
Unlisted securities
Movements for the year:
At 1st January
Exchange differences
Revaluation surplus/(deficit)
At 31st December
The fair value measurements of available-for-sale financial assets are based on
the following data:
Quoted prices in active markets
Unobservable inputs
2012
US$m
80.5
2.1
82.6
48.6
0.1
33.9
82.6
80.5
2.1
82.6
15 Deferred Tax Assets and Liabilities
Accelerated
capital
allowances
US$m
Revaluation
surpluses of
investment
properties
US$m
Other
temporary
differences
US$m
Tax losses
US$m
2012
At 1st January
Exchange differences
(Charged)/credited to profit and loss
Charged to other comprehensive income
At 31st December
Deferred tax assets
Deferred tax liabilities
1.4
–
(1.3 )
–
0.1
0.1
–
0.1
(50.5 )
(0.1 )
(3.7 )
–
(54.3 )
–
(54.3 )
(54.3 )
(1.9 )
–
0.6
–
(1.3 )
–
(1.3 )
(1.3 )
(2.9 )
0.2
(1.0 )
(2.0 )
(5.7 )
5.1
(10.8 )
(5.7 )
(61.2 )
2011
US$m
46.5
2.1
48.6
59.2
0.1
(10.7 )
48.6
46.5
2.1
48.6
Total
US$m
(53.9 )
0.1
(5.4 )
(2.0 )
(61.2 )
5.2
(66.4 )
48
Hongkong Land
Annual Report 2012 49
Notes to the Financial Statements
15 Deferred Tax Assets and Liabilities continued
2011
At 1st January
Exchange differences
(Charged)/credited to profit and loss
Charged to other comprehensive income
At 31st December
Deferred tax assets
Deferred tax liabilities
Accelerated
capital
allowances
US$m
Revaluation
surpluses of
investment
properties
US$m
Other
temporary
differences
US$m
Tax losses
US$m
1.0
–
0.4
–
1.4
1.4
–
1.4
(46.2 )
(0.1 )
(4.2 )
–
(50.5 )
–
(50.5 )
(50.5 )
(1.0 )
–
(0.9 )
–
(1.9 )
–
(1.9 )
(1.9 )
(1.5 )
–
(1.2 )
(0.2 )
(2.9 )
4.1
(7.0 )
(2.9 )
Total
US$m
(47.7 )
(0.1 )
(5.9 )
(0.2 )
(53.9 )
5.5
(59.4 )
(53.9 )
Deferred tax balances predominantly comprise non-current items. Deferred tax assets and liabilities are netted when the taxes
relate to the same taxation authority and where offsetting is allowed.
Deferred tax assets of US$3.7 million (2011: US$1.3 million) arising from unused tax losses of US$18.4 million
(2011: US$8.6 million) have not been recognised in the financial statements. Included in the unused tax losses, US$2.7 million
(2011: US$5.0 million) have no expiry date and the balance would expire at various dates up to and including 2017 (2011: 2015).
16 Pension Plans
The Group has a number of defined benefit pension plans, covering all the main territories in which it operates with the major
plans relating to employees in Hong Kong. Most of the pension plans are final salary defined benefit plans and are funded. The
assets of the funded plans are held independently of the Group’s assets in separate trustee administered funds. The Group’s
major plans are valued by independent actuaries annually using the projected unit credit method.
The principal actuarial assumptions used for accounting purposes at 31st December are as follows:
Discount rate applied to pension obligations
Expected return on plan assets
Future salary increases
2012
Weighted
average
%
3.40
7.50
5.00
2011
Weighted
average
%
4.50
7.50
5.00
The expected return on plan assets is determined on the basis of long-term average returns on global equities of 5.2% to 13.1%
(2011: 3.8% to 11.4%) per annum and global bonds of 2.0% to 2.7% (2011: 2.8% to 4.4%) per annum, and the long-term
benchmark allocation of assets between equities and bonds in the plan.
48
Hongkong Land
Annual Report 2012 49
16 Pension Plans continued
The amounts recognised in the consolidated balance sheet are as follows:
Fair value of plan assets
Present value of pension obligations
Movements in the fair value of plan assets:
At 1st January
Exchange differences
Expected return on plan assets
Contributions from employers and plan members
Benefits paid
Actuarial gain/(loss)
Transfer from/(to) other plans
At 31st December
Movements in the present value of pension obligations:
At 1st January
Exchange differences
Current service cost
Interest cost
Benefits paid
Actuarial loss
Transfer from/(to) other plans
At 31st December
The analysis of the fair value of plan assets at 31st December is as follows:
Equity instruments
Debt instruments
Other assets
The estimated amount of contributions expected to be paid to the plans in 2013 is US$0.3 million.
The amounts recognised in the consolidated profit and loss account are as follows:
Current service cost
Interest cost
Expected return on plan assets
Expense/(income) recognised
Actual return/(loss) on plan assets in the year
2012
US$m
33.0
(27.5 )
5.5
30.3
0.1
2.2
0.3
(1.4 )
1.4
0.1
33.0
23.9
0.1
1.3
1.0
(1.4 )
2.5
0.1
27.5
16.8
9.7
6.5
33.0
2012
US$m
1.3
1.0
(2.2 )
0.1
3.6
2011
US$m
30.3
(23.9 )
6.4
33.8
0.1
2.5
0.3
(2.0 )
(4.3 )
(0.1 )
30.3
23.2
0.1
1.3
1.1
(2.0 )
0.3
(0.1 )
23.9
14.6
9.4
6.3
30.3
2011
US$m
1.3
1.1
(2.5 )
(0.1 )
(1.8 )
The above amounts are all recognised in arriving at operating profit and are included in cost of sales and administrative expenses.
50
Hongkong Land
Annual Report 2012 51
Notes to the Financial Statements
16 Pension Plans continued
The five year history of experience adjustments is as follows:
Fair value of plan assets
Present value of pension obligations
Surplus
Experience adjustments on plan assets
Percentage of plan assets (%)
Experience adjustments on pension obligations
Percentage of pension obligations (%)
17 Properties for Sale
Properties under development
– land and development costs
– interest and other expenses capitalised
Provision for impairment
Completed properties
2012
US$m
33.0
(27.5 )
5.5
1.4
4
(0.5 )
2
2011
US$m
30.3
(23.9 )
6.4
(4.3 )
14
0.1
–
2010
US$m
33.8
(23.2 )
2009
US$m
31.4
(21.4 )
2008
US$m
25.1
(19.0 )
10.6
10.0
6.1
0.6
2
0.1
–
4.3
14
1.2
6
(14.5 )
58
–
–
2012
US$m
2,489.0
40.6
2,529.6
(113.0 )
2,416.6
96.8
2,513.4
2011
US$m
1,459.8
26.7
1,486.5
(112.0 )
1,374.5
146.7
1,521.2
At 31st December 2012, properties under development which were not scheduled for completion within the next twelve months
amounted to US$1,773.5 million (2011: US$1,346.7 million).
At 31st December 2012, properties for sale of US$314.7 million (2011: Nil) were pledged as security for borrowings of
US$157.1 million (2011: Nil) as shown in Note 21.
18 Debtors
Trade debtors
Other debtors
– third parties
– associates and joint ventures
Non-current
Current
2012
US$m
33.5
347.0
38.9
419.4
68.4
351.0
419.4
2011
US$m
22.6
278.0
84.9
385.5
72.0
313.5
385.5
50
Hongkong Land
Annual Report 2012 51
18 Debtors continued
By geographical area of operation
Greater China
Southeast Asia and others
2012
US$m
323.2
96.2
419.4
2011
US$m
271.7
113.8
385.5
An allowance for impairment of trade debtors is made based on the estimated irrecoverable amount. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency
in payment are considered indicators that the debt is impaired.
At 31st December 2012, no trade debtors (2011: Nil) were impaired and fully provided.
At 31st December 2012, trade debtors of US$8.0 million (2011: US$4.2 million) were past due but not impaired. The ageing
analysis of these trade debtors is as follows:
Below 30 days
Between 31 and 60 days
Between 61 and 90 days
Over 90 days
2012
US$m
6.9
0.2
0.1
0.8
8.0
2011
US$m
3.8
0.4
–
–
4.2
The risk of trade debtors that are neither past due nor impaired at 31st December 2012 becoming impaired is low as most of the
balances have been settled subsequent to the year end.
Other debtors are further analysed as follows:
Prepayments
Derivative financial instruments
Amounts due from associates and joint ventures
Others
2012
US$m
242.9
50.8
38.9
53.3
385.9
2011
US$m
178.4
70.0
84.9
29.6
362.9
The fair value of debtors other than derivative financial instruments approximates their carrying amounts, as the impact of
discounting is not significant. Derivative financial instruments are stated at fair value.
52
Hongkong Land
Annual Report 2012 53
Notes to the Financial Statements
19 Bank Balances
Deposits with banks and financial institutions
Bank balances
2012
US$m
809.7
172.4
982.1
2011
US$m
911.0
56.9
967.9
Deposits and bank balances of certain subsidiaries amounting to US$98.8 million (2011: US$92.9 million) are held under the
Housing Developers (Project Account) Rules in Singapore, withdrawals from which are subject to the provision of these Rules.
The weighted average interest rate on deposits with banks and financial institutions is 0.6% (2011: 0.6%) per annum.
20 Creditors
Trade creditors
Tenants’ deposits
Other creditors
Derivative financial instruments
Financial liabilities
Rent received in advance
Proceeds from property for sale received in advance
Non-current
Current
By geographical area of operation
Greater China
Southeast Asia and others
2012
US$m
251.9
178.4
81.9
24.5
536.7
9.8
672.4
1,218.9
76.3
1,142.6
1,218.9
572.7
646.2
1,218.9
2011
US$m
222.8
165.3
58.6
22.0
468.7
6.9
315.1
790.7
44.4
746.3
790.7
375.2
415.5
790.7
Derivative financial instruments are stated at fair value. Other creditors are stated at amortised cost. The fair value of these
creditors approximates their carrying amounts.
52
Hongkong Land
Annual Report 2012 53
21 Borrowings
Current
Bank overdrafts
Current portion of long-term borrowings
– bank loans
– bonds and notes
Long-term
Bank loans
Bonds and notes
Secured
Unsecured
2012
Carrying
amount
US$m
Fair value
US$m
2011
Carrying
amount
US$m
Fair value
US$m
1.1
1.1
1.2
363.4
–
364.5
363.4
–
364.5
0.3
56.5
58.0
1.2
0.3
53.3
54.8
844.1
3,046.9
844.1
3,125.4
1,062.7
2,206.5
1,062.7
2,241.6
3,891.0
3,969.5
3,269.2
3,304.3
4,255.5
4,334.0
3,327.2
3,359.1
157.1
4,098.4
4,255.5
–
3,327.2
3,327.2
The fair values are based on market prices or are estimated using the expected future payments discounted at market interest
rates ranging from 0.4% to 2.3% (2011: 0.6% to 2.1%) per annum. The fair values of current borrowings approximate their
carrying amounts, as the impact of discounting is not significant.
Secured borrowings at 31st December 2012 were certain subsidiaries’ bank borrowings which were secured against its
properties for sale.
54
Hongkong Land
Annual Report 2012 55
Notes to the Financial Statements
21 Borrowings continued
The borrowings are further summarised as follows:
Fixed rate borrowings
Weighted
Weighted
average average period
outstanding
Years
interest rates
%
Floating
rate
borrowings
US$m
US$m
Total
US$m
By currency
2012
Hong Kong dollar
Singapore dollar
United States dollar
2011
Hong Kong dollar
Singapore dollar
United States dollar
3.0
2.4
5.3
2.3
2.6
5.5
11.3
4.0
–
1,655.1
603.3
–
1,309.7
687.1
0.3
2,964.8
1,290.4
0.3
2,258.4
1,997.1
4,255.5
11.1
4.7
1.0
1,050.4
1,236.0
2,286.4
609.8
56.5
374.0
0.5
983.8
57.0
1,716.7
1,610.5
3,327.2
The weighted average interest rates and period of fixed rate borrowings are stated after taking into account hedging transactions.
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at 31st December after
taking into account hedging transactions are as follows:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Beyond five years
2012
US$m
2,170.7
106.7
308.1
–
–
1,670.0
4,255.5
2011
US$m
1,785.6
168.4
105.5
290.3
–
977.4
3,327.2
54
Hongkong Land
Annual Report 2012 55
21 Borrowings continued
Details of the bonds and notes outstanding at 31st December are as below:
Maturity
2012
Current
US$m
Non-current
US$m
2011
Current
US$m
Non-current
US$m
Convertible bonds at 2.75%
US$500m 10-year notes at 5.50%*
S$375m 10-year notes at 3.65%*
Medium term notes
S$50m 8-year notes at 3.86%
HK$200m 10-year notes at 4.135%
HK$300m 10-year notes at 4.1875%
HK$300m 10-year notes at 4.25%
HK$500m 10-year notes at 4.22%
HK$500m 10-year notes at 4.24%
S$150m 10-year notes at 3.43%
HK$500m 10-year notes at 3.95%
HK$500m 12-year notes at 4.28%
HK$410m 10-year notes at 3.86%
US$500m 10-year notes at 4.50%*
HK$305m 10-year notes at 3.00%
HK$200m 10-year notes at 2.90%
HK$300m 15-year notes at 4.10%
US$600m 15-year notes at 4.50%*
HK$302m 15-year notes at 3.75%
HK$785m 15-year notes at 4.00%
HK$473m 15-year notes at 4.04%
HK$200m 15-year notes at 3.95%
HK$800m 20-year notes at 4.11%
HK$200m 20-year notes at 4.125%
HK$240m 20-year partly paid notes at 4.00% †
HK$250m 30-year notes at 5.25%
2012
2014
2015
2017
2019
2019
2019
2020
2020
2020
2020
2021
2022
2022
2022
2022
2025
2025
2026
2027
2027
2027
2030
2031
2032
2040
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
527.7
308.1
44.6
25.6
38.7
38.7
72.6
64.3
122.2
64.2
74.5
52.4
497.2
39.0
25.6
38.5
618.5
38.5
99.2
60.8
25.7
103.2
25.4
9.6
32.1
56.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
544.8
290.3
41.0
25.6
38.6
38.6
69.6
64.1
114.9
64.1
71.6
–
–
–
–
38.4
606.2
38.4
–
–
–
103.0
25.3
–
32.0
3,046.9
56.5
2,206.5
During the year, the nominal amount of the medium term note programme increased from US$3,000 million to US$5,000 million.
* Listed on the Singapore Exchange.
† The first instalment of HK$80 million of the HK$240 million partly paid notes was issued in 2012. The second and final instalments of HK$80 million each will
be issued in 2013 and 2014 respectively.
22 Share Capital
Authorised
Shares of US$0.10 each
Issued and fully paid
At 1st January
Issued on conversion of convertible bonds
At 31st December
56
Hongkong Land
Ordinary shares in millions
2012
2011
2012
US$m
2011
US$m
4,000.0
4,000.0
400.0
400.0
2,338.1
14.7
2,250.8
87.3
2,352.8
2,338.1
233.8
1.5
235.3
225.1
8.7
233.8
Annual Report 2012 57
Notes to the Financial Statements
23 Dividends
Final dividend in respect of 2011 of US¢10.00 (2010: US¢10.00) per share
Interim dividend in respect of 2012 of US¢6.00 (2011: US¢6.00) per share
2012
US$m
234.2
140.9
375.1
2011
US$m
232.3
140.2
372.5
A final dividend in respect of 2012 of US¢11.00 (2011: US¢10.00) per share amounting to a total of US$258.8 million
(2011: US$234.2 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved
at the Annual General Meeting. The amount will be accounted for as an appropriation of revenue reserves in the year ending
31st December 2013.
24 Notes to Consolidated Cash Flow Statement
a)
Increase in properties for sale
In 2012, the cash flow included payments for property sites in mainland China and Singapore, which amounted to
US$489.0 million and US$302.0 million respectively.
b) Developments capital expenditure
In 2012, the cash flow included US$497.6 million for property developments in mainland China.
c) Cash and cash equivalents
Bank balances
Bank overdrafts (see Note 21)
25 Derivative Financial Instruments
The fair values of derivative financial instruments at 31st December are as follows:
2012
US$m
982.1
(1.1 )
981.0
2011
US$m
967.9
(1.2 )
966.7
Designated as cash flow hedges
– interest rate swaps
– cross currency swaps
Designated as fair value hedges
– interest rate swaps
– cross currency swaps
2012
Positive
fair value
US$m
Negative
fair value
US$m
2011
Positive
fair value
US$m
Negative
fair value
US$m
–
6.9
13.7
30.2
5.1
18.2
–
1.2
–
0.2
9.8
60.0
9.5
12.5
–
–
56
Hongkong Land
Annual Report 2012 57
25 Derivative Financial Instruments continued
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts at 31st December 2012 were US$384.8 million
(2011: US$483.4 million).
At 31st December 2012, the fixed interest rates relating to interest rate swaps vary from 1.84% to 4.28% (2011: 1.84%
to 4.28%).
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from 0.31%
to 1.26% (2011: 0.38% to 1.86%) per annum.
Cross currency swaps
The contract amounts of the outstanding cross currency swap contracts at 31st December 2012 were US$1,761.8 million
(2011: US$1,252.2 million).
26 Commitments
Capital commitments
Authorised not contracted
Contracted not provided
Contribution to associates and joint ventures
Operating lease commitments
Due within one year
Due between one and two years
Due between two and three years
2012
US$m
499.0
67.1
566.1
272.1
2.1
1.9
0.2
4.2
2011
US$m
475.6
415.5
891.1
480.2
1.6
0.8
0.6
3.0
27 Contingent Liabilities
Various Group companies are involved in litigation arising in the ordinary course of their respective businesses. Having reviewed
outstanding claims and taking into account legal advice received, the Directors are of the opinion that adequate provisions have
been made in the financial statements.
28 Related Party Transactions
The parent company of the Group is Jardine Strategic Holdings Limited and the ultimate holding company is Jardine Matheson
Holdings Limited (‘JMH’). Both companies are incorporated in Bermuda.
In the normal course of business, the Group has entered into a variety of transactions with the subsidiaries, associates and joint
ventures of JMH (‘Jardine Matheson group members’). The more significant of these transactions are described below:
Management fee
The management fee payable by the Group, under an agreement entered into in 1995, to Jardine Matheson Limited (‘JML’)
in 2012 was US$3.9 million (2011: US$3.5 million), being 0.5% per annum of the Group’s underlying profit in consideration for
management consultancy services provided by JML, a wholly-owned subsidiary of JMH.
58
Hongkong Land
Annual Report 2012 59
Notes to the Financial Statements
28 Related Party Transactions continued
Property and other services
The Group rented properties to Jardine Matheson group members. Gross rents on such properties in 2012 amounted to
US$21.4 million (2011: US$20.6 million).
Jardine Matheson group members provided property construction, maintenance and other services to the Group in 2012 in
aggregate amounting to US$34.7 million (2011: US$30.0 million).
The outstanding balances arising from the above services at 31st December 2012 are not material.
Hotel management services
Jardine Matheson group members provided hotel management services to the Group in 2012 amounted to US$2.7 million
(2011: US$1.9 million).
The outstanding balances arising from the above services at 31st December 2012 are not material.
Outstanding balances with associates and joint ventures
Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors as appropriate (see
Notes 18 and 20).
Directors’ emoluments
Details of Directors’ emoluments (being the key management personnel compensation) are shown on page 67 under the heading
of ‘Directors’ Appointment, Retirement, Remuneration and Service Contracts’.
29 Summarised Balance Sheet of the Company
Included below is certain summarised balance sheet information of the Company disclosed in accordance with Bermuda law.
Net operating assets
Investments at cost
Unlisted shares in subsidiaries
Net amounts due from subsidiaries
Creditors and other accruals
Total equity
Share capital (see Note 22)
Revenue and other reserves
Contributed surplus
Share premium
Revenue reserves
Shareholders’ funds
2012
US$m
2011
US$m
4,481.7
684.6
5,166.3
(15.8 )
5,150.5
235.3
2,249.6
386.9
2,278.7
4,915.2
5,150.5
4,481.7
499.2
4,980.9
(21.1 )
4,959.8
233.8
2,249.6
331.9
2,144.5
4,726.0
4,959.8
Subsidiaries are shown at cost less amounts provided.
The contributed surplus was set up on the formation of the Company in 1989 and, under the Bye-laws of the Company,
is distributable.
58
Hongkong Land
Annual Report 2012 59
30 Principal Subsidiaries, Associates and Joint Ventures
The principal subsidiaries, associates and joint ventures of the Group at 31st December 2012 are set out below.
Attributable
interests
2012 2011
%
%
Issued share capital
Main activities
Country/Place of
incorporation
Subsidiaries
Hongkong Land China Holdings Ltd*
100
100
USD
200,000,000
Investment holding
Bermuda
Hongkong Land International
100
100
USD
200,000,000
Investment holding
Bermuda
Holdings Ltd*
Hongkong Land Ltd*
100
100
USD
12,000
Group management
Bermuda
HK Glory Properties Ltd
100
100
USD
2
Property development British Virgin
Islands
HKL (Chater House) Ltd
100
100
HKD
1,500,000
Property investment
Hong Kong
HKL (Landmark Hotel) Ltd
100
100
HKD
2
Hotel investment
Hong Kong
HKL (Prince’s Building) Ltd
100
100
HKD
200
Property investment
Hong Kong
Hongkong Land (Chongqing North)
100
100
HKD 3,980,000,000
Property development Mainland China
Development Co Ltd
Hongkong Land (Chongqing)
100
100
USD
479,990,000
Property development Mainland China
Development Co Ltd
The Hongkong Land Company, Ltd
100
100
HKD 1,293,180,006
Property investment
Hong Kong
The Hongkong Land Property
100
100
HKD
200
Property investment
Hong Kong
Company, Ltd
King Kok Investment Ltd
90
90
USD
10,000
Property investment
Mauritius
Mulberry Land Company Ltd
100
100
HKD
200
Property investment
Hong Kong
Starsome Investments Ltd
100
100
USD
2
Investment holding
British Virgin
Islands
Wangfu Central Real Estate
Development Co Ltd
95
95
RMB 3,188,507,800
Property development Mainland China
Central Building Ltd
71
71
USD
1,991,547
Property investment
Vietnam
Doan Ket International Co Ltd
73.9
73.9
USD
7,291,500
Property investment
Vietnam
HKL (Esplanade) Pte Ltd
100
100
SGD
150,000,000
Property investment
Singapore
HKL Treasury (Singapore) Pte Ltd
100
100
SGD
The Hongkong Land Finance
100
100
USD
2
2
Finance
Finance
Singapore
Cayman Islands
(Cayman Islands) Company Ltd
* Owned directly
60
Hongkong Land
Annual Report 2012 61
Notes to the Financial Statements
30 Principal Subsidiaries, Associates and Joint Ventures continued
Attributable
interests
2012 2011
%
%
Issued share capital
Main activities
Country/Place of
incorporation
Subsidiaries continued
The Hongkong Land Notes Company Ltd
100
100
USD
2
Finance
British Virgin
Islands
Hongkong Land (Singapore) Pte Ltd
100
100
SGD
100,000
Property management Singapore
The Hongkong Land Treasury Services
100
100
SGD
2
Finance
Singapore
(Singapore) Pte Ltd
Caseldine Investments Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
Kedron Investments Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
MCL Land Holdings Pte Ltd
100
100
SGD
6,000,000
Property investment
Singapore
MCL Land Development Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
MCL Land (Gateway) Pte Ltd
100
–
SGD
1
Property development
Singapore
MCL Land (Pantai View) Sdn Bhd
100
100 MYR
2,000,000
Property investment
Malaysia
MCL Land (Pasir Ris) Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
MCL Land (Prime) Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
MCL Land (Serangoon) Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
MCL Land (Warren) Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
Maxgrowth Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
Beijing Yee Zhi Real Estate
Consultancy Co Ltd
Hongkong Land (Beijing)
Management Co Ltd
Hongkong Land (Chongqing)
Management Co Ltd
100
100
USD
1,000,000
Property consultancy Mainland China
100
100
USD
150,000
Property management Mainland China
100
100
USD
5,150,000
Property investment, Mainland China
development and
management
Hongkong Land (One Central) Retail
100
100 MOP
Property Management Ltd
25,000 Management and
administration
services
Macau
Hongkong Land (Property
Management) Ltd
PT Hongkong Land Consultancy
and Management
100
100
HKD
20
Property management Hong Kong
100
–
IDR
300
Consultancy and
management
Indonesia
60
Hongkong Land
Annual Report 2012 61
30 Principal Subsidiaries, Associates and Joint Ventures continued
Attributable
interests
2012 2011
%
%
Issued share capital
Main activities
Country/Place of
incorporation
40
50
40
USD
12,000,000
Property development Mainland China
50
USD
699,980,000
Property development Mainland China
Associates and joint ventures
Beijing Premium Real Estate Ltd
Chengdu Premium Property
Development Co Ltd
China West Premier Housing
50
50
USD
569,960,000
Property development Mainland China
Development Co Ltd
Longhu Land Ltd
Normelle Estates Ltd
50
50
50
USD
27,000,000
Property development Mainland China
50
HKD
10,000
Property investment
Hong Kong
Properties Sub F, Ltd
46.6
46.6 MOP
1,000,000
Property investment
Macau
Ampang Investments Pte Ltd
40
40
SGD
10
Hotel investment
Singapore
BFC Development LLP
33.3
33.3
SGD
6
Property development
Singapore
Calne Pte Ltd
50
50
SGD
1,000,000
Property development
Singapore
Central Boulevard Development
33.3
33.3
SGD
600
Property investment
Singapore
Pte Ltd
Gaysorn Land Company Ltd
49
49
THB
61,250,000
Property investments
and operations
Thailand
Golden Quantum Acres Sdn Bhd
50
50 MYR
2,764,210
Property development Malaysia
Grange Development Pte Ltd
53.5
53.5
SGD
1,000,000
Property development
Singapore
Jardine Gibbons Properties Ltd
40
40
BD
600,000 ‘A’
400,000 ‘B’
Property holding
Bermuda
MSL Properties Sdn Bhd
NorthPine Land Inc
50
40
50 MYR
3,000,000
Property development Malaysia
40
Peso 1,224,635,200
Property investment
The Philippines
One Raffles Quay Pte Ltd
33.3
33.3
SGD
6
Property development
Singapore
PT Bumi Parama Wisesa
PT Jakarta Land
49
50
–
IDR
10,000
Property investment
Indonesia
50
IDR 3,320,000,000
Property development
and asset
management
Indonesia
Sunrise MCL Land Sdn Bhd
50
50 MYR
2,000,000
Property development Malaysia
62
Hongkong Land
Annual Report 2012 63
Notes to the Financial Statements
Independent Auditors’ Report
To the members of Hongkong Land Holdings Limited
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Hongkong Land Holdings Limited (the ‘Company’)
and its subsidiaries (together the ‘Group’) which comprise the Consolidated Balance Sheet as at 31st December 2012 and the
Consolidated Profit and Loss Account, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes
in Equity and Consolidated Cash Flow Statement for the year then ended and a summary of significant accounting policies and
other explanatory notes.
Directors’ Responsibility for the Financial Statements
The Company’s Directors are responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards and with the requirements of Section 90 of the Bermuda Companies Act.
This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the
Group as at 31st December 2012, and its financial performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards and with the requirements of the Bermuda Companies Act.
Report on Legal and Regulatory Requirements
We have nothing to report in respect of the following matters that under the UK Listing Rules we are required to review:
• Directors’ Statement in relation to going concern; and
•
the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review.
Other Matters
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 90
of the Bermuda Companies Act and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
United Kingdom
7th March 2013
62
Hongkong Land
Annual Report 2012 63
Five Year Summary
Profit/(loss) attributable to shareholders
(337 )
1,813
4,739
5,306
1,439
Underlying profit attributable to shareholders
375
777
810
703
777
2008
US$m
2009
US$m
2010
US$m
2011
US$m
2012
US$m
(cid:26)(cid:22)
Investment properties
(cid:25)(cid:27)
(cid:25)(cid:22)
Net debt
(cid:24)(cid:27)
Shareholders’ funds
(cid:24)(cid:22)
(cid:23)(cid:27)
(cid:23)(cid:22)
(cid:27)
13,703
14,818
18,036
22,530
23,494
(cid:23)(cid:24)
2,601
(cid:23)(cid:22)
13,308
(cid:30)
(cid:28)
US$
(cid:26)
2,417
2,358
2,359
3,273
14,936
19,457
24,739
26,148
US$
US$
US$
US$
Net asset value per share
(cid:22)
5.92
(cid:24)
6.64
8.64
10.58
11.11
(cid:22)
34.55
36.02
33.14
30.29
11.11
10.58
8.64
16.41
13.00
16.00
16.00
16.00
17.00
6.64
5.92
2008
2009
2010
2011
2012
Underlying earnings
Dividends
2008
2009
2010
2011
2012
Underlying earnings/dividends
per share (US¢)
Net asset value per share (US$)
64
Hongkong Land
Responsibility Statement
The Directors of the Company confirm to the best of their knowledge that:
a.
the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards,
including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board; and
b. the sections of this Report, including the Chairman’s Statement, Chief Executive’s Review and Principal Risks and Uncertainties,
which constitute the management report include a fair review of all information required to be disclosed by the Disclosure and
Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Services Authority of the United Kingdom.
For and on behalf of the Board
Y.K. Pang
John R. Witt
Directors
7th March 2013
65
Annual Report 2012 Corporate Governance
Hongkong Land Holdings Limited is incorporated in Bermuda. The Group’s property interests are almost entirely in Asia. The Company’s
equity shares have a premium listing on the London Stock Exchange, and secondary listings in Bermuda and Singapore. The Company
attaches importance to the corporate stability that is fundamental to the Group’s ability to pursue a long-term strategy in Asian markets.
It is committed to high standards of governance. Its approach, however, developed over many years, differs from that envisaged by
the UK Corporate Governance Code (the ‘UK Code’), which was originally introduced as a guide for United Kingdom incorporated
companies listed on the London Stock Exchange. As provided in the Listing Rules issued by the Financial Services Authority in the
United Kingdom, the Company’s premium listed status requires that this Report address how the main principles of the UK Code have
been applied by the Company, and explain the reasons for the different approach adopted by the Company as compared to the UK
Code’s provisions. The Company’s governance differs from that contemplated by provisions of the UK Code on board balance and
refreshment, director independence, board evaluation procedures, nomination and remuneration committees and the appointment
of a senior independent director.
The Management of the Group
The Company has its dedicated executive management under the Chief Executive. The Memorandum of Association of the Company,
however, provides for the chairman of Jardine Matheson Holdings Limited (‘Jardine Matheson’) to be, or to appoint, the Managing
Director of the Company. The managing director of Jardine Matheson has been so appointed. Reflecting this, and the 50% interest
of the Jardine Matheson group in the Company’s share capital, the Chief Executive and the Managing Director meet regularly. Similarly,
the board of the Hong Kong-based Group management company, Hongkong Land Limited (‘HKL’), and its finance committee are chaired
by the Managing Director and include Group executives as well as the deputy managing director, the group finance director, the group
strategy director and the group general counsel of Jardine Matheson.
The Board
The Company currently has a Board of 17 Directors: the Chief Executive and Chief Financial Officer; seven executives of Jardine
Matheson; and eight non-executive Directors. Their names and brief biographies appear on pages 18 and 19 of this Report. The
Chairman has been appointed in accordance with the provisions of the Bye-laws of the Company, which provide that the chairman
of Jardine Matheson, or any Director nominated by him, shall be the Chairman of the Company. The composition and operation of
the Board reflect the Company’s commitment to its long-term strategy, shareholding structure and tiered approach to oversight
and management as described in this Report. These factors explain the balance on the Board between executive and non-executive
Directors, the stability of the Board, the absence of nomination and remuneration committees and the conduct of Board evaluation
procedures. The Board regards Asian business experience and relationships as more valuable attributes of its non-executive Directors
than formal independence criteria. Accordingly the Board has not designated a ‘senior independent director’ as set out in the UK Code.
Recommendations and decisions on remuneration result from consultations between the Chairman and the Managing Director as well
as other Directors as they consider appropriate.
Among the matters which the Board of the Company decides are the Group’s business strategy, its annual budget, dividends and major
corporate activities. Responsibility for implementing the Group’s strategy is delegated to the Company’s executive management, with
decision-making authority within designated financial parameters delegated to the HKL finance committee. In addition, as part of the
Company’s tiered approach to oversight and management, certain Directors of the Company who do not serve on the board of HKL and
who are based outside Asia make regular visits to Asia and Bermuda where they participate in four annual strategic reviews. All of these
reviews precede the Board meetings. These Directors are not directly involved in the operational management of the Group’s business
activities, but their knowledge and close oversight of the Group’s affairs reinforces the process by which business is reviewed before
consideration by the Board.
The Board is scheduled to hold four meetings in 2013 and ad hoc procedures are adopted to deal with urgent matters. In 2012 one
meeting was held in Bermuda and three were held in Asia. All current Directors who held office in 2012 attended all four Board
meetings, save that John R. Witt attended three meetings and Jenkin Hui and Lord Powell of Bayswater attended two meetings.
Ben Keswick and Adam Keswick, who were appointed in April 2012, attended all three Board meetings held following their
appointments to the Board, and Michael Wu attended the one meeting following his appointment. The Board receives high quality,
up to date information for each of its meetings, which has previously been considered and approved at meetings of the board of HKL.
This information is also the subject of a strategy review in a cycle of meetings (in Bermuda or Asia, as appropriate) prior to consideration
by the Board itself.
The division of responsibilities between the Chairman, the Managing Director and the Chief Executive is well established. The
Chairman’s role is to lead the Board as it oversees the Group’s strategic and financial direction. The Managing Director’s principal
role is to act as chairman of HKL and of its finance committee, while the responsibility for running the Group’s business and all the
executive matters affecting the Group rests with the Chief Executive.
66
Hongkong Land
Directors’ Appointment, Retirement, Remuneration and Service Contracts
Candidates for appointment as executive Directors of the Company, as executive directors of HKL or as senior executives elsewhere
in the Group may be sourced internally, from the Jardine Matheson group or externally using the services of specialist executive search
firms. The aim is to appoint individuals who combine international best practice with adaptability to Asian markets.
Each new Director is appointed by the Board and, in accordance with Bye-law 92 of the Company’s Bye-laws, each new Director is
subject to retirement at the first Annual General Meeting after appointment. Thereafter, the Director will be subject to retirement by
rotation pursuant to Bye-law 85 whereby one-third of the Directors retire at the Annual General Meeting each year. These provisions
apply to both executive and non-executive Directors, but the requirement to retire by rotation pursuant to Bye-law 85 does not extend
to the Chairman or Managing Director.
On 1st April 2012, Ben Keswick succeeded Anthony Nightingale as Managing Director of the Company and the latter remains as
a non-executive Director. Adam Keswick was appointed as a Director with effect from 1st April 2012. Michael Wu was appointed as
a Director on 6th December 2012 and Lord Sassoon was appointed as a Director with effect from 23rd January 2013. In accordance
with Bye-law 85, Lord Leach of Fairford, Dr Richard Lee, Y.K. Pang and John R. Witt retire by rotation at the Annual General Meeting
and, being eligible, offer themselves for re-election. In accordance with Bye-law 92, Lord Sassoon and Michael Wu will also retire, and,
being eligible, offer themselves for re-election. None of the Directors proposed for re-election has a service contract with the Company
or its subsidiaries.
Simon Keswick is to step down as Chairman of the Company on 15th May 2013 and will continue thereafter as a non-executive
Director. He will be succeeded as Chairman by Ben Keswick, who will retain his position as Managing Director.
The Company’s policy is to offer competitive remuneration packages to its senior executives. It is recognised that, due to the nature
of the Group and its diverse geographic base, a number of its senior executives are required to be offered international terms and
the nature of the remuneration packages is designed to reflect this.
Directors’ fees, which are payable to all Directors other than the Chief Executive and the Chief Financial Officer, are decided upon by
shareholders in general meeting as provided for by the Company’s Bye-laws. A motion to increase the Directors’ fees to US$50,000
each per annum and the fees for the Chairman and Managing Director to US$75,000 each per annum with effect from 1st January 2013
will be proposed at the forthcoming Annual General Meeting.
For the year ended 31st December 2012, the Directors received US$5.7 million (2011: US$5.2 million) in Directors’ fees and
employee benefits, being US$0.6 million (2011: US$0.6 million) in Directors’ fees, US$5.0 million (2011: US$4.5 million) in short-term
employee benefits including salary, bonuses, accommodation and deemed benefits in kind and US$0.1 million (2011: US$0.1 million)
in post-employment benefits. The information set out in this paragraph forms part of the audited financial statements.
The Company has in place shadow share option schemes under which cash bonuses are paid based on the performance of the
Company’s share price over a period. The shadow schemes were established to provide longer-term incentives for executive Directors
and senior managers. Shadow share options are granted after consultation between the Chairman, the Managing Director and the
Chief Executive as well as other Directors as they consider appropriate.
The Company purchases insurance to cover its Directors against their costs in defending themselves in civil proceedings taken against
them in that capacity and in respect of damages resulting from the unsuccessful defence of any proceedings. To the extent permitted
by law, the Company also indemnifies its Directors. Neither the insurance nor the indemnity provides cover where the Director has
acted fraudulently or dishonestly.
Directors’ Responsibilities in respect of the Financial Statements
The Directors are required under the Bermuda Companies Act 1981 to prepare financial statements for each financial year and to
present them annually to the Company’s shareholders at the Annual General Meeting. The financial statements should present fairly
in accordance with International Financial Reporting Standards (‘IFRS’) the financial position of the Group at the end of the year and
the results of its operations and its cash flows for the year then ended. The Directors consider that applicable accounting policies
under IFRS, applied on a consistent basis and supported by prudent and reasonable judgements and estimates, have been followed
in preparing the financial statements.
Going Concern
The Directors are required to consider whether it is appropriate to prepare financial statements on the basis that the Company and the
Group are going concerns. The Group prepares comprehensive financial forecasts and, based on these forecasts, cash resources and
existing credit facilities, the Directors consider that the Company and the Group have adequate resources to continue in business for
the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.
67
Annual Report 2012 Corporate Governance
Code of Conduct
The Group conducts business in a professional, ethical and even-handed manner. Its ethical standards are clearly set out in the Group’s
Code of Conduct, a set of guidelines to which every employee must adhere. The code requires that all Group companies comply with
all laws of general application, all rules and regulations that are industry specific and proper standards of business conduct. The code
prohibits the giving or receiving of illicit payments, and requires all employees to be treated fairly, impartially and with respect. It also
requires that all managers must be fully aware of their obligations under the Code of Conduct and establish procedures to ensure
compliance at all levels within their organisations. The Group has in place procedures by which employees can raise, in confidence,
matters of serious concern in areas such as financial reporting or compliance.
Risk Management and Internal Control
The Board has overall responsibility for the Group’s system of risk management and internal control. The system of internal control is
designed to manage, rather than eliminate, business risk; to help safeguard the Group’s assets against fraud and other irregularities;
and to give reasonable, but not absolute, assurance against material financial misstatement or loss.
The principal risks and uncertainties facing the Company are set out on page 70.
The Board has delegated to the audit committee of HKL responsibility for reviewing areas of risk and uncertainty, the operation and
effectiveness of the Group’s system of internal control and the procedures by which these are monitored. The audit committee
considers the system and procedures on a regular basis, and reports to the Board semi-annually. The members of the audit committee
of HKL are Ben Keswick, Mark Greenberg, Adam Keswick, James Riley and Giles White; they have extensive knowledge of the Group
while at the same time not being directly involved in operational management. Ben Keswick and Adam Keswick became members of
the HKL audit committee following their appointments to the Board on 1st April 2012, and Ben Keswick succeeded Anthony Nightingale
as chairman of the audit committee on that date. Ben Keswick will step down from the audit committee on 15th May 2013, upon his
appointment as Chairman of the Company becoming effective, and will be succeeded as chairman of the audit committee by Adam
Keswick. The Board considers that the members of the audit committee of HKL have, collectively, the requisite skills, knowledge and
experience to enable it to discharge its responsibilities in a proper manner. The two audit committee meetings held during the year
were attended by all the then current members. The chief executive and chief financial officer of HKL, together with representatives
of the internal and external auditors, also attend the audit committee meetings by invitation.
Executive management is responsible for the implementation of the system of internal control throughout the Group. The internal
audit function monitors the effectiveness of the system and the approach taken by the business units to risk. The internal audit function
is outside the operating businesses and reports its findings, and recommendations for any corrective action required, to the audit
committee of HKL. The audit committee of HKL also reviews the effectiveness of the internal audit function.
The Group has in place an organisational structure with defined lines of responsibility and delegation of authority. There are established
policies and procedures for financial planning and budgeting; for information and reporting systems; for assessment of risk; and for
monitoring the Group’s operations and performance. The information systems in place are designed to ensure that the financial
information reported is reliable and up to date.
The Company’s policy on commercial conduct underpins the Group’s internal control process, particularly in the area of compliance.
The policy, as set out in the Code of Conduct, is reinforced and monitored by an annual compliance certification process.
The audit committee of HKL has also been given the responsibility to oversee the effectiveness of the formal procedures for employees
to raise any matters of serious concern, and is required to review any reports made under those procedures that are referred to it by
the internal audit function.
Prior to completion and announcement of the half-year and year-end results, a review of the financial information and of any issues
raised in connection with the preparation of the results, including the adoption of new accounting policies, is undertaken by the audit
committee of HKL with the executive management and a report is received from the external auditors. The audit committee of HKL
also assesses any reports on frauds identified during the period under review. The external auditors also have access to the full Board,
in addition to the Chief Executive, Chief Financial Officer and other senior executives.
The audit committee of HKL keeps under review the nature, scope and results of the external audit and the audits conducted by the
internal audit function. The audit committee of HKL also keeps under review the independence and objectivity of the external auditors,
and as part of that process considers and approves the level and nature of non-audit work performed. The terms of reference of the
audit committee of HKL can be found on the Company’s website at www.hkland.com.
68
Hongkong Land
Directors’ Share Interests
The Directors of the Company in office on 25th March 2013 had interests (within the meaning of the Disclosure and Transparency
Rules (‘DTRs’) of the Financial Services Authority (the ‘FSA’) of the United Kingdom) as set out below in the ordinary share capital
of the Company. These interests include those notified to the Company in respect of the Directors’ connected persons (as that term
is used in the DTRs in relation to companies incorporated outside the United Kingdom).
Simon Keswick
Y.K. Pang
Charles Allen-Jones
Dr Richard Lee
Anthony Nightingale
Substantial Shareholders
74,521
38,000
60,000
3,678,685
2,184
As a non-UK issuer, the Company is subject to the DTRs pursuant to which a person must in certain circumstances notify the Company
of the percentage of voting rights attaching to the share capital of the Company that he holds. The obligation to notify arises if that
person acquires or disposes of shares in the Company which results in the percentage of voting rights which he holds reaching,
exceeding or falling below 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
The Company has been informed of the holding of voting rights of 5% or more attaching to the Company’s issued ordinary share
capital by Jardine Strategic Holdings Limited (‘Jardine Strategic’), which is directly interested in 1,176,616,646 ordinary shares carrying
50.01% of the voting rights. By virtue of its interest in Jardine Strategic, Jardine Matheson is also interested in the same ordinary
shares. Apart from this shareholding, the Company is not aware of any holders of voting rights of 5% or more attaching to the issued
ordinary share capital of the Company as at 25th March 2013.
There were no contracts of significance with corporate substantial shareholders during the year under review.
Relations with Shareholders
The 2013 Annual General Meeting will be held at The Fairmont Southampton, Bermuda on 15th May 2013. The full text of the
resolutions and explanatory notes in respect of the meeting are contained in the Notice of Meeting which accompanies this Report.
All shareholders are invited to attend the Annual General Meeting and participate in communicating with the Company. The Company
holds regular meetings with institutional shareholders. A corporate website is maintained containing a wide range of information of
interest to investors at www.hkland.com.
Securities Purchase Arrangements
At the Annual General Meeting held on 9th May 2012, shareholders renewed the approval of a general mandate authorising the
Directors to effect purchases by the Company or its subsidiaries of the Company’s own ordinary shares of less than 15% in aggregate
of its issued share capital.
Related Party Transactions
Details of transactions with related parties entered into by the Company during the course of the year are included in Note 28 to
the financial statements on pages 58 and 59. There were no transactions entered into by the Company during the course of the year
to which the related party transaction rules of the FSA in the United Kingdom apply.
69
Annual Report 2012
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and internal control. The process by which the Group identifies and manages
risk is set out in more detail on page 68 of the Corporate Governance section of this Report. The following are the principal risks
and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure and Transparency Rules issued by the
Financial Services Authority in the United Kingdom and are in addition to the matters referred to in the Chairman’s Statement and
Chief Executive’s Review.
Economic Risk
The Group is exposed to the risk of negative developments in global and regional economies, and financial and property markets, either
directly or through the impact on the Group’s joint venture partners, bankers, suppliers or tenants. These developments can result in:
• recession, inflation, deflation and currency fluctuations;
• restrictions in the availability of credit, increases in financing and construction costs and business failures; and
• reductions in office and retail rents, office and retail occupancy and sales prices of, and demand for, residential developments.
Such developments might increase costs of sales and operating costs, reduce revenues, or result in reduced valuations of the Group’s
investment properties or in the Group being unable to meet in full its strategic objectives.
Commercial Risk and Financial Risk
Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate such risks. These risks are
further pronounced when operating in volatile markets.
The Group makes significant investment decisions in respect of commercial and residential development projects that take time to
come to fruition and achieve the desired returns and are, therefore, subject to market risks. These risks are further pronounced when
operating in volatile markets.
The Group operates in areas that are highly competitive, and failure to compete effectively in terms of price, product specification or
levels of service can have an adverse effect on earnings as can construction risks in relation to new developments. Significant pressure
from such competition may lead to reduced margins. The quality and safety of the products and services provided by the Group are also
important and there is an associated risk if they are below standard.
The steps taken by the Group to manage its exposure to financial risk are set out in the Financial Review on page 15 and Note 2 to
the financial statements on pages 32 to 37.
Regulatory and Political Risk
The Group is subject to a number of regulatory environments in the territories in which it operates. Changes in the regulatory approach
to such matters as foreign ownership of assets and businesses, exchange controls, planning controls, tax rules and employment
legislation have the potential to impact the operations and profitability of the Group. Changes in the political environment in such
territories can also affect the Group.
Terrorism, Pandemic and Natural Disasters
A number of the Group’s interests are vulnerable to the effects of terrorism, either directly through the impact of an act of terrorism
or indirectly through the impact of generally reduced economic activity in response to the threat of or an actual act of terrorism.
The Group would be impacted by a global or regional pandemic which could be expected to seriously affect economic activity and the
ability of our business to operate smoothly. In addition, many of the territories in which the Group is active can experience from time
to time natural disasters such as earthquakes and typhoons.
70
Hongkong Land
Annual Report 2012 71
Shareholder Information
Financial Calendar
2012 full-year results announced
Share registers closed
Annual General Meeting to be held
2012 final dividend payable
2013 half-year results to be announced
Share registers to be closed
2013 interim dividend payable
* Subject to change
Dividends
7th March 2013
25th to 29th March 2013
15th May 2013
22nd May 2013
1st August 2013 *
26th to 30th August 2013 *
16th October 2013 *
Shareholders will receive their dividends in United States dollars, unless they are registered on the Jersey branch register where they
will have the option to elect for sterling. These shareholders may make new currency elections for the 2012 final dividend by notifying
the United Kingdom transfer agent in writing by 26th April 2013. The sterling equivalent of dividends declared in United States dollars
will be calculated by reference to a rate prevailing on 8th May 2013. Shareholders holding their shares through The Central Depository
(Pte) Limited (‘CDP’) in Singapore will receive United States dollars unless they elect, through CDP, to receive Singapore dollars.
Registrars and Transfer Agent
Shareholders should address all correspondence with regard to their shareholdings or dividends to the appropriate registrar or
transfer agent.
Principal Registrar
Jardine Matheson International Services Limited
P.O. Box HM 1068
Hamilton HM EX
Bermuda
Jersey Branch Registrar
Capita Registrars (Jersey) Limited
12 Castle Street
St Helier, Jersey JE2 3RT
Channel Islands
United Kingdom Transfer Agent
Capita Registrars
The Registry
34 Beckenham Road
Beckenham, Kent BR3 4TU
England
Singapore Branch Registrar
M & C Services Private Limited
112 Robinson Road #05-01
Singapore 068902
Press releases and other financial information can be accessed through the internet at www.hkland.com.
70
Hongkong Land
Annual Report 2012 71
Offices
Offices
Hongkong Land Holdings Limited
Jardine House
33-35 Reid Street
Hamilton
Bermuda
Tel +1441 292 0515
Fax +1441 292 4072
E-mail: gpobox@hkland.com
John C. Lang
Hongkong Land Limited
One Exchange Square, 8th Floor
Hong Kong
Tel +852 2842 8428
Fax +852 2845 9226
E-mail: gpobox@hkland.com
Y.K. Pang
Hongkong Land (Singapore) Pte. Limited
One Raffles Quay
North Tower #34–03
Singapore 048583
Tel +65 6238 1121
Fax +65 6238 1131
E-mail: gpobox.sg@hkland.com
Robert Garman
Hongkong Land (Asia Management) Limited
Suite 204, 2/F Central Building
31 Hai Ba Trung
Hoan Kiem
Hanoi
Vietnam
Tel +844 3825 1480
Fax +844 3824 0769
E-mail: gpobox.hanoi@hkland.com
Cao, Ly Anh
Hongkong Land (Beijing) Management
Company Limited
Room 303, Block 26, Central Park
No. 6 Chaoyangmenwai Avenue
Chaoyang District
Beijing 100020
China
Tel +8610 6597 0921
Fax +8610 6597 0925
E-mail: gpobox.bj@hkland.com
Joe Kwok
Hongkong Land (Chongqing) Management
Company Limited
7/F, Zone D, Neptune Building
No. 62 Star Light Road
New North Zone
Chongqing 401147
China
Tel +8623 6703 3016-8
Fax +8623 6703 3888
E-mail: gpobox.cq@hkland.com
Joe Kwok / Ling Chang Feng
72
Hongkong Land
Hongkong Land (Premium Investments) Limited
A-One Building, No. 1A, St. 102
Sangkat Wat Phnom, Khan Daun Penh
Phnom Penh
Cambodia
Tel +855 2398 6810
Fax +855 2399 0588
E-mail: gpobox.cambodia@hkland.com
Daniel Parkes
Beijing Yee Zhi Real Estate Consultancy
Company Limited
Room 1013, 10/F
Office Tower 1 Beijing APM
No. 138 Wangfujing Street
Dongcheng District
Beijing 100006
China
Tel +8610 6520 4828
Fax +8610 6520 4830
E-mail: gpobox.bj@hkland.com
Stanley Ko
PT Hongkong Land Consultancy
and Management
World Trade Center I, 17th Floor
JI. Jend. Sudirman Kav. 29–31
Karet, Setiabudi
Jakarta 12920
Indonesia
Tel +6221 521 1125
Fax +6221 521 1115
E-mail: gpobox.indonesia@hkland.com
Arthur Choo Weng Leong
MCL Land Limited
78 Shenton Way #33–00
Singapore 079120
Tel +65 6221 8111
Fax +65 6225 3383
E-mail: gpobox.mcl@hkland.com
Koh Teck Chuan
Representative Offices
Shanghai
Unit 1109C, Bund Centre
222 Yanan Road (East)
Shanghai 200002
China
Tel +8621 6335 1220
Fax +8621 6335 0100
E-mail: gpobox.sh@hkland.com
Stanley Ko / Vincent Sun
Vietnam
Unit 503, 5/F Gemadept Tower
2 bis-4-6 Le Thanh Ton, District 1
Ho Chi Minh City
Vietnam
Tel +848 3827 9006
Fax +848 3827 9020
E-mail: gpobox.hcmc@hkland.com
Cosimo Jencks
Annual Report 2012 73
Report of the Valuers
To Hongkong Land Holdings Limited
Dear Sirs
Revaluation of Commercial Investment Properties Held under Freehold and Leasehold
Further to your instructions, we have valued in our capacity as external valuers the commercial investment properties held under
freehold and leasehold as described in Note 12 to the consolidated financial statements of Hongkong Land Holdings Limited. We are
of the opinion that the market value of the commercial investment properties held under freehold in Cambodia and leasehold in Hong
Kong, Singapore and Vietnam as at 31st December 2012, totalled US$22,844,000,000 (United States Dollars Twenty Two Billion Eight
Hundred and Forty Four Million).
Our valuations were prepared in accordance with the International Valuation Standards by the International Valuation Standards Council
and The HKIS Valuation Standards 2012 Edition by The Hong Kong Institute of Surveyors.
We have inspected the properties without either making structural surveys or testing the services. We have been supplied with details
of tenure, tenancies and other relevant information.
In arriving at our opinion, each property was valued individually, on market value basis, calculated on the net income allowing for
reversionary potential, however no allowance has been made for expenses of realisation or for taxation which might arise in the event
of disposal.
Yours faithfully
Jones Lang LaSalle Limited
Hong Kong, 7th March 2013
72
Hongkong Land
Annual Report 2012 73
Major Property Portfolio
at 31st December 2012
Commercial Investment Property
Hong Kong
Alexandra House
Chater House
Exchange Square
One Exchange Square
Two Exchange Square
Three Exchange Square
Podium
The Forum (under redevelopment)
Jardine House
Gloucester Tower
Landmark Atrium
Edinburgh Tower
York House
Prince’s Building
Macau
One Central
Singapore
One Raffles Link
One Raffles Quay
North Tower
South Tower
Attributable
interests
%
Lettable area (100%)
Total
Office
Retail
(in thousands of square metres)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
35
43
139
63
44
24
45
10
51
30
39
53
47
30
–
4
59
44
–
32
10
38
454
386
46.6
19
100
33.3
29
124
–
22
71
53
58
95
116
415
15
16
37
57
438
17
18
43
61
139
125
17
4
7
11
5
4
6
10
5
4
–
–
–
5
–
4
–
24
13
–
13
68
19
7
–
–
1
7
8
23
2
2
6
4
14
12
–
1
1
Annual Report 2012 75
Marina Bay Financial Centre
33.3
285
Tower 1
Tower 2
Tower 3
Jakarta, Indonesia
Wisma Metropolitan I
Wisma Metropolitan II
World Trade Center
World Trade Center II
Bangkok, Thailand
Gaysorn Plaza
Hanoi, Vietnam
Central Building
63 L’y Thái Tô’
74
Hongkong Land
50
50
50
50
49
71
73.9
Residential Development Property for Sale
Completed development
Attributable
interests
%
Location
31st December 2012 (100%)
Available units at
Hong Kong
Serenade
Mainland China
Maple Place
Macau
100
Tai Hang Road
90
Beijing
One Central Residences
46.6
Avenida Dr Sun Yat Sen
The Residences & Apartments at Mandarin Oriental
46.6
Avenida Dr Sun Yat Sen
18
98
1
2
Under development
Singapore
The Estuary
Hallmark Residences
Palms@Sixth Avenue
Uber 388
Este Villa
Terrasse
Ripple Bay
Jurong Gateway
Marina Bay Suites
Mainland China
Bamboo Grove
Landmark Riverside
Yorkville South
Yorkville North
WE City
Park Life
One Capitol
One Island
Attributable
interests
%
Location
Site area (100%)
(in square metres)
100 Yishun Avenue 1/Avenue 2
100
100
100
100
100
100
100
33.3
50
50
100
100
50
50
50
50
Ewe Boon Road
Sixth Avenue
Upper East Coast Road
Nim Road
Hougang Avenue 2
Jalan Loyang Besar/
Pasir Ris Drive 4
Boon Lay Way
Central Boulevard
Chongqing
Chongqing
Chongqing
Chongqing
Chengdu
Shenyang
Shenyang
Shenyang
26,949
5,906
6,412
6,103
17,955
30,196
27,055
11,588
5,290
288,842
336,600
385,944
526,458
190,253
326,588
272,288
356,624
74
Hongkong Land
Annual Report 2012 75
Major Property Portfolio
hong kong – central district
R O A D C E N T R A L
S
E N ’
Q U E
P
E
D
D
E
R
S
T
R
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S V O E U X R O A D C E N T R A L
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10
9
8
S
T
R
E
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T
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L
A
R
E N T
R O A D C
3
C O N N A U G H T
hongkong land properties
Public car park
Pedestrian bridges
Mass transit railway access
M A N K A T S T R E E T
L
A
R
T
N
E
C
Standard
Chartered
Bank
7
6
D
A
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R
S
’
N
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Q
Bank of
China
HSBC
L
A
R
T
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A
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X R
U
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O
S V
E
D
Statue
Square
12
D
A
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IC
E H
O
U
S
E S
T
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E
T
Mandarin
Oriental
L
A
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T
N
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C
5
J
A
C
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S
O
N
R
E
T
A
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Statue
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R
O
A
D
N
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D
A
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R
T
H
G
U
A
N
1
2
Stock
Exchange
U
O
B
R
A
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4
W S T R E E T
Airport Express Station
G S T R E E T
N
A N C H E U
M
General
Post Office
M
A
N
Y
I
U
S
T
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D
O A
O R
G W
N
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8
11
9a
10
9
7
6
1
2
5
12
3
4
1 One Exchange Square
2 Two Exchange Square
3 Three Exchange Square
4 The Forum – under redevelopment
5 Jardine House
6 Chater House
7 Alexandra House
8 Gloucester Tower
9 Edinburgh Tower
9a The Landmark Mandarin Oriental
10 York House
11 Landmark Atrium
12 Prince’s Building
76
Hongkong Land
Annual Report 2012 PB
Hongkong Land’s retail portfolio located in
the heart of Hong Kong’s Central District is
one of the world’s most prestigious shopping
destinations (front cover).
hong kong
macau
beiJing, china
serenade
one central
indonesia
Wangfujing site
beiJing, china
cbd site
chongQing, china
Jakarta land – Wisma metropolitan i & ii and Wtc i
Jakarta land – Wtc ii
central Park
maple Place
bamboo grove
indonesia
vietnam
chongQing, china
bsd city*
63 lý thái tô’
central building
landmark Riverside
yorkville south
yorkville north*
thailand
cambodia
chengdu, china
shenyang, china
gaysorn
central mansions
embassy site
We city
Park life
one capitol
* this rendering is for reference only, subject to change and government approval
contents
Corporate Overview
Corporate Information
Highlights
Chairman’s Statement
Chief Executive’s Review
Financial Review
Directors’ Profiles
Financial Statements
Independent Auditors’ Report
Five Year Summary
Responsibility Statement
Corporate Governance
Principal Risks and Uncertainties
Shareholder Information
Offices
Report of the Valuers
Major Property Portfolio
1
2
3
4
6
12
18
20
63
64
65
66
70
71
72
73
74
Hongkong Land’s retail portfolio located in
the heart of Hong Kong’s Central District is
one of the world’s most prestigious shopping
destinations (front cover).
hong kong
macau
beiJing, china
serenade
one central
indonesia
Wangfujing site
beiJing, china
cbd site
chongQing, china
Jakarta land – Wisma metropolitan i & ii and Wtc i
Jakarta land – Wtc ii
central Park
maple Place
bamboo grove
indonesia
vietnam
chongQing, china
bsd city*
63 lý thái tô’
central building
landmark Riverside
yorkville south
yorkville north*
thailand
cambodia
chengdu, china
shenyang, china
gaysorn
central mansions
embassy site
We city
Park life
one capitol
* this rendering is for reference only, subject to change and government approval
contents
Corporate Overview
Corporate Information
Highlights
Chairman’s Statement
Chief Executive’s Review
Financial Review
Directors’ Profiles
Financial Statements
Independent Auditors’ Report
Five Year Summary
Responsibility Statement
Corporate Governance
Principal Risks and Uncertainties
Shareholder Information
Offices
Report of the Valuers
Major Property Portfolio
1
2
3
4
6
12
18
20
63
64
65
66
70
71
72
73
74
singapore
Marina Bay Financial Centre
one raffles Quay
Marina Bay Link Mall
one raffles Link
CityLink Mall
Marina Bay suites
parvis
D'Mira
The estuary*
este Villa*
* This rendering is for reference only, subject to change and government approval
1st page proof
01 Mar 2013
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singapore
Marina Bay Financial Centre
one raffles Quay
Marina Bay Link Mall
one raffles Link
CityLink Mall
Marina Bay suites
parvis
D'Mira
The estuary*
este Villa*
Hongkong Land Holdings Limited
Jardine House Hamilton Bermuda
* This rendering is for reference only, subject to change and government approval
www.hkland.com
annual report 2012
Hongkong Land Holdings Limited