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J
Jardine Matheson
Annual Report 2014
Contents
Highlights
Chairman’s Statement
Group Structure
Managing Director’s Review
People and the Community
Financial Review
Directors’ Profiles
Financial Statements
Independent Auditors’ Report
Five Year Summary
Responsibility Statement
Corporate Governance
Principal Risks and Uncertainties
Shareholder Information
Group Offices
1
2
4
5
22
24
27
28
113
114
115
116
122
123
124
Founded as a trading company in China in 1832,
Jardine Matheson is today a diversified business group
focused principally on Asia. Its businesses comprise a
combination of cash generating activities and long-term
property assets.
The Group’s interests include Jardine Pacific, Jardine Motors,
Jardine Lloyd Thompson, Hongkong Land, Dairy Farm,
Mandarin Oriental, Jardine Cycle & Carriage and Astra
International. These companies are leaders in the fields of
engineering and construction, transport services, insurance
broking, property investment and development, retailing,
restaurants, luxury hotels, motor vehicles and related
activities, financial services, heavy equipment, mining
and agribusiness.
Jardine Matheson Holdings Limited is incorporated in
Bermuda and has a standard listing on the London Stock
Exchange as its primary listing, with secondary listings in
Bermuda and Singapore. Jardine Matheson Limited operates
from Hong Kong and provides management services to
Group companies.
Jardine Matheson Holdings Limited
Jardine House
Hamilton
Bermuda
Highlights
• Underlying profit* up 2%
• Full-year dividend up 4%
• Good performances from most of the Group’s businesses
• Astra’s contribution reduced by weaker rupiah
• New strategic investments in mainland China
Results
Revenue together with revenue of associates and joint ventures#
Underlying profit before tax*
Underlying profit attributable to shareholders*
Profit attributable to shareholders
Shareholders’ funds
Underlying earnings per share*
Earnings per share
Dividends per share
Net asset value per share
2014
US$m
62,782
4,451
1,534
1,710
19,267
US$
4.14
4.62
1.45
51.79
2013
US$m
61,380
4,600
1,502
1,566
18,386
US$
4.09
4.26
1.40
49.84
Analysis of Underlying Profit
2014
2013
By Business
Jardine Pacific
Jardine Motors
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
Underlying profit
By Geographical Area
Greater China
Southeast Asia
United Kingdom
Rest of the world
Corporate and other interests
Underlying profit
US$m
131
97
85
384
320
59
50
439
1,565
(31)
1,534
2014
US$m
743
706
80
36
1,565
(31)
1,534
%
8
6
5
25
21
4
3
28
100
%
48
45
5
2
US$m
110
59
76
385
307
56
35
508
1,536
(34)
1,502
2013
US$m
648
803
60
25
%
7
4
5
25
20
4
2
33
100
%
42
52
4
2
100
1,536
100
(34)
1,502
10
11
12
13
14
Underlying Earnings per Share (US$)
10
11
12
13
14
37.98
45.08
48.53
49.84
51.79
Net Asset Value per Share (US$)
*
The Group uses ‘underlying profit’ 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.
#
Includes 100% of revenue from associates and
joint ventures.
1
Change
%
2
(3)
2
9
5
%
1
8
4
4
3.75
4.08
4.01
4.09
4.14
Jardine Matheson | Annual Report 2014 Chairman’s Statement
Our market-leading
businesses are
actively pursuing
opportunities
for growth.
Overview
Most of the Group’s businesses produced good performances
in 2014 despite more challenging trading conditions.
There were improved underlying earnings in Jardine Pacific,
Jardine Motors, JLT, Dairy Farm and Mandarin Oriental.
Hongkong Land did well to maintain its profitability after a
record year in 2013 despite lower earnings from residential
developments. Astra’s underlying earnings were modestly
lower in its reporting currency, but a weaker rupiah reduced
materially its contribution in US dollars.
Performance
The Group’s revenue for 2014, including 100% of revenue from
associates and joint ventures, was US$62.8 billion, compared
with US$61.4 billion in 2013. The Company’s underlying profit
before tax for the year was US$4,451 million, a decrease of
3%. The underlying profit attributable to shareholders was up
2% at US$1,534 million, while underlying earnings per share
were 1% higher at US$4.14.
The profit attributable to shareholders for the year was
US$1,710 million, with the main non-trading item being an
increase in the value of Hongkong Land’s investment property
portfolio. This compares with US$1,566 million in 2013, which
also benefited from a small increase in property valuations.
Shareholders’ funds were 5% higher at US$19.3 billion.
The Group’s continued profit generation, cash flows and
retained earnings have enabled high levels of capital
expenditure to be combined with low levels of debt. Total
capital investment across the Group, including 100% of
2
associates and joint ventures, exceeded US$5.6 billion in 2014.
The consolidated net debt at the end of the year, excluding
financial services companies, was US$2.5 billion, representing
gearing of 6%, which was modestly lower than at the end of 2013.
The Board is recommending a final dividend of US¢107 per share,
which represents an increase of 4% for the full year.
Business Developments
The Group announced two strategic initiatives in mainland
China in 2014. In January, Jardine Strategic agreed to invest
US$731 million in shares and convertible bonds representing
up to a 20% interest in Hong Kong-listed Zhongsheng Group,
a leading mainland China motor dealership group. In August,
Dairy Farm reached agreement with Yonghui Superstores, one
of mainland China’s fastest growing food retailers, to establish a
strategic partnership, and upon receipt of regulatory approvals
will acquire a shareholding of just below 20% in the company
for an investment of some US$925 million. These initiatives,
together with Hongkong Land’s ongoing investment in the
residential and commercial property sectors, reflect the Group’s
increasing commitment to mainland China’s economy.
Jardine Pacific produced good profit growth in 2014, supported
by strong sales in its recently acquired KFC franchise in
Hong Kong and a sustained turnaround at JOS. Increased levels
of throughput at the airport enabled Hactl to perform better
than expected following the move of a major customer to its
own dedicated cargo facility in 2013. The group’s engineering
and construction operations recorded steady performances.
Jardine Motors enjoyed a much better year with profits increasing
66%. It saw further recovery in mainland China, where Zung Fu
now has 33 outlets and a further two under development. In
Hong Kong and Macau, its operations achieved good deliveries
of new Mercedes-Benz models. In the United Kingdom, where
investment is being made to upgrade facilities, its dealerships
benefited from increased demand as the economy improved.
JLT continued to produce strong organic growth in 2014 and saw
good performances from its Reinsurance, Asian, Latin American
and Employee Benefits operations. In August, it announced its
intention to establish a specialty insurance broking business in
the United States, building on the successful business model it
has established in other regions.
Jardine Matheson | Annual Report 2014 Hongkong Land performed well in 2014 as its results were
broadly in line with the prior record year. Its commercial
portfolio had another good year, although in the residential
sector fewer completions in Singapore offset a strong
contribution from the remaining Serenade units in Hong Kong
and increased completions in mainland China. The group has
commercial developments in Beijing, Jakarta and Phnom Penh,
and ongoing residential developments in mainland China,
Singapore, Indonesia and the Philippines.
Dairy Farm produced sales improvement in all of its divisions,
but weaker performances in its Food division in Southeast
Asia held back profits. The group has embarked upon a
number of strategic initiatives that will see it positioned better
for sustained growth. It has expanded its activities in mainland
China and the Philippines, and is continuing to invest in
its existing store networks, supply chain infrastructure,
IT systems and people development.
build market-leading businesses. Its new life insurance joint
venture, Astra Aviva Life, began operating in November 2014,
while in the fourth quarter of 2014, United Tractors agreed
to acquire a majority stake in listed construction company,
PT Acset Indonusa Tbk. It is believed that both new ventures
will benefit from Astra’s reach and expertise.
Corporate Developments
Following shareholder approval at a Special General Meeting
held in April, the transfer of the Company’s listing on the Main
Market of the London Stock Exchange to the standard listing
category was completed on 27th May 2014.
People
The fine performances achieved by our businesses are a
reflection of the hard work, dedication and professionalism of
the Group’s 430,000 employees. I would like to thank them all
for their excellent contribution.
Mandarin Oriental added two hotels in 2014, and now
operates 27 hotels. It has a further 17 under development,
of which Marrakech, Milan, Beijing and Doha are due to
open within the next 18 months. In addition, it operates eight
Residences connected to its properties, and is developing a
further seven. The group has announced a US$300 million
rights issue to provide the capacity to finance the renovation
of its London property and reduce debt, while placing it in a
strong position to make further investments.
Jardine Cycle & Carriage’s non-Astra operations produced
an overall increase in earnings, with a particularly good
result from Truong Hai Auto Corporation in Vietnam.
In February 2015, Jardine Cycle & Carriage increased further
its commitment to Vietnam when it raised its shareholding
in publicly-listed Refrigeration Electrical Engineering
Corporation Group from 19% to 22%.
Astra’s underlying profit contribution of US$439 million was
14% lower, principally due to the weakening of the rupiah. Its
underlying profit in rupiah was 3% lower as improved results
from its agribusiness, contract mining operations and financial
services businesses were offset by lower earnings from its
automotive business and an impairment charge in relation
to its coal mining properties. Astra is seeking to complement
the development of its existing activities with investments in
new sectors, where it believes that over the longer term it can
Jenkin Hui passed away on 4th September 2014 and, on behalf
of the Board, I would like to express our appreciation for the
significant support that he gave to the Group over many years
of service as a non-executive Director. His wise counsel will
be missed.
Giles White will be retiring as Group General Counsel and as a
Director on 31st July 2015, and we would like to thank him for
his excellent contribution.
We were pleased to welcome Michael Wu to the Board on
5th March 2015.
Outlook
As we move into 2015 the headwinds that affected a
number of our businesses last year continue to put regional
economies under pressure. Nevertheless, our market-leading
businesses are trading well, they remain strongly financed,
and they are actively pursuing opportunities for growth. As a
result, we continue to view the future with confidence.
Sir Henry Keswick
Chairman
11th March 2015
3
Jardine Matheson | Annual Report 2014 Jardine Matheson
A holding company with a select
portfolio representing many of
the Group’s non-listed Asian
businesses, principally in engineering
and construction, transport services,
restaurants and IT services. (100%)
A group engaged in the sales and
service of motor vehicles in Hong
Kong, Macau and the United
Kingdom, and with a large and
growing presence in Southern China.
(100%)
A leading provider of insurance,
reinsurance and employee benefits
related advice, brokerage and
associated services, combining
specialist knowledge in the London
and international insurance markets
with a worldwide network. (42%)
A listed company holding most of
the Group’s major listed interests,
including 56% of Jardine Matheson.
(82%)
(Figures in brackets show effective ownership by Jardine Matheson as at 11th March 2015.)
Jardine Strategic
A listed property group with some
800,000 sq. m. of prime commercial
property, principally in Hong Kong
and Singapore, and high quality
residential developments in Asia.
(50%)
A listed pan-Asian retail group
operating over 6,100 outlets,
including supermarkets,
hypermarkets, convenience stores,
health and beauty stores, home
furnishings stores and restaurants.
(78%)
A listed hotel investment and
management group with a portfolio
of 44 deluxe and first class hotels
and resorts worldwide, including
17 under development. (73%)
A Singapore-listed company with an
interest of just over 50% in Astra,
a major listed Indonesian
conglomerate, and other interests
in Southeast Asia. (74%)
The largest Indonesian motor
group, manufacturing,
assembling and distributing
motor vehicles, motorcycles and
components in partnership with
industry leaders such as Toyota,
Daihatsu and Honda.
Astra’s financial services businesses
consist of consumer finance
(principally motor vehicle and
motorcycle), insurance and
banking.
Astra’s other interests include
heavy equipment and mining,
agribusiness, infrastructure,
logistics and others, and
information technology.
(Figures in brackets show effective ownership by Jardine Strategic as at 11th March 2015.)
4
Jardine Matheson | Annual Report 2014 Managing Director’s Review
A diversified business group, Jardine Matheson is focused
Within the businesses held through Jardine Strategic,
principally on Greater China and Southeast Asia, where
Hongkong Land maintained a high level of profitability
the Group enjoys the advantage of longstanding networks,
with strong contributions from both its commercial and
although some of its operations have a more global reach.
its residential interests. Dairy Farm’s sales and earnings
In 2014, the main contributors to the Group’s underlying profit
increased in most of its operations, although its Food
by activity were property at 25%, motor related interests at
businesses in Southeast Asia faced more challenging
22%, and retailing and restaurants at 21%. Some 48% of
conditions. Most of Mandarin Oriental’s hotels performed
underlying profit came from Greater China, compared with
well and there was a further contribution from branding
45% from Southeast Asia, which showed a slight decline from
fees on the sale of Residences. The overall results from
prior years due to the impact of the weaker rupiah on profit
Jardine Cycle & Carriage’s motor businesses were higher.
translation. Group companies remain leaders in the fields
Astra did well to maintain its rupiah net profit as it
of property investment and development, motor vehicles
experienced mixed performances within its portfolio.
and related activities, retailing and restaurants, engineering
and construction, transport services, luxury hotels, financial
The Group’s profit attributable to shareholders of
services, heavy equipment, mining and agribusiness.
US$1,710 million included a US$179 million increase in the
valuation of investment properties, and compares with
During the year, key Asian economies came under
US$1,566 million in 2013 which included an increase of
pressure which affected the performances of a number
US$113 million in investment property values.
of businesses. The underlying profit before tax for 2014
was US$4,451 million, a 3% decrease over the prior
With strong operating cash flows, ample committed facilities
year. The underlying profit attributable to shareholders
and access to the capital markets, the Group has a sound
was 2% higher at US$1,534 million, while underlying
financial base on which to support investment in developing
earnings per share were up 1% at US$4.14. Good trading
its leading market positions. Total capital investment across
performances continued to be seen in most of the Group’s
the Group in 2014 exceeded US$5.6 billion. The consolidated
businesses, although the weaker exchange rate reduced
net debt at the end of 2014, excluding financial services
Astra’s contribution.
companies, was US$2.5 billion, representing gearing of 6%,
which compares to US$2.6 billion at the end of 2013 and
Jardine Pacific recorded steady trading in most of its activities
gearing of 6%.
and good improvement in profits in its Restaurant business
and JOS. Jardine Motors enjoyed an excellent year, while
Jardine Lloyd Thompson benefited from good organic growth.
5
Jardine Matheson | Annual Report 2014 • Underlying profit up 19% at US$131 million
• Engineering and construction earnings were steady
• Improved contributions from Restaurants and JOS
• Underlying return on average shareholders’ funds of 19%
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Jardine Matheson | Annual Report 2014
10
11
12
13
14
149
145
172
110
131
Underlying Profit Attributable
to Shareholders (US$ million)
10
11
12
13
14
28
29
24
17
19
Underlying Return on Average
Shareholders’ Funds (%)
Gammon applied its technical expertise and
state of the art technology in its implementation of
the Harbour Area Treatment Scheme in Hong Kong,
resulting in increased efficiencies and enhanced risk
and safety management.
Underlying profit attributable to shareholders
Shareholders’ funds
2014
US$m
131
703
2013
US$m
110
703
Change
%
19
–
Jardine Pacific’s underlying profit of US$131 million was 19%
although difficult trading conditions meant that the franchise
higher than in 2013, reflecting good all-round performances
was still loss making, while the KFC franchise in Hong Kong
and particularly improved results in two of its businesses.
acquired in 2013 made a good contribution.
Its profit attributable to shareholders was US$137 million,
compared with US$112 million in 2013. Shareholders’ funds
Despite an increase in cargo throughput at Hong Kong
were US$703 million at the end of 2014, and the underlying
International Airport, Hactl recorded lower results following
return on average shareholders’ funds was 19%.
the move of a major customer to its own facility in the second
Jardine Schindler continued to perform well, generating stable
increase in profits as its joint venture with UASC performed
profits and achieving growth in its maintenance portfolio.
well. The results from Jardine Aviation Services showed a
half of 2013. Jardine Shipping Services achieved a good
JEC produced an increase in revenues, but profits declined
slight improvement.
due to weaker results in Singapore and from its Trane joint
venture. Gammon achieved higher earnings, and its order
JOS took positive steps to address a number of operational
book was maintained at US$4 billion.
weaknesses during the year and these have led to the start
of a recovery with improvements seen in both revenues
Jardine Restaurants produced good profit growth. Its Pizza Hut
and earnings.
operations in Hong Kong and Taiwan achieved higher sales
and profits. There was an improvement at KFC in Taiwan,
7
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Underlying profit increases 66% to US$97 million
• Good performances in Hong Kong and the United Kingdom
• Higher deliveries and enhanced margins in mainland China
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8
Jardine Matheson | Annual Report 2014
10
11
12
13
14
3,288
4,282
4,053
4,469
5,128
Revenue (US$ million)
10
11
12
13
14
15
58
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84
97
Underlying Profit Attributable to
Shareholders (US$ million)
Zung Fu’s operations in mainland China offer a
premium service and preferential customer support
through a wide network of outlets and service
centres specializing in Mercedes-Benz.
Hong Kong, Macau and mainland China
United Kingdom
Corporate
Revenue
2014
US$m
2,612
2,516
–
2013
US$m
2,295
2,174
–
5,128
4,469
Underlying profit
attributable to shareholders
2014
US$m
2013
US$m
63
35
(1)
97
39
21
(1)
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Shareholders’ funds
2014
US$m
360
159
4
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2013
US$m
319
146
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Jardine Motors achieved a much improved underlying profit
During the first half of the year, Jardine Strategic invested
of US$97 million in 2014, up 66% from the US$59 million
US$731 million for a minority interest in Hong Kong-listed
recorded in 2013. Zung Fu performed well in mainland China,
Zhongsheng Group, which is one of mainland China’s leading
despite a challenging trading environment, with higher
motor dealership groups. The investment represents an
deliveries of Mercedes-Benz passenger cars at enhanced
initial 11% equity stake together with convertible bonds.
margins. The group remains confident in the potential of
On conversion, the Group would hold 20% of Zhongsheng.
mainland China’s automotive sector.
This investment, which is not yet being equity accounted, is
included as part of Corporate and contributed US$13 million
Zung Fu continued to trade well in Hong Kong and Macau
to the Group’s results for 2014.
where it produced an increase in profit. Higher sales of
Mercedes-Benz passenger cars were recorded, and there was
also a satisfactory performance by Hyundai. Jardine Motors’
dealerships in the United Kingdom had a good year with
increased vehicle sales, tighter cost control and modest
margin improvements.
9
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Underlying profit up 3% despite difficult rating
environment
• Good performances from Reinsurance, Asia, Latin America
and Employee Benefits
• US specialty insurance broking business launched
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Jardine Matheson | Annual Report 2014
10
11
12
13
14
Total Revenue (US$ million)
10
11
12
13
14
1,152
1,315
1,401
1,533
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Underlying Profit Attributable to
Shareholders (US$ million)
JLT has built a strong reputation for its ‘client first’
approach. It has differentiated itself from its
competitors by senior management committing their
personal attention to each client, with particular
emphasis on negotiating the settlement of claims.
Total revenue
Underlying profit attributable to shareholders
*
Based on the change in UK sterling, being the reporting currency of Jardine Lloyd Thompson.
2014
US$m
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2013
US$m
1,533
188
Change*
%
13
3
Jardine Lloyd Thompson’s total revenue for the year was
In August, the company announced the expansion of its
US$1,817 million, an increase of 13% in its reporting currency.
specialty insurance broking activities with the establishment
In a year which saw a marked decline in the insurance and
of a new business in the United States. This is expected
reinsurance rating environment, the company did well
to result in a net investment by way of cumulative losses
to achieve organic growth of 6%, with particularly good
of US$80 million over the period 2014 to 2017, of which
performances by its Reinsurance, Asian, Latin American
US$8 million were incurred in 2014.
and Employee Benefits operations. The Risk & Insurance
group, comprising the company’s specialist insurance and
Despite tight cost controls and strong revenue growth
reinsurance broking businesses, achieved revenue growth
across most of the company’s operations, the increase
of 13% in 2014 and 3% growth in underlying trading profit.
to US$203 million in the company’s reported underlying
The Employee Benefits activities saw revenue growth of 11%
profit after tax and non-controlling interests was 3% in
and its underlying trading profit increased by 17%.
sterling terms, due to unfavourable exchange movements
and the initial investment in the US specialty business.
JLT’s contribution to the Group’s underlying profit, however,
was up 12% on conversion into US dollars.
11
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Underlying profit maintained
• Another strong year for commercial portfolio
• Reduced residential contribution despite increase
from mainland China
• Stable asset values
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12
Jardine Matheson | Annual Report 2014
10
11
12
13
14
35.99
30.25
33.11
39.73
39.52
Underlying Earnings per Share (US¢)
10
11
12
13
14
8.64
10.58
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11.41
11.71
Net Asset Value per Share (US$)
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12
13
14
10.85
11.22
11.64
12.70
13.14
Hong Kong Portfolio Average
Monthly Office Rent (US$ per sq. ft)
Hongkong Land’s properties are overseen by its
own specialist teams who seek to deliver the
highest level of property management standards
and tenant services, such as the concierge service
in LANDMARK.
Underlying profit attributable to shareholders (US$ million)
Net asset value per share (US$)
2014
930
11.71
2013
935
11.41
Change (%)
(1)
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Hongkong Land reported an underlying profit attributable to
portfolio remained fully occupied and saw strong positive
shareholders of US$930 million in 2014, only modestly below
rent reversions. The market was stable in Singapore, where
its record result in 2013. The group’s commercial portfolio had
the group’s office portfolio ended the year with vacancy of
another strong year, while its residential activities performed
1.7%. Higher rents were achieved at Jakarta Land in Indonesia.
well despite fewer completions in Singapore. There was a
In Beijing, good progress was made in the development of the
net gain of US$397 million on the valuation of investment
luxury retail complex at Wangfujing.
properties, producing a profit attributable to shareholders
of US$1,327 million. This compares to US$1,190 million in
Hongkong Land’s residential development activities benefited
2013, which included net valuation gains of US$255 million.
from the sale of remaining units at projects in Hong Kong
The net asset value per share at the end of 2014 was up 3% at
and Macau. Momentum is building in mainland China with
US$11.71. Hongkong Land remains well-financed with net debt
the first significant contribution from two wholly-owned
of US$2.7 billion at the year end and gearing of 10%.
projects in Chongqing. In Singapore, group subsidiary
The contribution from the group’s Hong Kong commercial
Two joint-venture developments in Indonesia are making
property portfolio benefited from the positive rent reversions
good progress, while in the Philippines a 40%-owned luxury
seen in 2013, although reversions became negative in 2014.
development in Manila is also proceeding well.
Vacancy in the portfolio was 5.4% at the year end. The retail
MCL Land completed two fully-sold projects during 2014.
13
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Sales up 5%, with growth in all divisions, and underlying
profit up 4%
• Good results from Health & Beauty, Home Furnishings
and Restaurants, offset by lower performance in Food
• Strategic initiative in mainland China
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14
Jardine Matheson | Annual Report 2014
10
11
12
13
14
Gross Revenue* (US$ billion)
10
11
12
13
14
9.1
10.4
11.5
12.4
13.1
406
470
444
480
500
Underlying Profit Attributable
to Shareholders (US$ million)
10
11
12
13
14
276
243
336
502
462
Capital Expenditure and
Investments (gross) (US$ million)
Cold Storage in Singapore continues to be a
pioneer in local retail by introducing new store
concepts and product offerings that cater to the
changing aspirations of customers.
Gross revenue* (US$ billion)
Underlying profit attributable to shareholders (US$ million)
*
Includes 100% of revenue from associates and joint ventures.
2014
13.1
500
2013
12.4
480
Change (%)
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Dairy Farm’s sales, including 100% of associates and joint
In 2014, Dairy Farm made a number of strategic moves,
ventures, increased by 5% to US$13.1 billion in 2014 with
notably in mainland China and the Philippines. Agreement
growth achieved in all divisions. Its underlying profit was up
was reached in August to establish a partnership with
4% at US$500 million. The group delivered good like-for-like
Yonghui Superstores Co., Ltd and to acquire a shareholding
sales growth in its major businesses in Health and Beauty,
of just below 20% in the company, subject to regulatory
Home Furnishings and Restaurants. While like-for-like sales
approvals, for an investment of approximately US$925 million.
growth in its Food retailing business in Greater China was
Yonghui is one of mainland China’s fastest growing food
good, it was much weaker in Southeast Asia. The profit
retailers, and both companies have started to work closely
attributable to shareholders was US$509 million, which
together on joint procurement initiatives and to drive
included a net non-trading gain of US$9 million arising mainly
operating synergies. In the Philippines, Dairy Farm increased
from the disposal of properties. The group’s financial position
its interest in Rustan Supercenters to 66%, and entered the
remains strong with net cash of US$475 million at the end
Health and Beauty market with the acquisition of a 49%
of 2014.
interest in Rose Pharmacy. In parallel, Dairy Farm continued
its investment in existing store networks, supply chain
infrastructure, IT systems and people, which are designed to
deliver a superior offer to its customers.
15
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Record underlying profit of US$97 million
• New hotels opened in Taipei and Bodrum
• Four new management contracts, including
Bangkok Residences
• Major renovation of London hotel announced
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16
Jardine Matheson | Annual Report 2014
10
11
12
13
14
1,026
1,196
1,283
1,361
1,390
Hong Kong
Other Asia
North America
Europe
Combined Total Revenue by Geographical
Area (US$ million)
10
11
12
13
14
43
58
69
93
97
Underlying Profit Attributable to
Shareholders (US$ million)
10
11
12
13
14
2.33
2.70
2.88
3.05
3.14
Net Asset Value per Share* (US$)
* With freehold and leasehold properties at valuation.
Mandarin Oriental is committed to exceeding its
guests’ expectations by delivering services and
products that anticipate and fulfil their desires, such
as in the recently-opened Mandarin Oriental, Taipei.
Combined total revenue of hotels under management
Underlying profit attributable to shareholders
2014
US$m
1,390
97
2013
US$m
1,361
93
Change
%
2
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Despite some challenging markets, Mandarin Oriental
During the year, Mandarin Oriental opened hotels in Taipei and
recorded an underlying profit up US$4 million at
Bodrum and also announced management contracts for new
US$97 million. The 2013 results had included a one-off
hotels under development in Bali, Manila and Dubai as well
profit of US$7 million arising on the acquisition of the
as Residences to be built opposite the group’s Bangkok hotel.
freehold rights of its Paris hotel. Profit attributable to
Mandarin Oriental also received US$15 million in branding
shareholders was US$97 million in 2014, compared to
fees on the sale of Residences in Bodrum. The group is to
US$96 million in the prior year.
undertake a US$130 million renovation of its London hotel,
scheduled to begin in 2016, and has agreed to invest some
The group’s two wholly-owned hotels in Hong Kong
US$150 million to expand its Munich hotel on an adjacent
performed well despite being affected by demonstrations
site, with completion expected in 2021. Mandarin Oriental
in the city during the final quarter. Tokyo benefited from
has announced that it is to raise US$300 million by way of a
improved visitor arrivals, but occupancy in the Bangkok
rights issue, which Jardine Strategic will underwrite.
property suffered from the country’s ongoing political
uncertainty. The performances of the group’s other Asian
hotels were broadly stable. In Europe, weaker demand in
the London property was offset by the further stabilization
of the Paris hotel and an improvement in Geneva. The
contribution from The Americas was impacted by lower
demand in Washington D.C.
17
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Underlying earnings per share down 11%
• Decline in Astra’s contribution mainly due to
weaker rupiah
• Contribution from other interests up 40%
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Jardine Matheson | Annual Report 2014
10
11
12
13
14
Revenue (US$ billion)
10
11
12
13
14
15.7
20.1
21.5
19.8
18.7
1,019
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811
894
793
Underlying Profit Attributable
to Shareholders (US$ million)
Jardine Cycle & Carriage prides itself in meeting
its customers’ requirements with the assurance
that the Mercedes-Benz vehicles are serviced
to the highest standards by professionally
trained technicians.
Revenue (US$ billion)
Underlying profit attributable to shareholders (US$ million)
Shareholders’ funds (US$ million)
2014
18.7
793
4,623
2013
19.8
894
4,261
Change (%)
(6)
(11)
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Jardine Cycle & Carriage’s underlying profit declined by 11% to
contribution improved significantly from a low base due
US$793 million in 2014. The profit attributable to shareholders
to good demand for new models, although margins on
was 10% lower at US$820 million. Astra’s contribution to
older models remained under pressure. In Indonesia,
underlying profit at US$724 million was 15% lower than 2013,
Tunas Ridean faced increased competitive pressure in
largely due to an 11% decline in the average rupiah exchange
the car market and its earnings contribution was down
rate. The group’s other interests produced earnings up 40%.
28%. In February 2015, Jardine Cycle & Carriage increased
There was a much improved performance at Truong Hai
Engineering Corporation Group from 19% to 22% at a cost
Auto Corporation in Vietnam, which benefited from strong
of US$12 million. It will now be treated as an associate.
its interest in Vietnam-listed Refrigeration Electrical
vehicle sales, good margins and lower financing costs.
Earnings from the Singapore motor operations were up 8%
due to higher sales. In Malaysia, Cycle & Carriage Bintang’s
19
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) • Underlying net profit 3% lower
• Unit sales of cars down 6%, while motorcycles up 8%
• Lower contribution from automotive and an impairment
charge in relation to its coal mining properties
• Improvements in its agribusiness, contract mining and
financial services
• Astra Aviva Life begins trading
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20
Jardine Matheson | Annual Report 2014
10
11
12
13
14
426
483
605
655
614
Motor Vehicle Sales including Associates
and Joint Ventures (thousand units)
10
11
12
13
14
3,416
4,274
4,089
4,697
5,051
Motorcycle Sales including Associates
and Joint Ventures (thousand units)
10
11
12
13
14
22.9
29.2
31.8
30.6
29.5
Gross Revenue* (US$ billion)
* Includes 100% of revenue from associates and joint ventures.
United Tractors has maintained its leadership
position in Indonesia’s heavy equipment market by
responding to the needs of its mid-market and retail
customers on product support and maintenance.
Gross revenue* (US$ billion)
Profit attributable to shareholders# (US$ million)
Shareholders’ funds# (US$ million)
2014
29.5
1,614
7,686
2013
30.6
1,838
6,886
Change† (%)
8
(1)
14
*
Includes 100% of revenue from associates and joint ventures.
†Based on the change in Indonesian rupiah, being the reporting currency of Astra.
#Reported under Indonesian GAAP.
Under Indonesian accounting standards Astra’s underlying
profit was down 3% at Rp18.3 trillion, equivalent to
US$1,538 million, and its net profit was 1% lower at
Rp19.2 trillion, some US$1,614 million. Improvements in its
agribusiness, contract mining operations and financial services
businesses were offset by lower earnings from its automotive
activities and an impairment charge in relation to its coal
mining properties.
United Tractors’ net income rose 11% after accounting for an
impairment charge on the valuation of its coal mining properties,
excluding which net income would have risen 43%. There was
a decline in Komatsu heavy equipment sales, but its contract
mining interests benefited from improved coal volumes on lower
stripping ratios and reported a 6% increase in net revenue.
United Tractors’ own mining subsidiaries saw net revenue rise
22%, but earnings were impacted by lower coal prices.
Discounting in the competitive car market in Indonesia led
to lower margins in Astra’s sales operations. The wholesale
market for cars declined 2%, while Astra’s sales were 6%
lower giving it a reduced market share of 51%. Astra Honda
Motor’s sales rose in an expanding motorcycle market, giving
it a market share of 64%. Astra Otoparts, in which the group
interest was reduced to 80% in 2013, saw higher sales but a
decline in net income.
Net income from Astra’s financial services businesses rose
11%. Excluding the gain arising from the acquisition of a 50%
interest in Astra Aviva Life, however, the increase would have
been 1%. There was strong growth in the consumer portfolio,
but this was largely offset by a lower contribution from
Astra Sedaya Finance, following the sale of a 25% interest to
Permata Bank, and reduced earnings at Permata Bank due
to an increase in funding costs and non-performing loans.
Asuransi Astra Buana benefited from growth in gross written
premiums and higher investment earnings.
Astra Agro Lestari reported net income up 39% as average
crude palm oil prices achieved were 14% higher. Crude palm
oil sales decreased following the opening of the company’s
refinery in West Sulawesi, which sold 255,000 tonnes of olein
during the year.
Net income from infrastructure, logistics and others fell
by 34%. Progress continues in the development of its toll
road interests. Its contract car hire business saw revenues
benefit from higher used car sales, but income suffered from
lower margins. Development continued at the group’s luxury
residential project in Jakarta’s Central Business District, with
completion expected in 2018. Astra’s information technology
interests produced a 24% increase in net income.
Ben Keswick
Managing Director
11th March 2015
21
Jardine Matheson | Annual Report 2014Managing Director’s Review (continued) People and the Community
Group companies in Hong Kong and Singapore
care home, MINDSET Place, maintained full
focus their philanthropic activities on the area
occupancy of service users with chronic conditions.
of mental health through MINDSET, the Group’s
(www.mindset.org.hk)
in-house charitable programme. Led by the Jardine
Ambassadors, young executives drawn from across
In Singapore, donations were made to a number of
the Group, the MINDSET programme aims to raise
projects in 2014, including support for four NGOs
awareness and understanding of mental health
in running programmes for their service users.
issues, while at the same time providing practical
MINDSET funded the second year of Raintree
support in this under-resourced area.
Sanctuary @ Punggol Wellness Centre operated
by Silver Ribbon, and financed the building of the
In Hong Kong, MINDSET launched a new initiative,
MINDSET Rehabilitation Gym in the Institute of Mental
MINDSET Expression, in July 2014, where service
Health. Work placement positions and job training
users from four non-governmental organizations
opportunities were arranged for service users. Together
engaged in various themed art-based programmes
with Group companies the Ambassadors also organized
designed to foster mental wellness and positive
the Mini-MINDSET Days and Fun Days. ‘The MINDSET
psychology. The art programmes include drama and
Challenge 2014’, racing up the 33 floors of the Tower 1 of
theatre, sand paint, photography and music, and
Marina Bay Financial Centre, raised some US$245,000
have received a positive response from service users.
for Singapore Anglican Community Services in support
The Peer Support Workers Project, launched in 2012,
of placement training for its service users.
saw its second cohort of service users graduate in
May. MINDSET also supported the creative design
In Indonesia, Astra continued to offer support to the
and refurbishment of the Child and Adolescent
community in the areas of education, environment,
Psychiatric Ward in Kwai Chung Hospital.
income generating activities and health. A village
programme, now in its seventh series, was extended
MINDSET’s school-based Health in Mind programme,
to Surabaya. Astra collaborated with members of
undertaken in collaboration with the Hong Kong
the villages to generate an activity plan and provide
Hospital Authority, continued its work to empower
the resources necessary to improve the education,
student ‘advocates’ to promote awareness of mental
health and environment of the villages. Astra also
health issues among young people. The residential
helped the residents engage in small commercial
.
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22
Jardine Matheson | Annual Report 2014
enterprises. Through SATU Indonesia (Astra’s Unified Spirit for
The Group also conducts a series of development centres
Indonesia) Awards, Astra gave 25 awards to recognize young
every year to identify talent and support the Group’s
people’s efforts in contributing to the environment and their
human resources planning process. In 2014, more than
communities with the aim of building a better Indonesia.
40 executives were transferred between businesses in
the Group.
In the United Kingdom, Jardine Lloyd Thompson launched a
new partnership programme with Kids’ Company to engage its
employees in the work of supporting London’s disadvantaged
Encouraging Higher Education
In January 2015, 13 students from mainland China, Hong
children. It has also committed a further three years of support
Kong, Malaysia and Singapore were awarded scholarships
to Action on Addiction. In India, it has continued its support
by the Jardine Foundation to pursue their undergraduate
through the Udaan Foundation for disadvantaged children
studies in the United Kingdom. Applications are also being
in Mumbai. Globally, Jardine Lloyd Thompson encourages
considered for postgraduate studies at Oxbridge. In its
its employees to engage with local communities through a
second year, the postgraduate scholarship scheme has
selection of volunteering or fundraising opportunities.
supported ten scholars from mainland China, Hong Kong,
Indonesia, Singapore, Thailand and Vietnam for their
Providing Expertise
Group executives are active on external management boards
master’s or doctoral studies commencing in October 2014.
Scholarships are available for selected colleges at Oxford
and professional and advisory bodies where they provide
and Cambridge Universities, and scholars are chosen for
expertise and knowledge. These activities are encouraged as
their academic ability, leadership qualities and community
they contribute to the development of the communities and
participation. Since its establishment, over 200 scholarships
the business sectors in which the Group operates.
have been awarded to students from the regions in which
Supporting our People
The Group supports its people with various management
the Group operates. (www.jardine-foundation.org)
In Indonesia, Astra distributed scholarships through
training and development programmes. A good example
a number of foundations to support students from
is the central recruitment of graduates who in addition to
underdeveloped areas. Over 159,600 scholarship grants
pursuing a modular, three-year leadership development
were given out to recipients in elementary schools up
programme, also attain a Chartered Institute of Management
to university level. Some 13,200 schools were funded to
Accountants qualification. This approach brings a rare balance
improve their educational activities.
of management breadth and financial depth, and readies
them for leadership positions. Another example is the Director
Meanwhile, in Singapore, Jardine Cycle & Carriage
Development Initiative, which provides senior executives with
scholarships are awarded yearly to three outstanding
the opportunity to meet chief executives from some of the
business management undergraduates.
world’s most admired companies.
(Above) Astra’s President Director Prijono Sugiarto is pictured with the
children at a village in Surabaya.
Staff from JEC and Jardine Shipping join the service users from Singapore
Anglican Community Services in an ice-cream making workshop.
(Left) In its ninth year, the CENTRAL Rat Race 2014 attracted over 460 entrants
and raised US$397,000 for MINDSET.
23
Jardine Matheson | Annual Report 2014 Financial Review
Accounting Policies
The Directors continue to review the appropriateness of the
Astra’s underlying operating profit reduced by US$237 million
or 12% from 2013, the principal reason for the fall being
accounting policies adopted by the Group having regard to
an 11% weakening in the average exchange rate for the
developments in International Financial Reporting Standards.
Indonesian rupiah against the US dollar. In its reporting
In 2014, a number of amendments to these standards
currency, Astra’s underlying operating profit declined by only
became effective and the Group adopted those which are
1% with lower contributions from its automotive activities
relevant to the Group’s operations although their overall
and an impairment charge of US$231 million in relation to its
impact on the Group’s financial statements has been modest.
coal mining properties being mitigated by improved results
Results
In 2014, revenue increased by 1% to US$39.9 billion.
in agribusiness, contract mining operations and financial
services businesses.
Gross revenue, including 100% of revenue from associates
The operating profit of US$3,676 million included a number
and joint ventures, which is a better measure of the extent of
of non-trading items, including a net increase of US$59 million
the Group’s operations, increased by 2% to US$62.8 billion.
in the fair value of investment properties mainly in
Underlying operating profit was US$3,634 million, an
sale of certain property interests in Dairy Farm, and a gain
increase of US$33 million or 1%. This reflected increased
on disposal of an investment in Tata Power of US$16 million
contributions from most of the Group’s businesses other
offset by a mark-to-market loss of US$17 million on the
Hongkong Land and Astra, a gain of US$12 million on the
than Astra.
convertible component of the Zhongsheng’s bonds held by
Jardine Strategic, and a decrease of US$34 million in the fair
The underlying operating profit for Hongkong Land increased
value of plantations in Astra.
by US$150 million as a result of the good performances
from its commercial activities mainly in Hong Kong and
Net financing charges decreased by US$7 million compared
residential development activities mainly in Hong Kong and
to 2013 primarily due to the lower level of net debt. Interest
mainland China. Dairy Farm’s contribution was in line with
cover exclusive of financial services companies remained
last year with increased profits from Health and Beauty
strong at 29 times, calculated as the sum of underlying
and Home Furnishing businesses, partly offset by weaker
operating profit and share of results of associates and joint
performance from the Food business in Southeast Asia.
ventures divided by net financing charges.
Jardine Pacific’s results were US$31 million higher due to
improved profitability in its Restaurant businesses and a
The Group’s share of underlying results of associates
turnaround in JOS. Jardine Motors achieved an underlying
profit US$62 million above last year with better margins
and joint ventures decreased by 17% to US$933 million.
The higher contributions from Jardine Lloyd Thompson
in mainland China and higher deliveries and margins in
Hong Kong and the United Kingdom. Mandarin Oriental
was US$9 million higher than 2013 as a result of better
of US$9 million due to a good trading performance and
Jardine Cycle & Carriage of US$20 million mainly from its
motor vehicle joint venture in Vietnam, were more than offset
performances from the hotels in Hong Kong and Geneva,
by lower contributions from Hongkong Land of US$112 million
and the receipt of branding fees of US$15 million upon the
resulting from the impact of lower residential property
sale of residences in Bodrum. An increase of US$9 million in
completions in its joint ventures in Singapore and Astra’s
contribution from Jardine Cycle & Carriage came from higher
associates and joint ventures of US$96 million, where lower
earnings in the Singapore motor operations. A contribution
earnings were recorded by its automotive and financial
of US$15 million was also obtained from Jardine Strategic’s
services businesses and these were further impacted by the
investment in the shares and convertible bonds of the Hong
weakness of the Indonesian rupiah.
Kong-listed Zhongsheng Group.
24
Jardine Matheson | Annual Report 2014 The overall contribution from the Group’s associates and joint
Summarized Cash Flow
ventures included a number of non-trading items, among
which were increases in the fair value of investment properties
held by Hongkong Land’s associates and joint ventures of
US$392 million and negative goodwill of US$37 million arising
on the creation of the Astra Aviva Life joint venture.
The underlying effective tax rate for the year was 24%, which
is broadly in line with that of 2013.
Underlying profit attributable to shareholders at
US$1,534 million was US$32 million higher than the prior
year. The increase was due to increases from Jardine Pacific,
Jardine Motors, Jardine Lloyd Thompson, Dairy Farm and
Jardine Cycle & Carriage, partly offset by a decrease in
contribution from Astra. Hongkong Land and Mandarin
Oriental were broadly in line with 2013. Astra reported
a net profit 1% lower than 2013 in its reporting currency.
After reclassifying certain items to non-trading for Group
reporting purposes and adjusting for exchange movements,
Astra’s contribution to the Group shows a decrease of
14%. Had Astra’s earnings been translated using the same
rate as applied in 2013, Astra’s contribution to the Group’s
underlying earnings would have been US$58 million higher
than reported. Underlying earnings per share increased by 1%
to US$4.14.
The profit attributable to shareholders for the year of
US$1,710 million included a surplus on the revaluation of
Operating cash flow
Dividends from associates
and joint ventures
Operating activities
Capital expenditure
and investments
Cash flow before financing
2014
US$m
2,656
698
3,354
(2,303)
1,051
2013
US$m
3,550
650
4,200
(2,372)
1,828
Cash Flow
The cash inflow from operating activities for the year
was US$3,354 million. This represented a decrease of
US$846 million on 2013 principally due to higher development
expenditure on residential projects in Hongkong Land and
an increase in working capital in Astra mainly in its heavy
equipment business.
Capital expenditure for the year before disposals amounted
to US$3,125 million and was broadly spread throughout the
Group. This included the following:
• US$53 million for the purchase of subsidiaries, the main
ones being the acquisition of an additional 16% interest in
a supermarket and hypermarket chain in the Philippines by
Dairy Farm and the acquisition by Astra of a 100% interest in
an oil palm plantation company;
investment properties, mainly in Hongkong Land, a gain on
• US$390 million for various joint ventures the main ones
the sale of property interests in Dairy Farm, negative goodwill
being Hongkong Land’s purchase of, and capital injections
on acquisition of a joint venture in Astra, and gain on disposal
into, joint ventures in mainland China and the Philippines,
of an investment in Tata Power offset by a mark-to-market
Dairy Farm’s acquisition of a 49% interest in a health and
loss on the convertible component of Zhongsheng’s bonds
beauty business in the Philippines, and Astra’s subscription
held by Jardine Strategic, and a decrease in the fair value
to PT Bank Permata’s rights issue and capital injections into
of plantations in Astra. Earnings per share were US$4.62,
a number of associates and joint ventures;
an increase of 8%.
Dividends
The Board is recommending a final dividend of US$1.07 per
share, giving a total dividend of US$1.45 per share for the
year, payable on 13th May 2015 to those persons registered as
shareholders on 20th March 2015. The dividends are payable
in cash with a scrip alternative.
• US$732 million for Jardine Strategic’s investment in
shares and convertible bonds representing an initial
11.1% interest and up to 20% upon conversion in the
Hong Kong-listed Zhongsheng Group, a leading mainland
China motor dealership group; and US$184 million for the
purchase of other investments mainly by Astra’s general
insurance business;
25
Jardine Matheson | Annual Report 2014 Financial Review (continued)
2.3
2.4
3.4
2.6
2.5
10
11
12
13
14
31.9
39.2
42.4
42.8
44.8
Net Debt* and Total Equity (US$ billion)
Net Debt
Total Equity
* Excluding net debt of financial services companies.
The Group’s management also looks at total capital investment
across the Group. This exceeded US$5.6 billion in 2014 against
US$5.8 billion in 2013. These figures include the capital
expenditure of associates and joint ventures and expenditure
on properties for sale together with the capital expenditure
outlined above.
Funding
At the year end, undrawn committed facilities totalled
US$6.1 billion. In addition, the Group had available liquid funds
of US$5.3 billion. Net borrowings, excluding those relating
to Astra’s financial services companies, were US$2.5 billion,
representing 6% of total equity. Astra’s financial services
• US$279 million for the purchase of intangible assets,
companies had net borrowings of US$3.7 billion. The Group’s
which included US$67 million for leasehold land mainly
total equity increased by US$2.0 billion to US$44.8 billion
for use by Astra as motor dealerships, US$69 million
during the year.
for the construction and improvement of toll roads and
US$63 million for the acquisition of contracts in Astra’s
The average tenor of the Group’s debt at 31st December 2014
general insurance business;
• US$1,158 million for the purchase of tangible assets, which
included US$112 million in Jardine Motors, US$297 million
in Dairy Farm, US$45 million in Mandarin Oriental, and
US$647 million in Astra. US$206 million of this was
for the acquisition of heavy equipment and machinery,
predominantly by Pamapersada Nusantara in response
to capacity expansion in its mine contracting business,
US$182 million was mainly for outlet development and
additional operational machinery and equipment in Astra’s
automotive business, and US$190 million was to develop
plantation infrastructure in Astra’s agribusiness; and
was 4.9 years compared with 4.5 years at the end of 2013.
US dollar denominated borrowings comprised 8% of the Group’s
total borrowings. Non-US dollar denominated borrowings are
directly related to the Group’s businesses in the countries of the
currencies concerned. As at 31st December 2014 approximately
55% of the Group’s borrowings, exclusive of financial services
companies, were at floating rates and the remaining 45% were
at fixed rates hedged with derivative instruments with major
creditworthy financial institutions.
Overall, the Group’s funding arrangements are designed to keep
an appropriate balance between equity and debt from banks
and capital markets, both short and long term, to give flexibility
• US$232 million for additions to investment properties in
to develop the business.
Hongkong Land and Astra, and US$82 million for additions
to plantations in Astra.
The contribution to the Group’s cash flow from disposals
for the year amounted to US$822 million which included
US$481 million from the repayment of advances from
associates and joint ventures in Hongkong Land, and
Treasury Policy
The Group manages its exposure to financial risk using a variety
of techniques and instruments. The main objectives are to limit
foreign exchange and interest rate risks to provide a degree
of certainty about costs. The investment of the Group’s cash
resources is managed so as to minimize risk while seeking to
US$217 million from the sale of its stake in Tata Power by
enhance yield.
Jardine Strategic and other investments by Astra’s general
insurance business.
The Group also purchased additional shares in Group
companies for a total cost of US$141 million and Astra
sold part of its interest in PT Astra Sedaya Finance for
US$185 million, which are both presented as financing
activities in 2014 in the cash flow statement.
26
Principal Risks and Uncertainties
A review of the principal risks and uncertainties facing the
Group is set out on page 122.
James Riley
Group Finance Director
11th March 2015
Jardine Matheson | Annual Report 2014 Directors’ Profiles
Sir Henry Keswick*
Chairman
Sir Henry joined the Group in 1961 and has been a Director of its
holding company since 1967. He is chairman of Matheson & Co.
and Jardine Strategic, and a director of Dairy Farm, Hongkong
Land and Mandarin Oriental. He is also vice chairman of the
Hong Kong Association.
a commissioner of Astra. Mr Nightingale also 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 chairman of The Sailors
Home and Missions to Seamen in Hong Kong.
Ben Keswick*
Managing Director
Mr Ben Keswick joined the Board in 2007 and was appointed as
Managing Director in 2012. He has held a number of executive
positions since joining the 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 2012. He has an MBA from INSEAD.
Mr Keswick is chairman of Jardine Matheson Limited and
Jardine Cycle & Carriage and a commissioner of Astra. He is also
chairman and managing director of Dairy Farm, Hongkong Land
and Mandarin Oriental, managing director of Jardine Strategic and
a director of Jardine Pacific and Jardine Motors.
Adam Keswick*
Deputy Managing Director
Mr Adam Keswick joined the Board in 2007 and was appointed
Deputy Managing Director in 2012. He is chairman of Jardine
Pacific and chairman and chief executive of Jardine Motors.
He has held a number of executive positions since joining the
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, Hongkong Land, Jardine Strategic, Mandarin
Oriental and Zhongsheng Group Holdings.
Mark Greenberg*
Mr Greenberg joined the Board as Group Strategy Director
in 2008 having first joined the Group in 2006. He had
previously spent 16 years in investment banking with
Dresdner Kleinwort Wasserstein in London. He is a director
of Jardine Matheson Limited, Dairy Farm, Hongkong Land,
Jardine Cycle & Carriage and Mandarin Oriental, and a
commissioner of Astra and Bank Permata.
Simon Keswick*
Mr Simon Keswick joined the Group in 1962 and has been a
Director of its holding company since 1972. He is a director of
Matheson & Co., Dairy Farm, Hongkong Land, Jardine Strategic
and Mandarin Oriental.
Lord Leach of Fairford*
Lord Leach joined the Board in 1984 after a career in banking.
He is a director of Matheson & Co., deputy chairman of
Jardine Lloyd Thompson, and a director of Dairy Farm,
Hongkong Land, Jardine Strategic and Mandarin Oriental.
He is also a member of the supervisory board of Paris Orléans.
Dr Richard Lee
Dr Lee joined the Board in 1999. 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 Hongkong Land and Mandarin Oriental.
Anthony Nightingale
Mr Nightingale joined the Group in 1969 and was appointed as
a Director in 1994. He was Managing Director from 2006 until he
retired from executive office in 2012. He is also a director of Dairy
Farm, Hongkong Land, Jardine Cycle & Carriage, Jardine Strategic,
Mandarin Oriental, China Xintiandi, Prudential and Schindler and
*
Executive Director
Y.K. Pang*
Mr Pang joined the Board in 2011. He was appointed chief
executive of Hongkong Land in 2007. He previously held a
number of senior executive positions in the Group, which he
joined in 1984. He is a director of Jardine Matheson Limited and
Jardine Matheson (China) Limited. He is also chairman of both the
Employers’ Federation of Hong Kong and the Hong Kong General
Chamber of Commerce.
James Riley*
Mr Riley joined the Board as Group Finance Director in 2007,
having been Chief Financial Officer since 2005. A Chartered
Accountant, he joined the Group from Kleinwort Benson in 1993.
He was appointed chief financial officer of Jardine Cycle & Carriage
in 1994, and in 1999 he took over responsibility for the
businesses grouped under Jardine Pacific. He is also a director
of Jardine Matheson Limited, Dairy Farm, and The Hongkong and
Shanghai Banking Corporation Limited.
Lord Sassoon, Kt*
Lord Sassoon joined the Board in 2013. He began his career at
KPMG, before joining SG Warburg (later UBS Warburg) in 1985.
From 2002 to 2006 he was in the United Kingdom Treasury 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 Matheson & Co., Dairy Farm,
Hongkong Land, Mandarin Oriental and Jardine Lloyd Thompson.
He is also chairman of the China-Britain Business Council.
Percy Weatherall
Mr Weatherall first joined the Company in 1976 and was
appointed to the Board in 1999 before being made Managing
Director in 2000. He retired from executive office in 2006. He is
also a director of Matheson & Co., Dairy Farm, Hongkong Land,
Jardine Strategic and Mandarin Oriental. He is chairman of
Corney & Barrow and the Nith District Salmon Fishery Board.
Giles White*
Mr White was appointed to the Board in 2010, having first joined
the Group as Group General Counsel in 2009. He was previously
Asia managing partner of Linklaters based in Hong Kong, prior
to which he was the firm’s head of global finance and projects in
London. Mr White is also a director of Jardine Matheson Limited,
Dairy Farm and Mandarin Oriental.
Michael Wei Kuo Wu
Mr Wu joined the Board in March 2015 and is a director of
Hongkong Land. 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.
Company Secretary and Registered Office
John C. Lang
Jardine House, 33-35 Reid Street
Hamilton
Bermuda
27
Jardine Matheson | Annual Report 2014 Consolidated Profit and Loss Account
for the year ended 31st December 2014
Underlying
business
performance
2014
Non-trading
items
Note
US$m
US$m
Underlying
business
performance
2013
Non-trading
items
US$m
US$m
Total
US$m
39,921
(36,287)
–
(17)
39,921
(36,304)
39,465
(35,864)
–
3,634
(279)
163
(116)
59
42
–
–
–
59
3,676
(279)
163
(116)
–
3,601
(260)
137
(123)
–
(31)
(60)
(91)
–
–
–
Total
US$m
39,465
(35,895)
(60)
3,510
(260)
137
(123)
933
23
956
1,122
(32)
1,090
–
933
4,451
(839)
3,612
2,078
3,612
US$
4.14
4.13
394
417
459
(1)
458
176
282
458
394
1,350
4,910
(840)
4,070
1,710
2,360
4,070
–
1,122
4,600
(835)
3,765
1,502
2,263
3,765
US$
US$
4.62
4.61
4.09
4.07
352
320
229
(9)
220
64
156
220
352
1,442
4,829
(844)
3,985
1,566
2,419
3,985
US$
4.26
4.25
10 & 11
1,534
5
6
7
8
9
Revenue
Net operating costs
Change in fair value
of investment
properties
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
– change in fair value
of investment
properties
Profit before tax
Tax
Profit after tax
Attributable to:
Shareholders of the
Company
Non-controlling
interests
Earnings per share
– basic
– diluted
10
28
Jardine Matheson | Annual Report 2014
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2014
Note
20
12
13
17
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans
Net revaluation surplus before transfer to investment properties
– intangible assets
– tangible assets
Tax on items that will not be reclassified
Share of other comprehensive (expense)/income of associates and joint ventures
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
– net loss arising during the year
– transfer to profit and loss
Revaluation of other investments
– net loss arising during the year
– transfer to profit and loss
Impairment of other investments transfer to profit and loss
Cash flow hedges
– net loss arising during the year
– transfer to profit and loss
Tax relating to items that may be reclassified
Share of other comprehensive expense of associates and joint ventures
Other comprehensive expense for the year, net of tax
Total comprehensive income for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
2014
US$m
4,070
(60)
20
–
11
(29)
(41)
(70)
(415)
7
(408)
(78)
(19)
(97)
–
(107)
102
(5)
3
(251)
(758)
(828)
3,242
1,245
1,997
3,242
2013
US$m
3,985
90
2
1
(19)
74
12
86
(1,793)
(1)
(1,794)
(28)
(11)
(39)
55
(40)
77
37
(8)
(637)
(2,386)
(2,300)
1,685
994
691
1,685
29
Jardine Matheson | Annual Report 2014 Note
12
13
14
15
16
17
18
19
20
21
22
18
17
23
2014
US$m
2,679
6,690
24,309
908
8,881
1,354
3,540
305
23
48,689
2,953
3,280
6,068
18
133
4,933
382
5,315
17,767
1
17,768
2013
US$m
2,333
6,823
24,088
856
8,694
1,129
2,811
264
51
47,049
2,670
3,015
5,733
17
130
4,930
284
5,214
16,779
7
16,786
66,457
63,835
Consolidated Balance Sheet
at 31st December 2014
Assets
Intangible assets
Tangible assets
Investment properties
Plantations
Associates and joint ventures
Other investments
Non-current debtors
Deferred tax assets
Pension assets
Non-current assets
Properties for sale
Stocks and work in progress
Current debtors
Current investments
Current tax assets
Bank balances and other liquid funds
– non-financial services companies
– financial services companies
Non-current assets classified as held for sale
Current assets
Total assets
Approved by the Board of Directors
Ben Keswick
James Riley
Directors
11th March 2015
30
Jardine Matheson | Annual Report 2014 Equity
Share capital
Share premium and capital reserves
Revenue and other reserves
Own shares held
Shareholders’ funds
Non-controlling interests
Total equity
Liabilities
Long-term borrowings
– non-financial services companies
– financial services companies
Deferred tax liabilities
Pension liabilities
Non-current creditors
Non-current provisions
Non-current liabilities
Current creditors
Current borrowings
– non-financial services companies
– financial services companies
Current tax liabilities
Current provisions
Current liabilities
Total liabilities
Total equity and liabilities
Note
24
26
28
29
30
19
20
31
32
31
30
32
2014
US$m
173
138
22,061
(3,105)
19,267
25,538
44,805
5,240
2,176
7,416
695
350
364
138
8,963
8,244
2,176
1,892
4,068
300
77
12,689
2013
US$m
170
119
20,761
(2,664)
18,386
24,396
42,782
4,799
1,674
6,473
733
294
390
134
8,024
7,921
2,732
2,079
4,811
226
71
13,029
21,652
21,053
66,457
63,835
31
Jardine Matheson | Annual Report 2014 Consolidated Statement of Changes in Equity
for the year ended 31st December 2014
Share
capital
US$m
Share
premium
US$m
Capital
reserves
US$m
Revenue
reserves
US$m
Asset
revaluation
reserves
US$m
Hedging
reserves
US$m
Exchange
reserves
US$m
2014
At 1st January
Total comprehensive income
Dividends paid by the Company
Dividends paid to non-controlling interests
Unclaimed dividends forfeited
Issue of shares
Employee share option schemes
Scrip issued in lieu of dividends
Increase in own shares held
Subsidiaries acquired
Capital contribution from non-controlling interests
Change in interests in subsidiaries
Change in interests in associates and joint ventures
Transfer
At 31st December
2013
At 1st January
Total comprehensive income
Dividends paid by the Company
Dividends paid to non-controlling interests
Issue of shares
Employee share option schemes
Scrip issued in lieu of dividends
Increase in own shares held
Subsidiaries acquired
Subsidiaries disposed of
Capital contribution from non-controlling interests
Change in interests in subsidiaries
Change in interests in associates and joint ventures
Transfer
At 31st December
170
–
–
–
–
–
–
3
–
–
–
–
–
–
173
168
–
–
–
–
–
2
–
–
–
–
–
–
–
170
19
–
–
–
–
2
–
(3)
–
–
–
–
–
2
20
16
–
–
–
3
–
(2)
–
–
–
–
–
–
2
19
100
–
–
–
–
–
21
–
–
–
–
–
–
(3)
118
89
–
–
–
–
21
–
–
–
–
–
–
–
(10)
100
21,224
1,545
(521)
–
–
–
–
619
–
–
–
(30)
(14)
1
22,824
19,545
1,673
(503)
–
1
–
626
–
–
–
–
(123)
(3)
8
21,224
Total comprehensive income included in revenue reserves comprises profit attributable to shareholders of the Company of
US$1,710 million (2013: US$1,566 million) and net fair value loss on other investments of US$80 million (2013: net fair value gain
on other investments (net of impairment and transfer to profit and loss) of US$43 million). Cumulative net fair value gain on other
investments amounted to US$189 million (2013: US$269 million).
169
7
–
–
–
–
–
–
–
–
–
–
–
–
176
168
1
–
–
–
–
–
–
–
–
–
–
–
–
169
7
(17)
–
–
–
–
–
–
–
–
–
–
–
–
(10)
(19)
26
–
–
–
–
–
–
–
–
–
–
–
–
7
(639)
(290)
–
–
–
–
–
–
–
–
–
–
–
–
(929)
67
(706)
–
–
–
–
–
–
–
–
–
–
–
–
(639)
Own
shares
held
US$m
(2,664)
–
–
–
–
–
–
–
(441)
–
–
–
–
–
(3,105)
(2,234)
–
–
–
–
–
–
(430)
–
–
–
–
–
–
(2,664)
Attributable to
shareholders of
the Company
Attributable to
non-controlling
interests
US$m
US$m
18,386
1,245
(521)
–
–
2
21
619
(441)
–
–
(30)
(14)
–
19,267
17,800
994
(503)
–
4
21
626
(430)
–
–
–
(123)
(3)
–
18,386
24,396
1,997
94
(940)
1
–
2
–
(94)
1
4
77
–
–
25,538
24,573
691
90
(996)
–
3
–
(78)
54
(1)
75
(15)
–
–
24,396
Total
equity
US$m
42,782
3,242
(427)
(940)
1
2
23
619
(535)
1
4
47
(14)
–
44,805
42,373
1,685
(413)
(996)
4
24
626
(508)
54
(1)
75
(138)
(3)
–
42,782
32
33
Jardine Matheson | Annual Report 2014Jardine Matheson | Annual Report 2014 Consolidated Cash Flow Statement
for the year ended 31st December 2014
Operating activities
Operating profit
Change in fair value of investment properties
Depreciation and amortization
Other non-cash items
Increase in working capital
Interest received
Interest and other financing charges paid
Tax paid
Dividends from associates and joint ventures
Cash flows from operating activities
Investing activities
Purchase of subsidiaries
Purchase of associates and joint ventures
Purchase of shares and convertible bonds in Zhongsheng
Purchase of other investments
Purchase of intangible assets
Purchase of tangible assets
Additions to investment properties
Additions to plantations
Advance to associates, joint ventures and others
Advance and repayment from associates, joint ventures and others
Sale of subsidiaries
Sale of associates and joint ventures
Sale of other investments
Sale of intangible assets
Sale of tangible assets
Sale of investment properties
Cash flows from investing activities
Financing activities
Issue of shares
Capital contribution from non-controlling interests
Advance from non-controlling interests
Change in interests in subsidiaries
Drawdown of borrowings
Repayment of borrowings
Dividends paid by the Company
Dividends paid to non-controlling interests
Cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Note
33 (a)
33 (b)
33 (c)
33 (d)
33 (e)
33 (f)
33 (g)
33 (h)
33 (i)
33 (j)
2014
US$m
3,676
(59)
1,007
403
(1,410)
171
(303)
(829)
2,656
698
3,354
(53)
(390)
(732)
(184)
(279)
(1,158)
(232)
(82)
(15)
481
1
17
217
1
105
–
(2,303)
2
4
–
44
20,863
(20,576)
(343)
(940)
(946)
105
5,189
(6)
Cash and cash equivalents at 31st December
33 (k)
5,288
2013
US$m
3,510
60
1,039
309
(258)
131
(271)
(970)
3,550
650
4,200
(127)
(492)
–
(107)
(296)
(1,506)
(229)
(65)
(6)
219
39
–
109
8
80
1
(2,372)
4
75
1
(114)
16,632
(15,973)
(295)
(996)
(666)
1,162
4,253
(226)
5,189
34
Jardine Matheson | Annual Report 2014 Notes to the Financial Statements
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 on a going concern basis and under the historical cost convention except as disclosed in the
accounting policies below.
Amendments and interpretation effective in 2014 which are relevant to the Group’s operations:
Amendments to IAS 32
Amendments to IAS 36
Amendments to IAS 39
IFRIC 21
Offsetting Financial Assets and Financial Liabilities
Recoverable Amount Disclosures for Non-Financial Assets
Novation of Derivatives and Continuation of Hedge Accounting
Levies
The adoption of these amendments and interpretation does not have a material impact on the Group’s accounting policies and
disclosures.
Amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’ 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. Specifically,
the amendments clarify the meaning of ‘currently has a legally enforceable right of offset’ and ‘simultaneous realization and
settlement’.
Amendments to IAS 36 ‘Recoverable Amount Disclosures for Non-Financial Assets’ set out the changes to the disclosures
when recoverable amount is determined based on fair value less costs of disposal. The key amendments are (a) to remove the
requirement to disclose recoverable amount when a cash generating unit (‘CGU’) contains goodwill or indefinite lived intangible
assets but there has been no impairment, (b) to require disclosure of the recoverable amount of an asset or CGU when an
impairment loss has been recognized or reversed, and (c) to require detailed disclosure of how the fair value less costs of
disposal has been measured when an impairment loss has been recognized or reversed.
Amendments to IAS 39 ‘Novation of Derivatives and Continuation of Hedge Accounting’ provide relief from discontinuing hedge
accounting when novation of a hedging instrument to a central counterparty meets specified criteria.
IFRIC 21 ‘Levies’ sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation clarifies that
the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the
payment of the levy.
The following standards and amendments which are effective after 2014, are relevant to the Group’s operations and yet to be adopted:
IFRS 9
IFRS 15
Amendments to IAS 1
Amendments to IFRS 10 and IAS 28
Amendments to IFRS 11
Amendments to IAS 16 and IAS 38
Amendments to IAS 16 and IAS 41
Amendments to IAS 19
Annual Improvements to IFRSs
Financial Instruments
Revenue from Contracts with Customers
Presentation of Financial Statements
Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
Accounting for Acquisitions of Interests in Joint Operations
Clarification of Acceptable Methods of Depreciation
and Amortization
Agriculture: Bearer Plants
Defined Benefit Plans: Employee Contributions
2010 – 2012 Cycle
2011 – 2013 Cycle
2012 – 2014 Cycle
Effective for
accounting periods
beginning on or after
1st January 2018
1st January 2017
1st January 2016
1st January 2016
1st January 2016
1st January 2016
1st January 2016
1st July 2014
1st July 2014
1st July 2014
1st January 2016
35
Jardine Matheson | Annual Report 2014 The Group is currently assessing the impact of these new standards and amendments. The Group will adopt these new
standards and amendments from their respective effective dates.
A complete set of IFRS 9 ‘Financial Instruments’ has been published which replaces IAS 39 ‘Financial Instruments: Recognition
and Measurement’. This complete version includes new guidance on the classification and measurement of financial assets
and liabilities. It also includes an expected credit losses model that replaces the incurred loss impairment model used today.
A substantially-reformed approach to hedging accounting is also introduced.
There are three categories for financial assets under IFRS 9: amortized cost, fair value through other comprehensive income
and fair value through profit or loss. The measurement principles of each category are similar to the current requirements under
IAS 39. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the
financial asset. Classification determines how financial assets and financial liabilities are accounted for in financial statements
and, in particular, how they are measured on an ongoing basis.
IFRS 9 introduces a new expected-loss impairment model which replaces the ‘incurred loss’ model in IAS 39. A loss event will
no longer need to occur before an impairment allowance is recognized. In practice, the new rules mean that entities will have
to record a day one loss equal to the 12-month expected credit loss on initial recognition of financial assets that are not credit
impaired (or lifetime expected credit loss for trade receivables). IFRS 9 contains a ‘three stage’ approach which is based on
the change in credit quality of financial assets since initial recognition. Assets move through the three stages as credit quality
changes and the stages dictate how an entity measures impairment losses and applies the effective interest rate method.
Where there has been a significant increase in credit risk, impairment is measured using lifetime expected credit loss rather
than 12-month expected credit loss. The model also applies to certain loan commitments and financial guarantees, and includes
operational simplifications for lease and trade receivables.
IFRS 9 introduces a substantially-reformed model for hedge accounting that aligns the accounting treatment with risk
management activities, enabling entities to better reflect in their financial statements how they manage risks associated with
financial instruments. Additional disclosures about risk management activity and the effect of hedge accounting on the financial
statements are required.
IFRS 15 ‘Revenue from Contracts with Customers’ is a new standard which contains a single model that applies to contracts
with customers and two approaches to recognizing revenue, that is at a point in time or over time. lFRS 15 replaces IAS 11
‘Construction Contracts’, IAS 18 ‘Revenue’, IFRIC 13 ‘Customer Loyalty Programmes’, IFRIC 15 ‘Agreements for the Construction
of Real Estate’, IFRIC 18 ‘Transfers of Assets from Customers’ and SIC-31 ‘Revenue - Barter Transactions Involving Advertising
Services’.
The core principle of IFRS 15 is for companies to recognize revenue to depict the transfer of goods or services to customers
in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for
those goods or services. The new standard will also result in new disclosure requirements on revenue, provide guidance for
transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and
improve guidance for multiple-element arrangements.
Amendments to IAS 1 ‘Presentation of Financial Statements’ are part of the International Accounting Standards Board’s
initiatives to improve the effectiveness of disclosure in financial reporting. Amendments to IAS 1 clarify that companies shall
apply professional judgments in determining what information to disclose and how to structure it in the financial statements.
The amendments include narrow-focus improvements in the guidance on materiality, disaggregation and subtotals, note
structure, disclosure of accounting policies and presentation of items of other comprehensive income arising from equity
accounted investments.
Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments in Associates and Joint Ventures’ clarify
the accounting treatment for sales or contribution of assets between an investor and its associates or joint ventures. The
accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture
constitute a ‘business’. Full gain or loss will be recognized by the investor where the non-monetary assets constitute a
‘business’. If the assets do not meet the definition of a business, the gain or loss is recognized by the investor to the extent of
the other investors’ interests.
36
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) Amendments to IFRS 11 ‘Joint Arrangements’ introduce new guidance on the accounting for the acquisition of an interest in a
joint operation that constitutes a business. Acquirers of such interests shall apply all of the principles on business combinations
accounting in IFRS 3 ‘Business Combinations’, and other IFRSs, that do not conflict with the guidance in IFRS 11 and disclose the
information that is required in those IFRSs in relation to business combinations.
Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 38 ‘Intangible Assets’ clarify that the use of revenue-based
methods to calculate the depreciation or amortization of an asset is not appropriate because revenue generated by an activity
that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the
asset. The amendments to IAS 38 further clarify that revenue is generally presumed to be an inappropriate basis for measuring
the consumption of the economic benefits embodied in an intangible asset. This presumption however, can be rebutted in
certain limited circumstances.
Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 41 ‘Agriculture’ provide definition to a bearer plant and require
bearer plants to be accounted for in the same way as property, plant and equipment in IAS 16, because their operation is
similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41.
The produce growing on bearer plants will remain within the scope of IAS 41.
Amendments to IAS 19 ‘Employee Benefits’ regarding defined benefit plans apply to contributions from employees or third
parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are
independent of the number of years of employee service, for example, employee contributions that are calculated according to a
fixed percentage of salary.
Annual Improvements to IFRSs 2010 – 2012 Cycle, 2011 – 2013 Cycle and 2012 – 2014 Cycle comprise a number of non-urgent
but necessary amendments. None of these amendments is likely to have a significant impact on the consolidated financial
statements of the Group.
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 and are described on page 4 and pages 6 to 21.
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) A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an
acquisition include the fair value at the acquisition date of any contingent consideration. The Group recognizes the non-
controlling interest’s proportionate share of the recognized identifiable net assets of the acquired subsidiary. In a business
combination achieved in stages, the Group remeasures its previously held interest in the acquiree at its acquisition-date fair
value and recognized 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 recognized in profit and loss.
All material intercompany transactions, balances and unrealized 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) An associate is an entity, not being a subsidiary or joint venture, over which the Group exercises significant influence. A
joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.
Associates and joint ventures are included on the equity basis of accounting.
37
Jardine Matheson | Annual Report 2014 Profits and losses resulting from upstream and downstream transactions between the Group and its associates and joint
ventures are recognized in the consolidated financial statements only to the extent of unrelated investor’s interests in the
associates and joint ventures.
(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.
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 recognized in other comprehensive income and
accumulated in equity under exchange reserves. On the disposal of these investments, such exchange differences are recognized
in profit and loss. Exchange differences on available-for-sale investments are recognized 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 amortized cost of
monetary securities classified as available-for-sale and all other exchange differences are recognized 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 amortization and are tested for impairment annually and whenever
there is an indication that the assets may be impaired. Assets that are subject to amortization 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 recognized 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
(i) 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 recognized 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.
(ii) Franchise rights, which are rights under franchise agreements, are separately identified intangible assets acquired as part of
a business combination. These franchise agreements are deemed to have indefinite lives because either they do not have any
term of expiry or their renewal by the Group would be probable and would not involve significant costs, taking into account the
history of renewal and the relationships between the franchisee and the contracting parties. The useful lives are reviewed at
each balance sheet date. Franchise rights are carried at cost less accumulated impairment loss.
38
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) (iii) Leasehold land represents payments to third parties to acquire short-term interests in property. These payments are stated
at cost and are amortized over the useful life of the lease which includes the renewal period if the lease can be renewed by the
Group without significant cost.
(iv) Concession rights are operating rights for toll roads under service concession arrangements. The cost of the construction
services provided under the arrangements is amortized over the period of the concession.
(v) Other intangible assets are stated at cost less accumulated amortization. Amortization is calculated on the straight line basis
to allocate the cost of intangible assets over their estimated useful lives.
Tangible fixed assets and depreciation
Freehold land and buildings, and the building component of owner-occupied leasehold properties are stated at cost less any
accumulated depreciation and impairment. Long-term interests in leasehold land are classified as finance leases and grouped
under tangible assets if substantially all risks and rewards relating to the land have been transferred to the Group, and are
amortized over the useful life of the lease. Grants related to tangible assets are deducted in arriving at the carrying amount
of the assets. Mining properties, which are contractual rights to mine and own coal reserves in specified concession areas,
and other tangible fixed assets are stated at cost less amounts provided for depreciation. Cost of mining properties includes
expenditure to restore and rehabilitate coal mining areas following the completion of production.
Depreciation of tangible fixed assets other than mining properties 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:
Buildings
Surface, finishes and services of hotel properties
Leasehold improvements
Leasehold land
Plant and machinery
Furniture, equipment and motor vehicles
14 – 150 years
20 – 30 years
period of the lease
period of the lease
2 – 20 years
2 – 25 years
No depreciation is provided on freehold land as it is deemed to have an indefinite life. Mining properties are depreciated using
the unit of production method.
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 recognized by reference to their carrying amount.
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 commercial properties are calculated on the discounted net rental income allowing for
reversionary potential. The market value of residential properties are arrived at by reference to market evidence of transaction
prices for similar properties. Changes in fair value are recognized in profit and loss.
Plantations
Plantations, which principally comprise oil palm plantations and exclude the related land, are measured at each balance sheet
date at their fair values, representing the present value of expected net cash flows from the assets in their present location and
condition determined internally, less estimated point of sale costs, based on a discounted cash flow method using unobservable
inputs. Changes in fair values are recorded in the profit and loss account. The plantations which have a life of approximately 25
years are considered mature three to four years after planting and once they are generating fresh fruit bunches which average
four to six tonnes per hectare per year.
39
Jardine Matheson | Annual Report 2014 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 fair value are recognized 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 recognized in profit and loss. Held-to-maturity investments are shown at
amortized cost. Investments are classified under non-current assets unless they are expected to be realized within 12 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 and are recognized in profit and loss.
(iii) All purchases and sales of investments are recognized 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.
(i) Amount due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the
leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s
net investment outstanding in respect of the leases.
(ii) Plant and machinery under finance leases are capitalized at the commencement of the lease at the lower of the fair value of
the leased asset and the present value of the minimum lease payments. Lease payments are allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance outstanding.
(iii) 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 recognized 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 realizable value.
The cost of properties for sale comprises land costs, and construction and other development costs.
Stocks and work in progress
Stocks, which principally comprise goods held for resale, are stated at the lower of cost and net realizable value. Cost is
determined by the first-in, first-out method. The cost of finished goods and work in progress comprises raw materials, labour
and an appropriate proportion of overheads.
Debtors
Consumer financing debtors and financing lease receivables are measured at amortized cost using the effective interest method.
The gross amount due from customers for contract work is stated at cost plus an appropriate proportion of profit, established
by reference to the percentage of completion, and after deducting progress payments and provisions for foreseeable losses.
Repossessed assets of finance companies are measured at the lower of the carrying amount of the debtors in default and fair
value less costs to sell. All other debtors, excluding derivative financial instruments, are measured at amortized 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 reorganization, 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 recognized 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 12 months after the balance sheet date are classified under non-current assets.
40
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial institutions,
bank and cash balances, and liquid investments, net of bank overdrafts. In the balance sheet, bank overdrafts are included in
current borrowings.
Liquid investments, which are readily convertible to known amounts of cash and which are subject to an insignificant risk of
change in value, are included in bank balances and other liquid funds and are stated at market value. Increases or decreases in
market value are recognized in profit and loss.
Provisions
Provisions are recognized 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 recognized at fair value, net of transaction costs incurred. In subsequent periods, borrowings are stated
at amortized cost using the effective interest method.
On the issue of bonds which are convertible into a fixed number of ordinary shares of the issuing entity, the fair value of the
liability portion is determined using a market interest rate for an equivalent non-convertible bond; this amount is included in
long-term borrowings on the amortized cost basis until extinguished on conversion or maturity of the bond. The remainder of
the proceeds is allocated to the conversion option which is recognized and included in shareholders’ funds. On the issue of
convertible bonds which are not convertible into the issuing entity’s own shares or which are not convertible into a fixed number
of ordinary shares of the issuing entity, the fair value of the conversion option component is determined and included in current
liabilities, and the residual amount is allocated to the carrying amount of the bond. Any conversion option component included
in current liabilities is shown at fair value with changes in fair value recognized in profit and loss.
Borrowing costs relating to major development projects are capitalized until the asset is substantially completed. Capitalized
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 12 months after the balance sheet date.
Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognized in profit and loss, except to the extent that
it relates to items recognized in other comprehensive income or direct in equity. In this case, the tax is also recognized 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 realized 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 recognized to the extent that it is probable that
future taxable profit will be available against which the unused tax losses can be utilized.
41
Jardine Matheson | Annual Report 2014 Employee benefits
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 arising from experience adjustments and changes in actuarial assumptions are recognized in other
comprehensive income in the year in which they occur.
Past service costs are recognized immediately in profit and loss.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year to which they
relate.
Share-based compensation
The Company and its subsidiaries and associates operate a number of equity settled employee share option schemes. The
fair value of the employee services received in exchange for the grant of the options in respect of options granted after 7th
November 2002 is recognized as an expense. The total amount to be expensed over the vesting period is determined by
reference to the fair value of the options granted as determined on the grant date. At each balance sheet date, the entity revises
its estimates of the number of options that are expected to become exercisable. The impact of the revision of original estimates,
if any, is recognized in profit and loss.
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 amortized or depreciated.
Derivative financial instruments
The Group only enters into derivative financial instruments in order to hedge underlying exposures. Derivative financial
instruments are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing 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 recognized asset or liability (‘fair value
hedge’), or a hedge of a forecasted 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
recognized 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 amortized
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
recognized in other comprehensive income and accumulated in equity under hedging reserves. Changes in the fair value relating
to the ineffective portion is recognized immediately in profit and loss. Where the forecasted 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 forecasted 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 recognized when the committed or forecasted transaction ultimately is recognized
in profit and loss. When a committed or forecasted 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.
42
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 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 recognized 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 recognized in other comprehensive income and
accumulated in exchange reserves; the gain or loss relating to the ineffective portion is recognized 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 12 months after the balance sheet date.
Insurance contracts
Insurance contracts are those contracts that transfer significant insurance risk.
Premiums on insurance contracts are recognized as revenue proportionately over the period of coverage. The portion of
premium received on in-force contracts that relates to unexpired risks at the balance sheet date is reported as the unearned
premium liability. Claims and loss adjustment expenses are charged to profit and loss as incurred based on the estimated
liabilities for compensation owed to contract holders or third parties damaged by the contract holders. They include direct and
indirect claims settlement costs and arise from events that have occurred up to the balance sheet date even if they have not
yet been reported to the Group. The Group does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are
estimated using the input of assessments for individual cases reported to the Group and statistical analyzes for the claims
incurred but not reported.
Financial guarantee contracts under which the Group accepts significant risk from a third party by agreeing to compensate
that party on the occurrence of a specified uncertain future event are accounted for in a manner similar to insurance contracts.
Provisions are recognized when it is probable that the Group has obligations under such guarantees and an outflow of resources
embodying economic benefits will be required to settle the obligations.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable
right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability
simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal
course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
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 and plantations;
gains and losses arising from the sale of businesses, investments and 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. The weighted average number excludes the Company’s share of the shares held by subsidiaries and the
shares held by the Trustee under the Senior Executive Share Incentive Schemes. 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
of subsidiaries, associates or joint ventures, and the weighted average number of shares is adjusted for the number of shares
which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average
share price during the year.
43
Jardine Matheson | Annual Report 2014 Dividends
Dividends proposed or declared after the balance sheet date are not recognized as a liability at the balance sheet date.
The nominal amount of the ordinary shares issued as a result of election for scrip is capitalized out of the share premium
account or other reserves, as appropriate.
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 the sale of goods, including properties for sale, is recognized on the transfer of significant risks and rewards of
ownership, which generally coincides with the time when the goods are delivered to customers.
(ii) Receipts under operating leases are accounted for on an accrual basis over the lease terms.
(iii) Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.
(iv) Revenue from consumer financing and financing leases is recognized over the term of the respective contracts based on a
constant rate of return on the net investment.
(v) Interest income is recognized on a time proportion basis taking into account the principal amounts outstanding and the
interest rates applicable.
(vi) Dividend income is recognized when the right to receive payment is established.
Pre-operating costs
Pre-operating costs are expensed as they are incurred.
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 directions of the board of Jardine Matheson 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 minimize the Group’s financial risks. The
Group uses derivative financial instruments, principally interest rate swaps, caps and collars, cross-currency swaps, forward
foreign exchange contracts and foreign currency options 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 recognized immediately in the 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 2014 are disclosed in note 34.
44
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) (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, forward foreign exchange contracts and foreign currency options 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 entities 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 2014 the Group’s Indonesian rupiah functional entities had United States dollar
denominated net monetary assets of US$176 million (2013: net monetary liabilities of US$159 million). At 31st December
2014, if the United States dollar had strengthened/weakened by 10% against the Indonesian rupiah with all other variables
unchanged, the Group’s profit after tax would have been US$13 million higher/lower (2013: US$12 million lower/ higher),
arising from foreign exchange gains/losses taken on translation. The impact on amounts attributable to the shareholders of
the Company would be US$2 million higher/lower (2013: US$3 million lower/ higher). This sensitivity analysis ignores any
offsetting foreign exchange factors and has been determined assuming that the change in foreign exchange rates had occurred
at the balance sheet date. The stated change represents management’s assessment of reasonably possible changes in foreign
exchange rates over the period until the next annual balance sheet date. There are no other significant monetary balances held
by Group companies at 31st December 2014 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.
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 partly by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities,
and partly through fixed rate borrowings and the use of derivative financial instruments such as interest rate swaps, caps and
collars. 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,
exclusive of the financial services companies, in fixed rate instruments. At 31st December 2014 the Group’s interest rate hedge
exclusive of the financial services companies was 45% (2013: 43%), with an average tenor of eight years (2013: eight years).
The financial services companies borrow predominately at a fixed rate. The interest rate profile of the Group’s borrowings after
taking into account hedging transactions are set out in note 30.
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, caps
and collars for a maturity of up to five years. Forward rate agreements and interest rate swaps have the economic effect of
converting borrowings from floating rate to fixed rate, caps provide protection against a rise in floating rates above a pre-
determined rate, whilst collars combine the purchase of a cap and the sale of a floor to specify a range in which an interest rate
will fluctuate.
Fair value interest rate risk is the risk that the value of a financial asset or liability and derivative financial instruments 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 within the Group’s guideline.
45
Jardine Matheson | Annual Report 2014 At 31st December 2014, 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$26 million (2013: US$27 million) higher/lower, and hedging reserves would have
been US$111 million (2013: US$84 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. There is no significant sensitivity resulting from interest rate caps and collars. 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 Indonesian rates, over the period until the next annual balance
sheet date. In the case of effective fair value hedges, changes in the fair value of the hedged items caused by interest rate
movements balance out in the 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 and unlisted 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
recognized 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 17.
Available-for-sale investments are unhedged. At 31st December 2014, 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$343 million
(2013: US$287 million) higher/lower unless impaired. The sensitivity analysis has been determined based on a reasonable
expectation of possible valuation volatility over the next 12 months.
The Group is exposed to financial risks arising from changes in commodity prices, primarily crude palm oil, coal, steel rebar
and copper. The Group considers the outlook for crude palm oil, coal, steel rebar and copper prices regularly in considering the
need for active financial risk management. The Group’s policy is generally not to hedge commodity price risk, although limited
hedging may be undertaken for strategic reasons. In such cases the Group uses forward contracts to hedge the price risk. To
mitigate or hedge the price risk, Group entities may enter into a forward contract to buy the commodity at a fixed price at a
future date, or a forward contract to sell the commodity at a fixed price at a future date.
(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 utilization of credit limits is regularly monitored. At 31st December 2014, over 66% (2013: 68%) of deposits
and balances with banks and financial institutions were made to institutions with credit ratings of no less than A- (Fitch).
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 sales on credit without collateral are
made principally to corporate companies with an appropriate credit history and credit insurance is purchased for businesses
where it is economically effective. The Group normally obtains collateral over vehicles from consumer financing debtors towards
settlement of vehicle receivables. Customers give the right to the Group to sell the repossessed collateral or take any other
action to settle the outstanding receivable. Sales to other customers are made in cash or by major credit cards.
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.
46
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) (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 2014, total available borrowing facilities amounted to US$20.4 billion (2013: US$20.2 billion) of which
US$11.5 billion (2013: US$11.3 billion) was drawn down. Undrawn committed facilities, in the form of revolving credit and
term loan facilities, and undrawn uncommitted facilities totalled US$6.1 billion (2013: US$6.5 billion) and US$2.8 billion
(2013: US$2.4 billion), respectively.
The following table analyzes the Group’s non-derivative financial liabilities, net-settled derivative financial liabilities and
gross-settled derivative financial instruments into relevant maturity groupings based on the remaining period at the balance
sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual
maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Between
one and
two years
Between
two and
three years
Between
three and
four years
Between
four and
five years
Beyond
Total
five undiscounted
cash flows
years
US$m
US$m
US$m
US$m
US$m
US$m
Within
one
year
US$m
4,466
6,495
2,405
163
1,516
67
3
1
–
2,046
2,050
143
5,172
6,352
835
824
–
488
476
–
2,169
86
1,475
52
7
2
1
1,919
1,774
110
443
370
–
171
149
–
At 31st December 2014
Borrowings
Creditors
Net settled derivative
financial instruments
Gross settled derivative
financial instruments
– inflow
– outflow
Estimated losses on
insurance contracts
At 31st December 2013
Borrowings
Creditors
Net settled derivative
financial instruments
Gross settled derivative
financial instruments
– inflow
– outflow
Estimated losses on
insurance contracts
603
28
–
100
86
–
791
32
–
53
44
–
949
20
2
151
141
–
371
27
–
53
44
–
3,320
99
13,259
6,872
–
6
1,858
1,815
5,478
5,392
–
143
2,983
90
12,961
6,639
–
10
1,499
1,475
4,138
3,856
–
110
47
Jardine Matheson | Annual Report 2014
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 maximize 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 and other
liquid funds. Interest cover is calculated as underlying operating profit and share of results of associates and joint ventures
divided by net financing charges. The ratios are monitored both inclusive and exclusive of the Group’s financial services
companies, which by their nature are generally more highly leveraged than the Group’s other businesses. The Group does not
have a defined gearing or interest cover benchmark or range.
The ratios at 31st December 2014 and 2013 are as follows:
Gearing ratio exclusive of financial services companies (%)
Gearing ratio inclusive of financial services companies (%)
Interest cover exclusive of financial services companies (times)
Interest cover inclusive of financial services companies (times)
2014
2013
6
14
29
39
6
14
30
38
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) 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 derivative financial instruments are determined using rates quoted by the Group’s bankers at the balance
sheet date. The rates for interest rate swaps and caps, cross-currency swaps, forward foreign exchange contracts and credit
default swaps are calculated by reference to market interest rates and foreign exchange rates.
The fair value of unlisted investments, which are classified as available-for-sale and mainly include club and school debentures,
are determined using prices quoted by brokers at the balance sheet date.
(c) Inputs for assets or liabilities that are not based on observable market data (‘unobservable inputs’)
The fair value of other unlisted securities, which are classified as available-for-sale, is determined using valuation techniques by
reference to observable current market transactions (including price-to earnings and price-to book ratios of listed securities of
entities engaged in similar industries) or the market prices of the underlying investments with certain degree of entity specific
estimates. The fair value of convertible component of convertible bonds held is made reference to the quoted price of the
underlying shares and estimation on volatility.
There were no changes in valuation techniques during the year.
48
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) The table below analyzes financial instruments carried at fair value, by the levels in the fair value measurement hierarchy.
2014
Assets
Available-for-sale financial assets
– listed securities
– unlisted investments
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Liabilities
Contingent consideration payable
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
2013
Assets
Available-for-sale financial assets
– listed securities
– unlisted investments
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Liabilities
Contingent consideration payable
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Quoted
prices in active
markets
Observable
current market
transactions
Unobservable
inputs
US$m
US$m
US$m
1,140
–
1,140
–
–
1,140
–
–
–
–
943
–
943
–
–
943
–
–
–
–
–
43
43
184
20
247
–
(33)
(10)
(43)
–
42
42
285
9
336
–
(25)
(34)
(59)
–
189
189
–
–
189
(67)
–
–
(67)
–
161
161
–
–
161
(66)
–
–
(66)
There were no transfers among the three categories during the year ended 31st December 2014.
Total
US$m
1,140
232
1,372
184
20
1,576
(67)
(33)
(10)
(110)
943
203
1,146
285
9
1,440
(66)
(25)
(34)
(125)
49
Jardine Matheson | Annual Report 2014 Movements of financial instruments which are valued based on unobservable inputs during the year ended 31st December are
as follows:
At 1st January
Exchange differences
Additions
Capital repayment
Payment of contingent consideration
Net change in fair value during the year
– included in other comprehensive income
– included in profit and loss
At 31st December
2014
2013
Available-for-
sale financial
assets
Contingent
consideration
payable
Available-for-
sale financial
assets
Contingent
consideration
payable
US$m
US$m
US$m
US$m
161
(2)
2
–
–
28
–
189
66
–
–
–
(1)
–
2
67
134
(5)
6
(2)
–
28
–
161
68
–
–
–
(2)
–
–
66
The contingent consideration payable mainly arose from Astra’s acquisition of a 60% interest in PT Duta Nurcahya in 2012 and
represents the fair value of service fee payable for mining services to be provided by the vendor.
(ii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank balances and other liquid funds, 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.
50
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) Financial instruments by category
The fair values of financial assets and financial liabilities, together with carrying amounts at 31st December 2014 and 2013 are
as follows:
Loans and
receivables
Derivatives
used for
hedging
Available-
for-sale
Other
financial
instruments
fair value
through
profit and
loss
Other
financial
instruments
at amortized
cost
US$m
US$m
US$m
US$m
US$m
2014
Assets
Other investments
Debtors
Bank balances and other
liquid funds
Liabilities
Borrowings (excluding
finance lease liabilities)
Finance lease liabilities
Trade and other payables
excluding non-financial
liabilities
2013
Assets
Other investments
Debtors
Bank balances and other
liquid funds
Liabilities
Borrowings (excluding
finance lease liabilities)
Finance lease liabilities
Trade and other payables
excluding non-financial
liabilities
–
8,308
5,315
13,623
–
–
–
–
–
7,336
5,214
12,550
–
–
–
–
–
204
–
204
–
–
(43)
(43)
–
294
–
294
–
–
(59)
(59)
1,372
–
–
1,372
–
–
–
–
–
–
–
–
(11,400)
(84)
(6,805)
(18,289)
1,146
–
–
1,146
–
–
–
–
–
–
–
–
(11,161)
(123)
(6,573)
(17,857)
Total
carrying
amount
US$m
Fair value
US$m
1,372
8,525
1,372
8,455
5,315
5,315
15,212
15,142
(11,400)
(84)
(11,471)
(84)
–
13
–
13
–
–
(67)
(67)
(6,915)
(6,915)
(18,399)
(18,470)
–
14
–
14
–
–
1,146
7,644
1,146
7,239
5,214
5,214
14,004
13,599
(11,161)
(123)
(11,075)
(123)
(66)
(66)
(6,698)
(6,698)
(17,982)
(17,896)
51
Jardine Matheson | Annual Report 2014
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 franchise rights, leasehold land, concession rights, tangible assets, investment properties and plantations 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.
On initial acquisition or acquisition of further interests in an entity, an assessment of the level of control or influence exercised
by the Group is required. For entities where the Group has a shareholding of less than 50%, an assessment of the Group’s level
of voting rights, board representation and other indicators of influence is performed to consider whether the Group has de facto
control, requiring consolidation of that entity, or significant influence, requiring classification as an associate.
Tangible fixed assets and depreciation
Management determines the estimated useful lives and related depreciation charges for the Group’s tangible fixed assets.
Management will revise the depreciation charge where useful lives are different to those previously estimated, or it will write off
or write down technically obsolete or non-strategic assets that have been abandoned.
Investment properties
The fair values of investment properties, which are principally held by Hongkong Land, are determined by independent valuers
on an open market for existing-use basis calculated on the discounted net income allowing for reversionary potential. For
investment properties in Hong Kong and Singapore, capitalization rates in the range of 3.50% to 4.45% for office (2013: 3.50%
to 4.45%) and 4.50% to 5.50% for retail (2013: 4.50% to 5.50%) are used by Hongkong Land in the fair value determination.
Consideration has been given to assumptions that are mainly based on market conditions existing at the balance sheet date and
appropriate capitalization rates. These estimates are regularly compared to actual market data and actual transactions entered
into by the Group.
Plantations
The fair values of plantations are determined by management based on the expected cash flows from the plantations.
Management applies judgement in determining the assumptions to be used; the significant ones include a historical average
crude palm oil price as the basis for deriving the price of fresh fruit bunches, maintenance costs, inflation, the yield per hectare
based on industry standards and historical experience and the discount rate.
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 amount of estimated coal reserves, the discount rates or the growth
rate assumptions in the cash flow projections, could materially affect the value-in-use calculations.
The results of the impairment reviews undertaken at 31st December 2014 on the Group’s indefinite life franchise rights indicated
that no impairment charge was necessary. If there is a significant increase in the discount rate and/or a significant adverse
change in the projected performance of the business to which these rights attach, it may be necessary to take an impairment
charge to profit and loss in the future.
52
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 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 financing cash flow.
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 for 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 utilized. The outcome of their actual utilization 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 discount rate. Any
changes in these assumptions will impact the carrying amount of pension obligations.
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 obligation.
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.
53
Jardine Matheson | Annual Report 2014 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 eight
operating segments as more fully described on page 4. 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.
2014
Revenue (refer note 5)
Net operating costs
Change in fair value of investment properties
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
– change in fair value of investment properties
Profit before tax
Tax
Profit after tax
Non-controlling interests
Profit attributable to shareholders
Net (debt)/cash (excluding net debt of financial
services companies)*
Total equity
2013
Revenue (refer note 5)
Net operating costs
Change in fair value of investment properties
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
– change in fair value of investment properties
Profit before tax
Tax
Profit after tax
Non-controlling interests
Profit attributable to shareholders
Net (debt)/cash (excluding net debt of financial
services companies)*
Total equity
Jardine
Pacific
US$m
2,576
(2,530)
–
46
(6)
–
(6)
105
–
105
145
(14)
131
–
131
(225)
706
2,346
(2,332)
–
14
(6)
–
(6)
112
–
112
120
(10)
110
–
110
(255)
706
Jardine
Motors
US$m
5,128
(4,982)
–
146
(13)
–
(13)
–
–
–
133
(34)
99
(2)
97
(177)
554
4,469
(4,386)
–
83
(13)
1
(12)
–
–
–
71
(13)
58
1
59
(117)
514
Jardine
Lloyd
Thompson
US$m
Hongkong
Land
US$m
Dairy Farm
US$m
Mandarin
Oriental
US$m
–
–
–
–
–
–
–
85
–
85
85
–
85
–
85
–
513
–
–
–
–
–
–
–
76
–
76
76
–
76
–
76
–
553
1,876
(809)
–
1,067
(114)
45
(69)
123
–
123
1,121
(188)
933
(549)
384
(2,657)
27,598
1,857
(940)
–
917
(106)
42
(64)
235
–
235
1,088
(149)
939
(554)
385
11,008
(10,484)
–
524
(9)
7
(2)
69
–
69
591
(93)
498
(178)
320
475
1,724
10,357
(9,835)
–
522
(11)
8
(3)
69
–
69
588
(102)
486
(179)
307
(3,025)
26,899
638
1,585
680
(559)
–
121
(20)
3
(17)
12
–
12
116
(19)
97
(38)
59
(403)
1,065
669
(557)
–
112
(17)
2
(15)
17
–
17
114
(20)
94
(38)
56
(479)
1,099
Jardine
Cycle &
Carriage
US$m
1,680
(1,629)
–
51
–
–
–
47
–
47
98
(11)
87
(37)
50
60
382
1,348
(1,306)
–
42
(1)
–
(1)
27
–
27
68
(7)
61
(26)
35
17
357
Astra
US$m
16,995
(15,259)
–
1,736
(116)
102
(14)
490
–
490
2,212
(476)
1,736
(1,297)
439
(266)
10,497
18,440
(16,467)
–
1,973
(105)
78
(27)
586
–
586
2,532
(530)
2,002
(1,494)
508
(303)
9,590
Corporate
and other
interests
US$m
Intersegment
transactions
Underlying
businesses
performance
Non-trading
items
US$m
US$m
US$m
–
(57)
–
(57)
(1)
6
5
2
–
2
(50)
(4)
(54)
23
(31)
710
1,829
–
(62)
–
(62)
(1)
6
5
–
–
–
(57)
(4)
(61)
27
(34)
(22)
22
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(63)
(21)
21
–
–
–
–
–
–
–
–
–
–
–
–
–
39,921
(36,287)
–
3,634
(279)
163
(116)
933
–
933
4,451
(839)
3,612
(2,078)
1,534
39,465
(35,864)
–
3,601
(260)
137
(123)
1,122
–
1,122
4,600
(835)
3,765
(2,263)
1,502
–
(17)
59
42
–
–
–
23
394
417
459
(1)
458
(282)
176
–
(31)
(60)
(91)
–
–
–
(32)
352
320
229
(9)
220
(156)
64
922
1,541
1
(62)
Group
US$m
39,921
(36,304)
59
3,676
(279)
163
(116)
956
394
1,350
4,910
(840)
4,070
(2,360)
1,710
(2,483)
44,805
39,465
(35,895)
(60)
3,510
(260)
137
(123)
1,090
352
1,442
4,829
(844)
3,985
(2,419)
1,566
(2,601)
42,782
*
Net (debt)/cash is total borrowings less bank balances and other liquid funds. Net debt of financial services companies amounted to US$3,686 million at
31st December 2014 (2013: US$3,469 million) and relates to Astra.
54
55
Jardine Matheson | Annual Report 2014Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 4 Segment Information (continued)
Set out below are analyzes of the Group’s underlying profit attributable to shareholders and non-current assets, by
geographical areas:
Underlying profit attributable to shareholders:
Greater China
Southeast Asia
United Kingdom
Rest of the world
Corporate and other interests
Non-current assets*:
Greater China
Southeast Asia
United Kingdom
Rest of the world
*
Excluding financial instruments, deferred tax assets and pension assets.
2014
US$m
743
706
80
36
1,565
(31)
1,534
27,449
14,347
768
903
43,467
2013
US$m
648
803
60
25
1,536
(34)
1,502
26,978
14,012
755
1,049
42,794
56
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 5 Revenue
By business:
Jardine Pacific
Jardine Motors
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Intersegment transactions
By product and service:
Agribusiness
Engineering and construction
Mining
Financial services
Logistics and IT services
Motor vehicles
Property and hotels
Restaurants
Retail
By geographical location of customers:
Greater China
Southeast Asia
United Kingdom
Rest of the world
Gross revenue
Revenue
2014
US$m
6,125
5,128
1,817
3,125
13,103
1,044
3,633
29,461
(654)
62,782
2,232
4,976
3,224
4,812
2,715
26,701
4,393
2,373
11,356
62,782
17,376
40,745
3,573
1,088
62,782
2013
US$m
5,380
4,469
1,532
3,643
12,432
1,035
3,019
30,646
(776)
61,380
1,200
4,625
3,341
4,358
2,707
27,352
4,896
2,020
10,881
61,380
15,243
42,083
3,106
948
61,380
2014
US$m
2,576
5,128
–
1,876
11,008
680
1,680
16,995
(22)
39,921
1,372
1,668
3,224
1,330
2,246
15,809
2,690
574
11,008
39,921
12,069
24,951
2,608
293
39,921
Gross revenue comprises revenue together with 100% of revenue from associates and joint ventures.
2013
US$m
2,346
4,469
–
1,857
10,357
669
1,348
18,440
(21)
39,465
1,200
1,866
3,341
1,374
2,223
16,045
2,638
421
10,357
39,465
10,847
26,079
2,264
275
39,465
57
Jardine Matheson | Annual Report 2014 6 Net Operating Costs
Cost of sales
Other operating income
Selling and distribution costs
Administration expenses
Other operating expenses
The following credits/(charges) are included in net operating costs:
Cost of stocks recognized as expense
Cost of properties for sale recognized as expense
Amortization of intangible assets
Depreciation of tangible assets
Impairment of tangible assets
Impairment of other investments
Write down of stocks and work in progress
Reversal of write down of stocks and work in progress
Reversal of write down of properties for sale
Impairment of debtors
Operating expenses arising from investment properties
Employee benefit expense
– salaries and benefits in kind
– share options granted
– defined benefit pension plans (refer note 20)
– defined contribution pension plans
Net foreign exchange losses
Operating lease expenses
– minimum lease payments
– contingent rents
– subleases
Auditors’ remuneration
– audit
– non-audit services
Dividend and interest income from available-for-sale investments
Rental income from properties
Net operating costs included the following gains/(losses) from non-trading items:
Decrease in fair value of plantations
Asset impairment
Sale and closure of businesses
Sale of other investments
Sale of property interests
Fair value loss on convertible component of Zhongsheng bonds
Expenses relating to transfer of listing segment of group companies’ shares
Other
58
2014
US$m
(30,575)
566
(4,129)
(1,844)
(322)
(36,304)
(27,688)
(616)
(109)
(898)
(231)
–
(57)
26
56
(129)
(149)
(3,159)
(11)
(80)
(87)
(3,337)
(8)
(1,072)
(27)
54
(1,045)
(18)
(6)
(24)
50
32
(34)
10
6
16
12
(17)
(5)
(5)
(17)
2013
US$m
(30,663)
532
(3,848)
(1,738)
(178)
(35,895)
(27,525)
(719)
(96)
(943)
(1)
(55)
(59)
19
12
(117)
(142)
(3,032)
(11)
(77)
(77)
(3,197)
(16)
(983)
(26)
55
(954)
(18)
(6)
(24)
52
33
(15)
(55)
10
–
29
–
–
–
(31)
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 7 Net Financing Charges
Interest expense
– bank loans and advances
– other
Fair value gains/(losses) on fair value hedges
Fair value adjustment on hedged items attributable to the hedged risk
Interest capitalized
Commitment and other fees
Financing charges
Financing income
8 Share of Results of Associates and Joint Ventures
By business:
Jardine Pacific
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
2014
US$m
(116)
(135)
(251)
28
(28)
–
(251)
41
(69)
(279)
163
(116)
2014
US$m
104
72
516
69
12
47
530
2013
US$m
(132)
(118)
(250)
(73)
73
–
(250)
28
(38)
(260)
137
(123)
2013
US$m
112
67
586
66
21
27
563
Share of results of associates and joint ventures included the following gains/(losses)
from non-trading items:
Increase in fair value of investment properties
Asset impairment
Restructuring of businesses
Negative goodwill on acquisition of business
Results are shown after tax and non-controlling interests in the associates and joint ventures.
1,350
1,442
394
(1)
(13)
37
417
352
(20)
(12)
–
320
59
Jardine Matheson | Annual Report 2014
9 Tax
Tax charged to profit and loss is analyzed as follows:
Current tax
Deferred tax
Greater China
Southeast Asia
United Kingdom
Rest of the world
Reconciliation between tax expense and tax at the applicable tax rate*:
Tax at applicable tax rate
Income not subject to tax
– change in fair value of investment properties
– other items
Expenses not deductible for tax purposes
– change in fair value of investment properties
– other items
Tax losses and temporary differences not recognized
Utilization of previously unrecognized tax losses and temporary differences
Recognition of previously unrecognized tax losses and temporary differences
Deferred tax assets written off
Over/(under) provision in prior years
Withholding tax
Other
Tax relating to components of other comprehensive income is analyzed as follows:
Remeasurements of employee benefit plans
Cash flow hedges
2014
US$m
(900)
60
(840)
(302)
(525)
(10)
(3)
(840)
2013
US$m
(905)
61
(844)
(212)
(618)
(8)
(6)
(844)
(731)
(685)
19
55
(15)
(58)
(30)
7
–
(1)
6
(62)
(30)
(840)
11
3
14
25
41
(42)
(103)
(31)
6
4
(2)
(1)
(54)
(2)
(844)
(19)
(8)
(27)
Share of tax charge of associates and joint ventures of US$321 million and credit of US$13 million (2013: charge of
US$374 million and US$4 million) are included in share of results of associates and joint ventures and share of other
comprehensive income of associates and joint ventures, respectively.
*
The applicable tax rate for the year was 20.5% (2013: 20.2%) and represents the weighted average of the rates of taxation prevailing in the territories in
which the Group operates. The increase in applicable tax rate was mainly caused by a change in the geographic mix of the Group’s profits.
60
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 10 Earnings per Share
Basic earnings per share are calculated on profit attributable to shareholders of US$1,710 million (2013: US$1,566 million) and
on the weighted average number of 370 million (2013: 368 million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable to shareholders of US$1,710 million (2013: US$1,565 million),
which is after adjusting for the effects of the conversion of dilutive potential ordinary shares of subsidiaries, associates or joint
ventures, and on the weighted average number of 371 million (2013: 369 million) shares in issue during the year.
The weighted average number of shares is arrived at as follows:
Weighted average number of shares in issue
Company’s share of shares held by subsidiaries
Weighted average number of shares for basic earnings per share calculation
Adjustment for shares deemed to be issued for no consideration under the
Senior Executive Share Incentive Schemes
Weighted average number of shares for diluted earnings per share calculation
Ordinary shares
in millions
2014
685
(315)
370
1
371
2013
675
(307)
368
1
369
Additional basic and diluted earnings per share are also calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2014
Basic
earnings
per share
US$
4.62
Diluted
earnings
per share
US$
4.61
US$m
1,710
(176)
2013
Basic
earnings
per share
US$
4.26
Diluted
earnings
per share
US$
4.25
US$m
1,566
(64)
1,534
4.14
4.13
1,502
4.09
4.07
Profit attributable to shareholders
Non-trading items (refer note 11)
Underlying profit attributable to
shareholders
61
Jardine Matheson | Annual Report 2014 11 Non-trading Items
By business:
Jardine Pacific
Jardine Motors
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
An analysis of non-trading items after interest, tax and non-controlling interests
is set out below:
Increase in fair value of investment properties
– Hongkong Land
– other
Decrease in fair value of plantations
Asset impairment
Sale and closure of businesses
Sale of other investments
Sale of property interests
Restructuring of businesses
Fair value loss on convertible component of Zhongsheng bonds
Expenses relating to transfer of listing segment of group companies’ shares
Negative goodwill on acquisition of business
Other
2014
US$m
2013
US$m
7
(2)
(13)
164
6
–
(1)
18
(3)
176
161
18
179
(5)
2
3
14
7
(14)
(14)
(4)
11
(3)
176
2
(3)
(9)
105
13
2
–
(1)
(45)
64
105
8
113
(2)
(50)
3
–
14
(14)
–
–
–
–
64
62
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
Goodwill
US$m
Franchise
rights
US$m
Leasehold
land
Concession
rights
US$m
US$m
1,030
(4)
1,026
(27)
127
–
–
–
–
1,126
1,130
(4)
1,126
1,079
(5)
1,074
(115)
69
–
(2)
–
–
–
1,026
1,030
(4)
1,026
177
(2)
175
(4)
–
1
–
–
–
172
172
–
172
220
–
220
(45)
–
–
–
–
–
–
175
177
(2)
175
754
(137)
617
(18)
2
187
20
(40)
(33)
735
898
(163)
735
781
(138)
643
(142)
42
106
(7)
2
4
(31)
617
754
(137)
617
357
(17)
340
(11)
–
85
–
–
(6)
408
431
(23)
408
384
(17)
367
(83)
–
61
–
–
–
(5)
340
357
(17)
340
12
Intangible Assets
2014
Cost
Amortization and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Revaluation surplus before transfer
to investment properties
Transfer to investment properties
and properties for sale
Amortization
Net book value at 31st December
Cost
Amortization and impairment
2013
Cost
Amortization and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Revaluation surplus before transfer
to investment properties
Transfer from investment properties
Amortization
Net book value at 31st December
Cost
Amortization and impairment
Goodwill allocation by business:
Jardine Pacific
Jardine Motors
Dairy Farm
Mandarin Oriental
Astra
Other
US$m
296
(121)
175
(5)
10
128
Total
US$m
2,614
(281)
2,333
(65)
139
401
–
20
–
(70)
238
385
(147)
238
271
(109)
162
(23)
17
80
(1)
–
–
(60)
175
296
(121)
175
2014
US$m
152
49
575
40
310
(40)
(109)
2,679
3,016
(337)
2,679
2,735
(269)
2,466
(408)
128
247
(10)
2
4
(96)
2,333
2,614
(281)
2,333
2013
US$m
152
52
466
40
316
1,126
1,026
63
Jardine Matheson | Annual Report 2014
Intangible Assets (continued)
12
Goodwill relating to Dairy Farm is allocated to groups of cash-generating units identified by banners or group of stores acquired
in each geographical segment. Cash flow projections for impairment reviews are based on budgets prepared on the basis of
assumptions reflective of the prevailing market conditions, and are discounted appropriately. Key assumptions used for value-
in-use calculations include budgeted gross margins of between 23% and 30% and growth rates of up to 8% to extrapolate cash
flows, which vary across the group’s business segments and geographical locations, over a five-year period and thereafter,
and are based on management expectations for the market development; and pre-tax discount rates of between 7% and 18%
applied to the cash flow projections. The discount rates used reflect business specific risks relating to the relevant industry,
business life-cycle and geographical location. On the basis of these reviews, management concluded that no impairment
has occurred.
Goodwill relating to Astra represents goodwill arising from acquisition of shares in Astra which is regarded as an operating
segment. Accordingly, for the purpose of impairment review, the carrying value of Astra is compared with the recoverable
amount measured by reference to the quoted market price of the shares held. On the basis of this review and the continued
expected level of profitability, management concluded that no impairment has occurred.
Franchise rights are rights under franchise agreements with automobile and heavy equipment manufacturers. These franchise
agreements are deemed to have indefinite lives because either they do not have any term of expiry or their renewal would be
probable and would not involve significant costs, taking into account the history of renewal and the relationships between the
franchisee and the contracting parties. The carrying amounts of franchise rights, which included automotive of US$61 million
and heavy equipment of US$109 million, are not amortized as such rights will contribute cash flows for an indefinite period.
Management has performed an impairment review of the carrying amounts of franchise rights at 31st December 2014 and has
concluded that no impairment has occurred. The impairment review was made by comparing the carrying amounts of the cash-
generating units in which the franchise rights reside with the recoverable amounts of the cash-generating units. The recoverable
amounts of the cash-generating units are determined based on value-in-use calculations. These calculations use pre-tax cash
flow projections based on budgets covering a three-year period. Cash flows beyond the three-year period are extrapolated
using growth rates of between 3% and 4%. Pre-tax discount rates of between 23% and 26%, reflecting business specific risks,
are applied to the cash flow projections.
Other intangible assets comprise trademarks, computer software, hotel development costs, deferred acquisition costs for
insurance contracts and customer contracts.
At 31st December 2014, the carrying amount of leasehold land pledged as security for borrowings amounted to US$9 million
(2013: US$10 million) (refer note 30).
The amortization charges are all recognized in arriving at operating profit and are included in cost of sales, selling and
distribution costs and administration expenses.
The remaining amortization periods for intangible assets are as follows:
up to 85 years
30 – 33 years
up to 8 years
up to 40 years
Leasehold land
Concession rights
Computer software
Other
64
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 13 Tangible Assets
Freehold
properties
Leasehold
properties
Leasehold
improve-
ments
Mining
properties
Plant &
machinery
Furniture,
equipment
& motor
vehicles
US$m
US$m
US$m
US$m
US$m
US$m
2014
Cost
Depreciation and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Transfer to stock and work in progress
Depreciation charge
Impairment charge
Reclassified to non-current assets
held for sale
Net book value at 31st December
Cost
Depreciation and impairment
2013
Cost
Depreciation and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Revaluation surplus before transfer
to investment properties
Transfer to investment properties,
and stock and work in progress
Depreciation charge
Impairment charge
Reclassified to non-current assets
held for sale
Net book value at 31st December
1,037
(92)
945
(73)
–
55
(26)
–
(11)
–
(1)
889
983
(94)
889
651
(82)
569
33
4
364
(15)
–
–
(10)
–
–
945
Cost
Depreciation and impairment
1,037
(92)
2,322
(453)
1,869
(52)
29
300
(1)
–
(85)
–
–
2,060
2,580
(520)
2,060
2,296
(433)
1,863
(235)
35
312
(23)
1
(2)
(79)
–
(3)
1,869
2,322
(453)
Total
US$m
11,191
(4,368)
6,823
(211)
82
1,231
(58)
(47)
(898)
(231)
3,507
(1,945)
1,562
(35)
1
379
(9)
(3)
(404)
–
2,118
(1,131)
987
(32)
31
370
(19)
(44)
(275)
–
1,087
(100)
987
1
–
–
–
–
(21)
(231)
–
736
1,120
(647)
473
(20)
21
127
(3)
–
(102)
–
–
496
1,167
(671)
–
–
(1)
1,491
1,018
6,690
1,076
(340)
3,612
(2,121)
2,234
(1,216)
11,652
(4,962)
496
736
1,491
1,018
6,690
1,026
(590)
436
(15)
6
146
(5)
–
–
(95)
–
–
473
1,191
(92)
1,099
(104)
–
17
–
–
–
(25)
–
–
987
1,120
(647)
1,087
(100)
3,690
(1,879)
1,811
(317)
35
499
(5)
2,261
(1,118)
1,143
(194)
2
398
(22)
11,115
(4,194)
6,921
(832)
82
1,736
(70)
–
–
1
(3)
(457)
(1)
–
1,562
3,507
(1,945)
(63)
(277)
–
–
987
2,118
(1,131)
(68)
(943)
(1)
(3)
6,823
11,191
(4,368)
945
1,869
473
987
1,562
987
6,823
In 2014, as a result of the decline in coal prices as well as the subdued outlook, management has performed an impairment
review of the carrying amount of the mining properties, and concluded that an impairment has occurred. An impairment charge
of US$231 million had been included in profit and loss in the line ‘Other operating expenses’.
65
Jardine Matheson | Annual Report 2014
13 Tangible Assets (continued)
The impairment review was performed by comparing the carrying amount of the cash-generating units of the mining properties
with the recoverable amount. The cash-generating units are determined based on the location of the mining properties and the
extent that they share infrastructure. The recoverable amount of US$696 million, net of deferred tax, is determined based on
fair value less costs of disposal, using a discounted cash flow method with unobservable inputs. Major assumptions used in the
valuation are coal price per tonne of US$65 to US$90 and post-tax discount rate of 12.5%.
The periods used in the cash flow forecast are based on the depletion of reserves or the expiration of the concession period,
whichever is earlier. Cash flows beyond five years are extrapolated using an estimated growth rate of 2.2%. The growth rate
does not exceed the long-term average growth rate for the business in which the cash-generating units operate.
Freehold properties include a hotel property of US$96 million (2013: US$99 million), which is stated net of a grant of
US$24 million (2013: US$25 million).
Net book value of leasehold properties, plant and machinery and motor vehicles acquired under finance leases amounted to
US$322 million, US$64 million and US$3 million (2013: US$326 million, US$92 million and nil), respectively.
Rental income from properties and other tangible assets amounted to US$353 million (2013: US$347 million) including
contingent rents of US$3 million (2013: US$3 million).
Future minimum rental payments receivable under non-cancellable leases are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
2014
US$m
156
92
76
15
339
2013
US$m
146
81
89
22
338
At 31st December 2014, the carrying amount of tangible assets pledged as security for borrowings amounted to US$620 million
(2013: US$782 million) (refer note 30).
66
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 14
Investment Properties
2014
At 1st January
Exchange differences
Additions
Transfer from intangible assets
Net increase in fair value
At 31st December
Freehold properties
Leasehold properties
2013
At 1st January
Exchange differences
Additions
Disposals
Transfer to completed commercial properties
Transfer from/(to) intangible assets and tangible assets
Net decrease in fair value
At 31st December
Freehold properties
Leasehold properties
Completed
commercial
properties
Under
development
commercial
properties
Completed
residential
properties
US$m
US$m
US$m
22,868
(37)
25
32
34
22,922
22,753
(46)
49
(12)
172
5
(53)
22,868
682
(17)
157
–
12
834
666
9
192
–
(172)
(7)
(6)
682
538
(1)
3
–
13
553
542
(4)
1
–
–
–
(1)
538
Total
US$m
24,088
(55)
185
32
59
24,309
75
24,234
24,309
23,961
(41)
242
(12)
–
(2)
(60)
24,088
55
24,033
24,088
The Group measures its investment properties at fair value. The fair values of the Group’s investment properties at
31st December 2014 and 2013, which were principally held by Hongkong Land, have been determined on the basis of valuations
carried out by independent valuers who hold a recognized relevant professional qualification and have recent experience in
the locations and segments of the investment properties valued. Hongkong Land employed Jones Lang LaSalle to value its
commercial investment properties in Hong Kong, mainland China, 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 Council and the HKIS Valuation Standards 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 valuations are comprehensively reviewed by Hongkong Land.
Fair value measurements using no significant non-observable inputs
Fair values of completed residential properties are generally derived using the direct comparison method. This valuation method
is based on comparing the property to be valued directly with other comparable properties, which have recently transacted.
However, given the heterogeneous nature of real estate properties, appropriate adjustments are usually required to allow for
any qualitative differences that may affect the price likely to be achieved by the property under consideration.
67
Jardine Matheson | Annual Report 2014 Investment Properties (continued)
14
Fair value measurements using significant unobservable inputs
Fair values of completed commercial properties in Hong Kong and Singapore are generally derived using the income
capitalization method. This valuation method is based on the capitalization of the net income and reversionary income potential
by adopting appropriate capitalization rates, which are derived from analysis of sale transactions and valuers’ interpretation
of prevailing investor requirements or expectations. The prevailing market rents adopted in the valuation have reference to
valuers’ view of recent lettings, within the subject properties and other comparable properties.
Fair values of completed commercial properties in Vietnam and Cambodia are generally derived using the discounted cash flow
method. The net present value of the income stream is estimated by applying an appropriate discount rate which reflects the
risk profile.
Fair values of under development commercial properties are generally derived using the residual method. This valuation method
is essentially a means of valuing the land by reference to its development potential by deducting development costs together
with developer’s profit and risk from the estimated capital value of the proposed development assuming completion as at the
date of valuation.
The Group’s policy is to recognize transfers between fair value measurements as of the date of the event or change in
circumstances that caused the transfer.
Information about fair value measurements of Hongkong Land’s investment properties using significant unobservable inputs:
Commercial Property
Fair value at
31st December
2014
US$m
Range of
significant unobservable inputs
Valuation
method
Prevailing market
rent per month
Capitalization/
discount rates
US$
%
Completed
Hong Kong
22,159
Income capitalization
Singapore
586
Income capitalization
Vietnam and Cambodia
53
Discounted cash flow
Total
22,798
4.4 to 38.9
per square foot
5.8 to 9.6
per square foot
21.0 to 26.0
per square metre
3.65 to 5.50
3.50 to 5.50
15.00 to 16.00
Under development Mainland China
Cambodia
Total
714
41
755
Residual
Residual
158.5
per square metre
35.0 to 86.0
per square metre
5.25
16.00
68
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) Investment Properties (continued)
14
Prevailing market rents are estimated based on independent valuers’ view of recent lettings, within the subject properties and
other comparable properties. The higher the rents, the higher the fair value.
Capitalization and discount rates are estimated by independent valuers based on the risk profile of the properties being valued.
The lower the rates, the higher the fair value.
Rental income from investment properties amounted to US$842 million (2013: US$811 million) including contingent rents of
US$14 million (2013: US$15 million).
Future minimum rental payments receivable under non-cancellable leases are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
2014
US$m
723
521
471
97
1,812
2013
US$m
714
468
429
64
1,675
Generally the Group’s operating leases in respect of investment properties are for terms of three or more years.
The Group’s investment properties had not been pledged as security for borrowings at 31st December 2013 and 2014.
69
Jardine Matheson | Annual Report 2014 15 Plantations
The Group’s plantation assets are primarily for the production of palm oil.
Movements during the year:
At 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Net decrease in fair value
At 31st December
Immature plantations
Mature plantations
Planted area:
Immature plantations
Mature plantations
2014
US$m
856
(20)
27
86
(7)
(34)
908
166
742
908
2013
US$m
1,026
(219)
–
69
(5)
(15)
856
105
751
856
Hectares
Hectares
35,904
192,795
228,699
33,147
187,382
220,529
The plantations were valued internally at their fair values less point of sale costs, based on a discounted cash flow method
using unobservable inputs. The major unobservable inputs used in the valuation are:
Crude palm oil price per tonne (US$)
Effective annual price inflation (for the first five years) (%)
Effective annual cost inflation (for the first five years) (%)
Post-tax discount rates (%)
2014
2013
941
7*
7*
14
909
9*
7*
14
The higher the crude palm oil price per tonne and the higher the effective annual price inflation, the higher the fair value.
The higher the effective annual cost inflation and the higher the post-tax discount rates, the lower the fair value.
Changes in unrealized loss for the year for plantations held at the end of the year amounted to US$34 million
(2013: US$15 million) and have been included in profit and loss in the line ‘Other operating expenses’.
During the year, the Group harvested 4.1 million (2013: 3.7 million) tonnes of produce from the plantations with a fair value at
the point of harvest less point of sale costs of US$626 million (2013: US$482 million).
The Group’s plantations had not been pledged as security for borrowings at 31st December 2013 and 2014.
*
0% inflation thereafter.
70
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 16 Associates and Joint Ventures
Listed associates
– Jardine Lloyd Thompson
– OHTL
Unlisted associates
Share of attributable net assets
Goodwill on acquisition
Listed joint ventures
– Bank Permata
– PT Tunas Ridean
Unlisted joint ventures
Share of attributable net assets
Goodwill on acquisition
By business:
Jardine Pacific
Jardine Motors
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
2014
US$m
283
19
302
944
1,246
250
1,496
651
76
727
6,508
7,235
150
7,385
8,881
373
–
513
4,884
391
106
203
2,394
17
8,881
2013
US$m
313
20
333
873
1,206
261
1,467
556
71
627
6,458
7,085
142
7,227
8,694
386
1
553
4,914
372
116
169
2,166
17
8,694
Movements of associates and joint ventures
during the year:
At 1st January
Share of results after tax and non-controlling interests
Negative goodwill on acquisition of business
Share of other comprehensive expense after tax
and non-controlling interests
Dividends received
Acquisitions, increases in attributable interests
and advances
Disposals, decreases in attributable interests
and repayment of advances
Reclassification of associates and joint ventures
as subsidiaries
Employee share options schemes
At 31st December
Fair value of listed associates/joint ventures
Associates
Joint ventures
2014
US$m
1,467
315
–
(91)
(194)
(11)
(3)
–
13
1,496
1,310
2013
US$m
1,396
303
–
(113)
(139)
19
(11)
–
12
1,467
1,553
2014
US$m
7,227
1,035
(37)
(201)
(504)
441
(481)
(95)
–
7,385
760
2013
US$m
6,720
1,139
–
(512)
(511)
494
(103)
–
–
7,227
598
71
Jardine Matheson | Annual Report 2014 16 Associates and Joint Ventures (continued)
(a) Investment in associates
The material associates of the Group are listed below. These associates have share capital consisting solely of ordinary shares,
which are held directly by the Group.
Nature of investments in material associates in 2014 and 2013:
Name of entity
Nature of business
Country of incorporation/
principal place of business
% of ownership interest
2013
2014
Jardine Lloyd Thompson Group plc
PT Astra Daihatsu Motor
Insurance and reinsurance
broking, risk management
and employee benefit
services
Automotive
United Kingdom/Worldwide
42
Indonesia/Indonesia
32
42
32
As at 31st December 2014, the fair value of the Group’s interest in Jardine Lloyd Thompson Group plc (‘Jardine Lloyd Thompson’),
which is listed on the London Stock Exchange, was US$1,227 million (2013: US$1,475 million) and the carrying amount of the
Group’s interest was US$513 million (2013: US$553 million).
Summarized financial information for material associates
Summarized balance sheet at 31st December
Jardine Lloyd Thompson
2013
2014
PT Astra Daihatsu Motor
2013
2014
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
US$m
1,277
1,357
778
2,135
(691)
(335)
US$m
1,237
1,241
697
1,938
(787)
(244)
Total non-current liabilities
(1,026)
(1,031)
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
Non-controlling interests
Net assets
(263)
(1,641)
(1,904)
(28)
454
(25)
(1,525)
(1,550)
(32)
562
US$m
630
479
335
814
–
(42)
(42)
–
(432)
(432)
–
970
US$m
610
474
407
881
–
(41)
(41)
(1)
(525)
(526)
–
924
Total
2013
US$m
1,847
1,715
1,104
2,819
2014
US$m
1,907
1,836
1,113
2,949
(691)
(377)
(787)
(285)
(1,068)
(1,072)
(263)
(2,073)
(2,336)
(28)
1,424
(26)
(2,050)
(2,076)
(32)
1,486
*
Financial liabilities exclude trade and other payables and provisions, which are presented under other current and non-current liabilities.
72
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 16 Associates and Joint Ventures (continued)
Summarized statement of comprehensive income for the year ended 31st December
Jardine Lloyd Thompson
2013
2014
PT Astra Daihatsu Motor
2013
2014
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit from underlying business
performance
Income tax expense
Profit after tax from underlying
business performance
Profit after tax from
non-trading items
Profit after tax
Other comprehensive income
Total comprehensive income
Dividends received
from associates
US$m
1,817
(46)
3
(38)
301
(78)
223
(30)
193
(97)
96
41
US$m
1,533
(39)
2
(27)
278
(73)
205
(28)
177
(49)
128
35
US$m
4,012
(99)
47
–
380
(89)
291
–
291
(21)
270
71
Total
2013
US$m
6,093
(149)
35
(27)
737
(193)
544
(28)
516
(268)
248
2014
US$m
5,829
(145)
50
(38)
681
(167)
514
(30)
484
(118)
366
US$m
4,560
(110)
33
–
459
(120)
339
–
339
(219)
120
32
112
67
The information above reflects the amounts presented in the financial statements of the associates adjusted for differences in
accounting policies between the Group and the associates, and fair value of the associates at the time of acquisition.
Reconciliation of the summarized financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interests in its material
associates for the year ended 31st December:
Net assets
Adjustment for shares
purchased for employee
benefit plans
Adjusted net assets
Interest in associates (%)
Group’s share of net assets
in associates
Goodwill
Carrying value
Jardine Lloyd Thompson
2013
2014
PT Astra Daihatsu Motor
2013
2014
US$m
454
221
675
42
283
230
513
US$m
562
192
754
42
313
240
553
US$m
970
–
970
32
309
–
309
US$m
924
–
924
32
295
–
295
Total
2013
US$m
1,486
192
1,678
608
240
848
2014
US$m
1,424
221
1,645
592
230
822
73
Jardine Matheson | Annual Report 2014
Associates and Joint Ventures (continued)
16
The Group has interests in a number of individually immaterial associates. The following table analyzes, in aggregate, the share
of profit and other comprehensive income and carrying amount of these associates.
Share of profit
Share of other comprehensive expense
Share of total comprehensive income
Carrying amount of interests in these associates
Contingent liabilities relating to the Group’s interest in associates
Financial guarantee in respect of facilities made available to an associate
2014
US$m
150
(12)
138
674
2014
US$m
22
2013
US$m
128
(35)
93
619
2013
US$m
21
(b) Investment in joint ventures
The material joint ventures of the Group are listed below. These joint ventures have share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investments in material joint ventures in 2014 and 2013:
Nature of business
Country of incorporation and
principal place of business
% of ownership interest
2013
2014
Hongkong Land
Property investment
– Properties Sub F, Ltd
– BFC Development LLP
Property investment
– Central Boulevard Development Pte Ltd Property investment
– One Raffles Quay Pte Ltd
Property investment
Astra
– PT Astra Honda Motor
– PT Bank Permata Tbk
Automotive
Commercial and foreign
exchange bank
Macau
Singapore
Singapore
Singapore
Indonesia
Indonesia
49
33
33
33
50
45
49
33
33
33
50
45
As at 31st December 2014, the fair value of the Group’s interest in PT Bank Permata Tbk, which is listed on the Indonesian Stock
Exchange, was US$641 million (2013: US$492 million) and the carrying amount of the Group’s interest was US$690 million
(2013: US$596 million). All other joint ventures in the above table are unlisted.
74
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) Associates and Joint Ventures (continued)
16
Summarized financial information for material joint ventures
Set out below are the summarized financial information for the Group’s material joint ventures.
Summarized balance sheets at 31st December
Central
Boulevard
Properties Development Development
Pte Ltd
Sub F, Ltd
BFC
LLP
US$m
US$m
US$m
One
Raffles
Quay
Pte Ltd
US$m
PT Astra
Honda
Motor
US$m
PT Bank
Permata
Tbk
US$m
Total
US$m
2014
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
Total non-current liabilities
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
1,575
3,581
2,676
2,726
1,384
5,453
17,395
38
59
97
(54)
(158)
(212)
(1)
(48)
(49)
28
12
40
(1,291)
–
(1,291)
(3)
(96)
(99)
55
70
125
(1,214)
(14)
(1,228)
(6)
(70)
(76)
11
2
13
(787)
(196)
(983)
(11)
(36)
(47)
303
444
747
–
(247)
(247)
–
(655)
(655)
1,476
8,059
9,535
(678)
(96)
(774)
1,911
8,646
10,557
(4,024)
(711)
(4,735)
(58)
(12,696)
(12,754)
(79)
(13,601)
(13,680)
Net assets
1,411
2,231
1,497
1,709
1,229
1,460
9,537
2013
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
Total non-current liabilities
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
1,170
3,595
2,467
2,758
1,199
4,932
16,121
29
111
140
(91)
(109)
(200)
(3)
(49)
(52)
12
14
26
(1,331)
–
(1,331)
(1)
(87)
(88)
117
142
259
(1,275)
(15)
(1,290)
(8)
(168)
(176)
18
1
19
(823)
(196)
(1,019)
(6)
(42)
(48)
376
396
772
–
(247)
(247)
–
(588)
(588)
1,692
7,071
8,763
(687)
(86)
(773)
2,244
7,735
9,979
(4,207)
(653)
(4,860)
(26)
(11,650)
(11,676)
(44)
(12,584)
(12,628)
Net assets
1,058
2,202
1,260
1,710
1,136
1,246
8,612
*
Financial liabilities exclude trade and other payables and provisions, which are presented under other current and non-current liabilities.
75
Jardine Matheson | Annual Report 2014
Associates and Joint Ventures (continued)
16
Summarized statements of comprehensive income for the year ended 31st December
Central
Boulevard
Properties Development Development
Pte Ltd
Sub F, Ltd
BFC
LLP
US$m
US$m
US$m
One
Raffles
Quay
Pte Ltd
US$m
PT Astra
Honda
Motor
US$m
PT Bank
Permata
Tbk
US$m
128
–
–
(22)
72
(12)
60
75
135
(68)
67
4,973
(89)
36
–
540
(131)
409
–
409
(29)
380
1,426
(20)
–
–
172
(39)
133
–
133
(29)
104
Total
US$m
6,955
(116)
36
(93)
1,022
(216)
806
929
1,735
(273)
1,462
164
–
–
(47)
83
(13)
70
136
206
(92)
114
124
–
–
(21)
70
(11)
59
356
415
(55)
360
29
41
22
143
7
283
165
–
–
(48)
77
9
86
206
292
852
–
–
(25)
391
(66)
325
129
454
126
–
–
(23)
72
(12)
60
149
209
4,947
(90)
28
–
601
(145)
456
–
456
1,249
(18)
–
–
216
(54)
162
–
162
7,491
(117)
28
(100)
1,452
(280)
1,172
639
1,811
(70)
(35)
(52)
(282)
(291)
(730)
2014
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit from underlying
business performance
Income tax expense
Profit after tax from
underlying business
performance
Profit after tax from
non-trading items
Profit after tax
Other comprehensive
expense
Total comprehensive income
Dividends received from
joint ventures
2013
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit from underlying
business performance
Income tax expense
Profit after tax from
underlying business
performance
Profit after tax from
non-trading items
Profit after tax
Other comprehensive
expense
Total comprehensive
income/(expense)
Dividends received from
joint ventures
140
(7)
–
(3)
85
(10)
75
362
437
–
437
41
152
(9)
–
(4)
95
(12)
83
155
238
–
238
222
419
157
–
30
62
24
174
152
(129)
1,081
–
268
The information above reflects the amounts presented in the financial statements of the joint ventures adjusted for differences
in accounting policies between the Group and the joint ventures, and fair value of the joint ventures at the time of acquisition.
76
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
Associates and Joint Ventures (continued)
16
Reconciliation of the summarized financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interests in its material
joint ventures for the year ended 31st December
Central
Boulevard
Properties Development Development
Pte Ltd
Sub F, Ltd
BFC
LLP
US$m
US$m
US$m
2014
Net assets
Shareholders’ loans
Adjusted net assets
Interest in joint ventures (%)
Group’s share of net assets
in joint ventures
Goodwill
Carrying value
2013
Net assets
Shareholders’ loans
Adjusted net assets
Interest in joint ventures (%)
Group’s share of net assets
in joint ventures
Goodwill
Carrying value
1,411
55
1,466
49
718
–
718
1,058
93
1,151
49
564
–
564
2,231
1,291
3,522
33
1,174
–
1,174
2,202
1,332
3,534
33
1,178
–
1,178
1,497
–
1,497
33
499
–
499
1,260
1,276
2,536
33
845
–
845
One
Raffles
Quay
Pte Ltd
US$m
1,709
102
1,811
33
604
–
604
1,710
107
1,817
33
605
–
605
PT Astra
Honda
Motor
US$m
PT Bank
Permata
Tbk
US$m
1,229
–
1,229
50
615
–
615
1,136
–
1,136
50
568
–
568
1,460
–
1,460
45
650
40
690
1,246
–
1,246
45
556
40
596
Total
US$m
9,537
1,448
10,985
4,260
40
4,300
8,612
2,808
11,420
4,316
40
4,356
The Group has interests in a number of individually immaterial joint ventures. The following table analyzes, in aggregate, the
share of profit and other comprehensive income and carrying amount of these joint ventures.
Share of profit
Share of other comprehensive expense
Share of total comprehensive income
Carrying amount of interests in these joint ventures
Commitments and contingent liabilities in respect of joint ventures
The Group has the following commitments relating to its joint ventures as at 31st December:
Commitment to provide funding if called
2014
US$m
305
(99)
206
3,085
2014
US$m
188
2013
US$m
404
(165)
239
2,871
2013
US$m
387
There were no contingent liabilities relating to the Group’s interest in the joint ventures at 31st December 2014 and 2013.
77
Jardine Matheson | Annual Report 2014
17 Other Investments
Available-for-sale financial assets
Listed securities
– Asia Commercial Bank
– Paris Orléans
– Schindler Holdings
– Tata Power
– The Bank of N.T. Butterfield & Son
– Zhongsheng
– other
Unlisted securities
Non-current
Current
Analysis by geographical area of operation:
Greater China
Southeast Asia
Rest of the world
Movements during the year:
At 1st January
Exchange differences
Additions
Disposals and capital repayments
Unwinding of discount
Net revaluation deficit
At 31st December
2014
US$m
49
91
183
–
47
215
555
1,140
232
1,372
1,354
18
1,372
313
730
329
2013
US$m
51
104
188
103
35
–
462
943
203
1,146
1,129
17
1,146
102
711
333
1,372
1,146
1,146
(16)
522
(200)
(2)
(78)
1,372
1,254
(90)
127
(115)
(2)
(28)
1,146
In 2014, a wholly-owned subsidiary purchased new shares in Zhongsheng Group Holdings Limited (‘Zhongsheng’) which
represents an initial 11% equity interest. Together with the convertible bonds held (refer note 18), this investment would enable
the wholly-owned subsidiary to increase its interest to 20% upon fully exercising the bonds.
Movements of available-for-sale financial assets which were valued based on unobservable inputs during the year are disclosed
in note 2. There was no sale of these assets in 2014 and 2013.
No held-to-maturity financial assets were held at 31st December 2014 and 2013.
78
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 18 Debtors
Consumer financing debtors
– gross
– provision for impairment
Financing lease receivables
– gross investment
– unearned finance income
– net investment
– provision for impairment
Financing debtors
Trade debtors
– third parties
– associates and joint ventures
– provision for impairment
Other debtors
– third parties
– associates and joint ventures
– provision for impairment
Non-current
Current
Analysis by geographical area of operation:
Greater China
Southeast Asia
United Kingdom
Rest of the world
Fair value:
Consumer financing debtors
Financing lease receivables
Financing debtors
Trade debtors
Other debtors*
*
Excluding prepayments, rental and other deposits, and other non-financial debtors.
2014
US$m
4,401
(202)
4,199
805
(95)
710
(29)
681
4,880
2,569
79
2,648
(44)
2,604
2,021
114
2,135
(11)
2,124
9,608
3,540
6,068
9,608
1,288
8,160
89
71
9,608
4,136
687
4,823
2,604
1,028
8,455
2013
US$m
3,915
(183)
3,732
889
(102)
787
(33)
754
4,486
2,401
78
2,479
(29)
2,450
1,511
108
1,619
(11)
1,608
8,544
2,811
5,733
8,544
858
7,550
82
54
8,544
3,368
713
4,081
2,450
708
7,239
79
Jardine Matheson | Annual Report 2014 18 Debtors (continued)
Trade and other debtors excluding derivative financial instruments are stated at amortized cost. The fair value of these debtors
other than convertible bonds in Zhongsheng and short-term debtors is estimated using the expected future receipts discounted
at market rates ranging from 6% to 16% (2013: 6% to 15%) per annum. The fair value of convertible bonds in Zhongsheng
is estimated by reference to market interest rate and the quoted price of the underlying shares. The fair value of short-term
debtors approximates their carrying amounts. Derivative financial instruments are stated at fair value.
Financing debtors
Financing debtors comprise consumer financing debtors and financing lease receivables. They relate primarily to Astra’s motor
vehicle and motorcycle financing. Before accepting any new customer, the Group assesses the potential customer’s credit
quality and sets credit limits by customer using internal scoring systems. These limits and scoring are reviewed periodically. The
Group obtains collateral in the form of motor vehicles and motorcycles from consumer financing debtors who give the Group the
right to sell the repossessed collateral or take any other action to settle the outstanding debt.
The loan period ranges from 6 to 60 months for motor vehicles and motorcycles. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payment are
considered indicators that the debtor is impaired. An allowance for impairment is made based on the estimated irrecovable
amount by reference to past default experience. The Group has the right to repossess the assets whenever its customers default
on their installment obligations. It usually exercises its right if monthly installments are overdue for 30 days for motor vehicles
and 60 days for motorcycles. Management has considered the balances against which collective impairment provision is made
as impaired.
The maturity analysis of consumer financing debtors at 31st December is as follows:
2014
US$m
2,917
1,650
1,051
5,618
2,152
1,315
934
4,401
2014
US$m
805
262
(262)
805
(95)
710
2013
US$m
2,654
1,387
853
4,894
2,027
1,122
766
3,915
2013
US$m
889
300
(300)
889
(102)
787
Including related finance income
Within one year
Between one and two years
Between two and five years
Excluding related finance income
Within one year
Between one and two years
Between two and five years
Financing lease receivables
An analysis of financing lease receivables is set out below:
Lease receivables
Guaranteed residual value
Security deposits
Gross investment
Unearned lease income
Net investment
80
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 18 Debtors (continued)
The maturity analyzes of financing lease receivables at 31st December are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
2014
2013
Gross
investment
Net
investment
Gross
investment
Net
investment
US$m
US$m
US$m
US$m
458
246
100
1
805
395
221
93
1
710
514
273
102
–
889
444
247
96
–
787
The fair value of the financing debtors is US$4,823 million (2013: US$4,081 million). The fair value of financing debtors is
determined based on a discounted cash flow method using unobservable inputs, which are mainly rates of 9% to 33% per
annum (2013: 9% to 32% per annum). The higher the rates, the lower the fair value.
Financing debtors are due within five years (2013: five years) from the balance sheet date and the interest rates range from 6%
to 33% per annum (2013: 12% to 32% per annum).
Trade and other debtors
The average credit period on sale of goods and services varies among Group businesses and is generally not more than 60 days.
Before accepting any new customer, the individual Group business assesses the potential customer’s credit quality and sets
credit limits by customer using internal credit scoring systems. These limits and scoring are reviewed periodically.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and
default or delinquency in payment are considered indicators that the debtor is impaired. An allowance for impairment of trade
and other debtors is made based on the estimated irrecoverable amount.
At 31st December 2014, consumer financing debtors of US$42 million (2013: US$31 million), financing lease receivables of
US$56 million (2013: US$133 million), trade debtors of US$80 million (2013: US$116 million) and other debtors of US$11 million
(2013: US$14 million) were impaired. The impaired consumer financing debtors and financing lease receivables were covered by
provisions for impairment of these debtors which are assessed collectively. The amounts of the provisions for trade debtors and
other debtors were US$44 million (2013: US$29 million) and US$11 million (2013: US$11 million), respectively. It was assessed
that a portion of the debtors is expected to be recovered.
At 31st December 2014, consumer financing debtors of US$379 million (2013: US$315 million), financing lease receivable
of US$148 million (2013: US$182 million), trade debtors of US$795 million (2013: US$662 million) and other debtors of
US$24 million (2013: US$87 million), respectively, were past due but not impaired. The ageing analysis of these debtors is
as follows:
Below 30 days
Between 31 and 60 days
Between 61 and 90 days
Over 90 days
Consumer
financing debtors
Financing
lease receivables
Trade debtors
Other debtors
2014
US$m
307
61
11
–
379
2013
US$m
265
44
6
–
315
2014
US$m
123
17
3
5
148
2013
US$m
174
8
–
–
182
2014
US$m
383
178
93
141
795
2013
US$m
350
173
87
52
662
2014
US$m
2013
US$m
11
4
1
8
24
9
2
2
74
87
81
Jardine Matheson | Annual Report 2014 18 Debtors (continued)
The risk of trade and other debtors that are neither past due nor impaired at 31st December 2014 becoming impaired is low as
they have a good track record with the Group. Based on past experience, management believes that no impairment allowance
is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still
considered fully recoverable.
Other debtors
Other debtors are further analyzed as follows:
Convertible bonds in Zhongsheng
Derivative financial instruments
Restricted bank balances and deposits
Loans to employees
Other amounts due from associates and joint ventures
Repossessed assets of finance companies
Other receivables
Financial assets
Prepayments
Reinsurers’ share of estimated losses on insurance contracts
Rental and other deposits
Other
2014
US$m
385
204
50
38
114
19
231
1,041
692
72
215
104
2,124
2013
US$m
–
294
7
33
108
14
252
708
555
47
183
115
1,608
The convertible bonds in Zhongsheng with a nominal value of HK$3,092 million, held by a wholly-owned subsidiary, carry
interest at 2.85% per annum and are unsecured. The bonds are convertible, at the option of the holders, into ordinary shares of
Zhongsheng at a conversion price of HK$12.96 per share on or after the date falling 180 days after the issue date of 25th April
2014 up to the close of business on the date falling 10 days prior to the maturity. The bonds will mature on 25th April 2017.
Movements in the provisions for impairment are as follows:
Consumer
financing debtors
Financing
lease receivables
Trade debtors
Other debtors
2014
US$m
(183)
5
(102)
–
78
2013
US$m
(218)
47
(97)
–
85
2014
US$m
2013
US$m
2014
US$m
2013
US$m
2014
US$m
2013
US$m
(33)
(1)
(4)
–
9
(37)
7
(5)
–
2
(29)
1
(31)
9
6
(27)
4
(15)
3
6
(11)
–
(2)
1
1
(10)
–
(3)
–
2
At 1st January
Exchange differences
Additional provisions
Unused amounts
reversed
Amounts written off
At 31st December
(202)
(183)
(29)
(33)
(44)
(29)
(11)
(11)
At 31st December 2014, the carrying amount of consumer financing debtors, financing lease receivables, trade debtors and
other debtors pledged as security for borrowings amounted to US$2,257 million, US$187 million, US$1 million and US$6 million
(2013: US$1,951 million, US$221 million, US$1 million and US$6 million), respectively (refer note 30).
82
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
19 Deferred Tax Assets/(Liabilities)
2014
At 1st January
Exchange differences
New subsidiaries
Credited/(charged) to profit and loss
Credited to other comprehensive
income
At 31st December
Deferred tax assets
Deferred tax liabilities
2013
At 1st January
Exchange differences
New subsidiaries
Credited/(charged) to profit and loss
Charged to other comprehensive
income
At 31st December
Deferred tax assets
Deferred tax liabilities
Accelerated
tax
depreciation
US$m
Fair value
gains/
losses
US$m
Losses
US$m
Employee
benefits
US$m
Provisions
and other
temporary
differences
US$m
(162)
3
–
4
–
(155)
99
(254)
(155)
(180)
1
–
17
–
(162)
79
(241)
(162)
(526)
4
–
79
3
(440)
(40)
(400)
(440)
(595)
85
(7)
(1)
(8)
(526)
(45)
(481)
(526)
33
(2)
–
2
–
33
22
11
33
35
(3)
3
(2)
–
33
25
8
33
66
(2)
1
8
11
84
72
12
84
95
(17)
–
7
(19)
66
60
6
66
120
(2)
3
(33)
–
88
152
(64)
88
111
(31)
–
40
–
120
145
(25)
120
Total
US$m
(469)
1
4
60
14
(390)
305
(695)
(390)
(534)
35
(4)
61
(27)
(469)
264
(733)
(469)
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$127 million (2013: US$121 million) arising from unused tax losses of US$545 million
(2013: US$527 million) have not been recognized in the financial statements. Included in the unused tax losses,
US$242 million have no expiry date and the balance will expire at various dates up to and including 2024.
Deferred tax liabilities of US$436 million (2013: US$386 million) arising on temporary differences associated with investments
in subsidiaries of US$4,360 million (2013: US$3,863 million) have not been recognized as there is no current intention of
remitting the retained earnings of these subsidiaries to the holding companies in the foreseeable future.
83
Jardine Matheson | Annual Report 2014
20 Pension Plans
The Group operates defined benefit pension plans in the main territories in which it operates, with the major plans in Hong Kong
and the United Kingdom. Most of the pension plans are final salary defined benefits, calculated based on a members’ length
of service and their salaries in the final years leading up to retirement. In Hong Kong, the pension benefits are usually paid in
one lump sum. With the exception of certain plans in Hong Kong, all the defined benefit plans are closed to new members. In
addition, although all plans are impacted by the discount rate, liabilities in Hong Kong are driven by salary growth, whilst the
United Kingdom plans are driven by inflationary rates.
The Group’s defined benefit plans are either funded or unfunded, with the assets of the funded plans held independently of the
Group’s assets in separate trustee administered funds. Plan assets held in trusts are governed by local regulations and practices
in each country. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies
jointly with the company and the boards of trustees. The Group’s major plans are valued by independent actuaries annually
using the projected unit credit method.
The amounts recognized in the consolidated balance sheet are as follows:
Fair value of plan assets
Present value of funded obligations
Present value of unfunded obligations
Net pension liabilities
Analysis of net pension liabilities:
Pension assets
Pension liabilities
2014
US$m
1,006
(1,097)
(91)
(236)
(327)
23
(350)
(327)
2013
US$m
1,002
(1,043)
(41)
(202)
(243)
51
(294)
(243)
84
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 20 Pension Plans (continued)
The movement in the net pension liabilities is as follows:
2014
At 1st January
Current service cost
Interest income/(expense)
Past service cost and gains on settlements
Administration expenses
Exchange differences
New subsidiaries
Remeasurements
– return on plan assets, excluding amounts included in interest income
– change in financial assumptions
– experience losses
Contributions from employers
Contributions from plan participants
Benefit payments
Settlements
Transfer from other plans
At 31st December
2013
At 1st January
Current service cost
Interest income/(expense)
Past service cost and gains on settlements
Administration expenses
Exchange differences
New subsidiaries
Remeasurements
– return on plan assets, excluding amounts included in interest income
– change in financial assumptions
– experience losses
Contributions from employers
Contributions from plan participants
Benefit payments
Transfer from other plans
At 31st December
Fair value
of plan
assets
US$m
Present
value of
obligation
US$m
1,002
–
47
–
(2)
45
1,047
(23)
–
17
–
–
17
36
4
(67)
(7)
(1)
(1,245)
(57)
(63)
(5)
–
(125)
(1,370)
33
(3)
–
(51)
(26)
(77)
–
(4)
80
7
1
Total
US$m
(243)
(57)
(16)
(5)
(2)
(80)
(323)
10
(3)
17
(51)
(26)
(60)
36
–
13
–
–
1,006
(1,333)
(327)
977
–
38
–
(1)
37
1,014
(20)
–
37
–
–
37
38
4
(73)
2
(1,327)
(67)
(55)
8
–
(114)
(1,441)
72
(5)
–
103
(50)
53
–
(4)
82
(2)
(350)
(67)
(17)
8
(1)
(77)
(427)
52
(5)
37
103
(50)
90
38
–
9
–
1,002
(1,245)
(243)
85
Jardine Matheson | Annual Report 2014 20 Pension Plans (continued)
The weighted average duration of the defined benefit obligation at 31st December 2014 is 12 years (2013: 12 years).
Expected maturity analysis of undiscounted pension benefits at 31st December is as follows:
Less than a year
Between one and two years
Between two and five years
Beyond five years
2014
US$m
100
90
309
6,607
7,106
The principal actuarial assumptions used for accounting purposes at 31st December are as follows:
Hong Kong
United Kingdom
Others
2014
%
3.4
5.0
N/A
2013
%
4.4
5.0
N/A
2014
%
3.4
–
2.9
2013
%
4.4
–
3.5
2014
%
8.1
7.5
N/A
Discount rate
Salary growth rate
Inflation rate
2013
US$m
91
89
281
5,683
6,144
2013
%
7.1
6.9
N/A
Life expectancy for pensioners in the United Kingdom plans at the age of 65 for male and female are 22 years and 24 years,
respectively (2013: 22 years and 24 years). As participants of the plans relating to Hong Kong usually take lump sum amounts
upon retirement, mortality rate is not a principal assumption for these plans.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Discount rate
Salary growth rate
Inflation rate
Change in
assumption
Impact on defined benefit obligation
Decrease in
Increase in
assumption
assumption
%
1
1
1
US$m
(138)
82
28
US$m
166
(70)
(21)
The above sensitivity analyzes are based on a change in an assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity
of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when
calculating the pension liability recognized within the balance sheet.
86
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 20 Pension Plans (continued)
The analysis of the fair value of plan assets at 31st December is as follows:
Asia
Pacific
US$m
Europe
US$m
North
America
US$m
Global
US$m
Total
US$m
2014
Quoted investments
Equity instruments
Debt instruments
– government
– corporate bonds
– investment grade
Investment funds
Unquoted investments
Debt instruments
– government
– corporate bonds
– investment grade
– non-investment grade
Investment funds
Total investments
Cash and cash equivalents
Benefits payable and other
122
38
20
58
18
198
12
1
–
1
13
1
14
212
64
1
133
134
109
307
33
5
10
15
48
–
48
355
15
–
–
–
141
156
14
8
16
24
38
–
38
194
13
–
–
–
27
40
3
–
–
–
3
167
170
210
214
39
153
192
295
701
62
14
26
40
102
168
270
971
34
1
1,006
87
Jardine Matheson | Annual Report 2014
20 Pension Plans (continued)
Asia
Pacific
US$m
Europe
US$m
North
America
US$m
Global
US$m
Total
US$m
2013
Quoted investments
Equity instruments
Debt instruments
– government
– corporate bonds
– investment grade
Investment funds
Unquoted investments
Debt instruments
– government
– corporate bonds
– investment grade
– non-investment grade
Investment funds
Total investments
Cash and cash equivalents
Benefits payable and other
148
40
21
61
17
226
9
2
–
2
11
1
12
238
63
1
110
111
117
291
30
10
1
11
41
–
41
332
14
–
–
–
147
161
12
22
3
25
37
–
37
198
11
–
–
–
36
47
6
–
–
–
6
163
169
216
236
41
131
172
317
725
57
34
4
38
95
164
259
984
22
(4)
1,002
The defined benefit plans in Hong Kong have 3 strategic asset allocations for its open and closed plans. The open plans have an
equity/debt allocation of 70/30 whilst the closed plans have either a 60/40 or 55/45 split.
The strategic asset allocation is derived from the asset-liability modeling (‘ALM’) review, done triennially to ensure the plans can
meet future funding and solvency requirements. The last ALM review was completed in 2012, with the revised strategic asset
allocation adopted in 2013 and 2014. The next ALM review is scheduled for 2015.
As at 31st December 2014, the Hong Kong plans had assets of US$520 million (2013: US$523 million). These assets were
invested 18% in Asia Pacific, 19% in Europe and 32% in North America (2013: 22%, 20% and 32%, respectively). Within Asia
Pacific, 81% was invested in Hong Kong equities. In 2014, 55% and 45% of the investments were in quoted and unquoted
instruments, respectively. In 2013, the split was 58% and 42%. The high percentage of quoted instruments provides liquidity
to fund drawdowns and benefit payments. Within the quoted equity allocation, the plan is well diversified in terms of sectors,
with the top three being financials, industrials and consumer goods with a combined fair value of US$52 million. In 2013 the top
three sectors were financials, properties and technology with a combined fair value of US$54 million.
88
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
20 Pension Plans (continued)
In the United Kingdom, the defined benefit plans have strategic asset allocations of 60/40 for Matheson & Co. and 50/50
for Jardine Motors’ equity/debt. The majority of the equity investments are in passive funds with a significant percentage
in developed economies. Matheson & Co. has 87% of their investments in developed and 13% in emerging economies. This
is largely similar to 2013. The regional splits are 9% in Asia Pacific, 45% in Europe, 14% in North America and 32% globally.
In 2014, 70% of their investments were in quoted instruments, which is the same as 2013. Jardine Motors had 95% of the
investments in developed economies and all of their investments were in quoted instruments, similar to 2013. Their regional
splits are 7% in Asia Pacific, 82% in Europe, 6% in North America and 5% globally. The top three sectors of the quoted equity
instruments at the end of both 2014 and 2013 were financials, consumer goods and industrials, with combined fair values of
US$56 million and US$51 million, respectively.
Through its defined benefit pension plans, the Group is expected to be exposed to a number of risks such as asset volatility,
changes in bond yields, inflation risk and life expectancy, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform
this yield, this will create a deficit. The Group’s defined benefit plans hold a percentage of equities, which are expected to
outperform corporate bonds in the long-term, whilst generating volatility and risk in the short-term.
In Hong Kong, where the Group has open and closed plans, the assets and liabilities mix are distinct to reduce the level
of investment risk to each plan. The open and closed plans reduced their equity exposure and increased investments in
government and corporate bonds in the fourth quarter of 2014. The open plans retained a higher exposure to equities to
generate higher returns to meet pension obligations. Management believes that the long-term nature of the plan liabilities
and the strength of the Group supports a level of equity investment as part of the Group’s long-term strategy to manage the
plans efficiently.
Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value
of the plans’ bond holdings.
Inflation risk
Only the Group’s United Kingdom plans’ benefit obligations are linked to inflation, specifically CPI, where a higher CPI leads to
higher liabilities. Although CPI has remained benign in 2014, the long-term outlook is for a higher inflation assumption. The rest
of the Group’s plan assets are unaffected by inflation.
Life expectancy
Life expectancy risk is only applicable to the United Kingdom plans, where increase in longevity assumptions results in an
increase in the plan’s liabilities. The Hong Kong plans provide for a lump-sum benefit payment at retirement.
The Group ensures that the investment positions are managed within an ALM framework that is developed to achieve long-term
returns that are in line with the obligations under the pension schemes. Within the ALM framework, the Group’s objective is to
match assets to the pension obligations by investing in a well-diversified portfolio that generates sufficient risk-adjusted returns
that match the benefit payments. The Group also actively monitors the duration and the expected yield of the investments to
ensure it matches the expected cash outflows arising from the pension obligations.
Investments across the plans are well diversified, such that the failure of any single investment would not have a material
impact on the overall level of assets.
The Group maintains an active and regular contribution schedule across all the plans. The contributions to all its plans in 2014
were US$36 million and the estimated amount of contributions expected to be paid to all its plans in 2015 is US$45 million.
89
Jardine Matheson | Annual Report 2014 21 Properties for Sale
Properties in the course of development
Completed properties
2014
US$m
2,724
229
2,953
2013
US$m
2,570
100
2,670
As at 31st December 2014, properties in the course of development amounting to US$2,164 million (2013: US$1,890 million)
were not scheduled for completion within the next twelve months.
At 31st December 2014, the carrying amount of properties for sale pledged as security for borrowings amounted to
US$732 million (2013: US$711 million) (refer note 30).
22 Stocks and Work in Progress
Finished goods
Work in progress
Raw materials
Spare parts
Other
2014
US$m
2,944
47
70
110
109
3,280
2013
US$m
2,722
43
76
85
89
3,015
At 31st December 2014, the carrying amount of stocks and work in progress pledged as security for borrowings amounted to
US$2 million (2013: US$2 million) (refer note 30).
90
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 23 Bank Balances and Other Liquid Funds
Deposits with banks and financial institutions
Bank balances
Cash balances
Analysis by currency:
Chinese renminbi
Euro
Hong Kong dollar
Indonesian rupiah
Japanese yen
Malaysian ringgit
New Taiwan dollar
Philippine peso
Singapore dollar
Thailand baht
United Kingdom sterling
United States dollar
Other
2014
US$m
3,543
1,659
113
5,315
401
42
336
1,049
19
49
52
21
396
24
32
2,864
30
5,315
The weighted average interest rate on deposits with banks and financial institutions is 2.1% (2013: 2.8%) per annum.
24 Share Capital
Authorized:
1,000,000,000 shares of US¢25 each
Issued and fully paid:
At 1st January
Scrip issued in lieu of dividends
At 31st December
2014
US$m
250
2014
US$m
170
3
173
Ordinary shares
in millions
2014
2013
681
10
691
670
11
681
2013
US$m
3,958
1,161
95
5,214
508
60
388
1,208
20
73
40
7
355
13
29
2,498
15
5,214
2013
US$m
250
2013
US$m
168
2
170
91
Jardine Matheson | Annual Report 2014
25 Senior Executive Share Incentive Schemes
The Senior Executive Share Incentive Schemes (the ‘Schemes’) were set up in order to provide selected executives with options
to purchase ordinary shares in the Company.
The exercise price of the granted options is based on the average market price for the five trading days immediately preceding
the date of grant of the options. Options are vested in tranches over a period of up to five years and are exercisable for up to ten
years following the date of grant. Prior to the adoption of the 2005 Plan on 5th May 2005, ordinary shares were issued on the
date of grant of the options to the Trustee of the Schemes, Clare Investment Overseas (PTC) Limited, a wholly-owned subsidiary,
which holds the ordinary shares until the options are exercised. Under the 2005 Plan, ordinary shares may be issued upon
exercise of the options.
The shares issued under the Schemes held on trust by the wholly-owned subsidiary are, for presentation purposes, netted
off the Company’s share capital in the consolidated balance sheet and the premium attached to them is netted off the share
premium account (refer note 26).
Movements during the year:
At 1st January
Granted
Exercised
Cancelled
At 31st December
2014
2013
Weighted
average
exercise
price
US$
41.4
59.6
28.8
48.5
44.3
Options
in millions
2.4
0.2
(0.2)
(0.1)
2.3
Weighted
average
exercise
price
US$
34.5
64.9
20.6
–
41.4
Options
in millions
2.3
0.4
(0.3)
–
2.4
The average share price during the year was US$60.1 (2013: US$58.7) per share.
Outstanding at 31st December:
Expiry date
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total outstanding
of which exercisable
Exercise
price
US$
18.2
21.7
27.3
16.7 – 24.5
32.2
45.7 – 46.8
51.2
64.9
59.6
Options
in millions
2014
2013
0.1
0.2
0.2
0.1
0.3
0.3
0.5
0.4
0.2
2.3
0.8
0.1
0.2
0.2
0.3
0.3
0.4
0.5
0.4
–
2.4
0.7
The fair value of options granted during the year, determined using the Trinomial valuation model, was US$3 million
(2013: US$7 million). The significant inputs into the model, based on the weighted average number of options issued, were
share price of US$59.0 (2013: US$64.6) at the grant dates, exercise price shown above, expected volatility based on the last
seven years of 32.1% (2013: 32.3%), dividend yield of 2.4% (2013: 2.1%), option life disclosed above, and annual risk-free
interest rate of 2.1% (2013: 1.3%). Options are assumed to be exercised at the end of the seventh year following the date
of grant.
92
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 26 Share Premium and Capital Reserves
2014
At 1st January
Capitalization arising on scrip issued in lieu of dividends
Employee share option schemes
– exercise of share options
– value of employee services
Transfer
At 31st December
2013
At 1st January
Capitalization arising on scrip issued in lieu of dividends
Employee share option schemes
– exercise of share options
– value of employee services
Transfer
At 31st December
Share
premium
US$m
Capital
reserves
US$m
19
(3)
2
–
2
20
18
(2)
1
–
2
19
100
–
–
21
(3)
118
89
–
–
21
(10)
100
Total
US$m
119
(3)
2
21
(1)
138
107
(2)
1
21
(8)
119
Capital reserves represent the value of employee services under the Group’s employee share option schemes. At 31st December
2014, US$19 million (2013: US$16 million) related to the Company’s Senior Executive Share Incentive Schemes.
93
Jardine Matheson | Annual Report 2014 27 Dividends
Final dividend in respect of 2013 of US¢103.00 (2012: US¢100.00) per share
Interim dividend in respect of 2014 of US¢38.00 (2013: US¢37.00) per share
Company’s share of dividends paid on the shares held by subsidiaries
Shareholders elected to receive scrip in respect of the following:
Final dividend in respect of previous year
Interim dividend in respect of current year
2014
US$m
701
261
962
(441)
521
449
170
619
2013
US$m
670
251
921
(418)
503
453
173
626
A final dividend in respect of 2014 of US¢107.00 (2013: US¢103.00) per share amounting to a total of US$739 million
(2013: US$701 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved at
the 2015 Annual General Meeting. The net amount after deducting the Company’s share of the dividends payable on the shares
held by subsidiaries of US$341 million (2013: US$321 million) will be accounted for as an appropriation of revenue reserves in
the year ending 31st December 2015.
28 Own Shares Held
Own shares held of US$3,105 million (2013: US$2,664 million) represent the Company’s share of the cost of 386 million
(2013: 378 million) ordinary shares in the Company held by subsidiaries and are deducted in arriving at shareholders’ funds.
29 Non-controlling Interests
By business:
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Jardine Strategic
Other
Less own shares held attributable to non-controlling interests
2014
US$m
16,212
641
382
180
7,773
983
28
26,199
(661)
25,538
2013
US$m
15,798
592
396
180
7,112
858
27
24,963
(567)
24,396
94
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 29 Non-controlling Interests (continued)
Summarized financial information on subsidiaries with material non-controlling interests
Set out below are the summarized financial information for each subsidiary that has non-controlling interests that are material
to the Group.
Summarized balance sheet at 31st December
2014
Current
Assets
Liabilities
Total current net assets/(liabilities)
Non-current
Assets
Liabilities
Total non-current net assets
Non-controlling interests
Net assets
2013
Current
Assets
Liabilities
Total current net assets/(liabilities)
Non-current
Assets
Liabilities
Total non-current net assets
Non-controlling interests
Net assets
Hongkong
Land
US$m
Dairy
Farm
US$m
Mandarin
Oriental
US$m
Astra
US$m
Jardine
Strategic
US$m
4,890
(1,832)
3,058
28,742
(4,202)
24,540
(50)
27,548
4,367
(2,192)
2,175
28,629
(3,905)
24,724
(42)
26,857
1,930
(2,565)
(635)
2,386
(228)
2,158
(94)
1,429
1,931
(2,426)
(495)
2,032
(160)
1,872
(96)
1,281
426
(371)
55
1,482
(576)
906
(5)
7,805
(5,895)
1,910
11,957
(3,579)
8,378
(2,138)
16,208
(11,086)
5,122
48,575
(8,659)
39,916
(21,845)
956
8,150
23,193
397
(715)
(318)
1,621
(308)
1,313
(6)
989
7,241
(5,827)
1,414
11,162
(3,198)
7,964
(1,943)
15,323
(11,472)
3,851
46,685
(7,646)
39,039
(20,862)
7,435
22,028
95
Jardine Matheson | Annual Report 2014 29 Non-controlling Interests (continued)
Summarized profit and loss for the year ended 31st December
2014
Profit after tax from underlying
business performance
Profit after tax from non-trading items
Profit after tax
Other comprehensive expense
Total comprehensive income
Total comprehensive income/(expense)
allocated to non-controlling interests
Dividends paid to non-controlling interests
2013
Profit after tax from underlying
business performance
Profit after tax from non-trading items
Profit after tax
Other comprehensive (expense)/income
Total comprehensive income
Total comprehensive income/(expense)
allocated to non-controlling interests
Dividends paid to non-controlling interests
Hongkong
Land
US$m
Dairy
Farm
US$m
Mandarin
Oriental
US$m
Astra
US$m
Jardine
Strategic
US$m
933
409
1,342
(216)
1,126
13
(5)
939
261
1,200
(78)
1,122
13
(7)
498
10
508
(53)
455
(2)
–
487
26
513
(123)
390
(7)
–
97
–
97
(63)
34
(1)
–
94
3
97
11
108
–
–
1,773
53
1,826
(228)
1,598
223
(123)
2,039
39
2,078
(2,065)
13
(141)
(129)
3,444
461
3,905
(764)
3,141
1,779
(896)
3,626
224
3,850
(2,322)
1,528
555
(951)
96
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 29 Non-controlling Interests (continued)
Summarized cash flows at 31st December
2014
Cash flows from operating activities
Cash generated from operations
Interest received
Interest and other financing charges paid
Tax paid
Other operating cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Cash and cash equivalents at 31st December
2013
Cash flows from operating activities
Cash generated from operations
Interest received
Interest and other financing charges paid
Tax paid
Other operating cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Cash and cash equivalents at 31st December
Hongkong
Land
US$m
Dairy
Farm
US$m
Mandarin
Oriental
US$m
Astra
US$m
Jardine
Strategic
US$m
1,091
51
(132)
(134)
(177)
699
88
(516)
271
1,402
(15)
1,658
835
40
(117)
(139)
289
908
(378)
(117)
413
981
8
1,402
534
7
(8)
(94)
237
676
(432)
(293)
(49)
711
(5)
657
551
7
(11)
(95)
231
683
(285)
(316)
82
665
(36)
711
121
2
(24)
(21)
82
160
(46)
(99)
15
316
(7)
324
112
2
(18)
(19)
80
157
(422)
132
(133)
453
(4)
316
1,741
102
(115)
(494)
304
1,538
(1,182)
(242)
114
1,522
30
1,666
2,033
76
(106)
(628)
900
2,275
(1,144)
(536)
595
1,118
(191)
1,522
3,408
172
(284)
(791)
657
3,162
(2,189)
(815)
158
4,895
(3)
5,050
3,334
133
(253)
(933)
1,527
3,808
(2,230)
(376)
1,202
3,918
(225)
4,895
The information above is the amount before inter-company eliminations.
97
Jardine Matheson | Annual Report 2014 30 Borrowings
Current
– bank overdrafts
– other bank advances
– other advances
Current portion of long-term borrowings
– bank loans
– bonds and notes
– finance lease liabilities
– other loans
Long-term borrowings
– bank loans
– bonds and notes
– finance lease liabilities
– other loans
Carrying
amount
US$m
27
1,176
32
1,235
1,806
967
36
24
2,833
4,068
3,448
3,914
48
6
7,416
2014
2013
Fair
value
US$m
27
1,176
32
1,235
1,806
967
36
24
2,833
4,068
3,456
3,977
48
6
7,487
Carrying
amount
US$m
25
1,387
39
1,451
2,018
1,261
43
38
3,360
4,811
2,558
3,810
80
25
6,473
Fair
value
US$m
25
1,387
39
1,451
2,018
1,261
43
38
3,360
4,811
2,560
3,723
80
24
6,387
11,484
11,555
11,284
11,198
The fair values are based on market prices or are estimated using the expected future payments discounted at market interest
rates ranging from 0.2% to 11.5% (2013: 0.5% to 11.8%) per annum. This is in line with the definition of ‘observable current
market transactions’ under the fair value measurement hierarchy. The fair value of current borrowings approximates their
carrying amount, as the impact of discounting is not significant.
Secured
Unsecured
2014
US$m
4,911
6,573
2013
US$m
4,460
6,824
11,484
11,284
Secured borrowings at 31st December 2014 included Hongkong Land’s bank borrowings of US$212 million
(2013: US$230 million) which were secured against its properties for sale, Mandarin Oriental’s bank borrowings of
US$517 million (2013: US$555 million) which were secured against its tangible assets, and Astra’s bonds and notes of
US$1,624 million (2013: US$1,753 million) which were secured against its various assets as described below and bank
borrowings of US$2,558 million (2013: US$1,922 million) which were secured against its various assets.
98
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 30 Borrowings (continued)
Fixed rate borrowings
Weighted
average
interest rates
Weighted
average period
outstanding
Floating
rate
borrowings
By currency:
2014
Chinese renminbi
Euro
Hong Kong dollar
Indonesian rupiah
Japanese yen
Malaysian ringgit
New Taiwan dollar
Philippine peso
Singapore dollar
Swiss franc
United Kingdom sterling
United States dollar
Other
2013
Chinese renminbi
Euro
Hong Kong dollar
Indonesian rupiah
Japanese yen
Malaysian ringgit
New Taiwan dollar
Singapore dollar
Swiss franc
United Kingdom sterling
United States dollar
Other
%
5.3
1.6
3.3
9.1
1.0
4.1
2.0
3.5
2.2
1.8
1.6
2.1
5.9
5.2
1.8
2.9
7.6
1.2
4.0
1.9
2.1
1.2
2.6
2.3
3.7
Years
US$m
US$m
–
2.4
10.1
1.5
–
–
2.9
0.8
2.5
17.0
–
1.4
0.6
–
3.4
10.1
1.3
–
0.1
0.4
3.4
18.0
0.5
1.6
0.4
–
4
2,142
4,218
–
–
–
78
475
2
–
259
5
7,183
–
6
2,038
3,632
–
–
1
510
2
33
351
8
6,581
100
182
1,559
712
21
87
10
24
792
12
175
626
1
4,301
147
207
1,745
885
29
140
9
794
54
130
560
3
4,703
The weighted average interest rates and period of fixed rate borrowings are stated after taking into account hedging
transactions.
Total
US$m
100
186
3,701
4,930
21
87
10
102
1,267
14
175
885
6
11,484
147
213
3,783
4,517
29
140
10
1,304
56
163
911
11
11,284
99
Jardine Matheson | Annual Report 2014 30 Borrowings (continued)
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
The finance lease liabilities are as follows:
Within one year
Between one and five years
Future finance charges on finance leases
Present value of finance lease liabilities
Current
Non-current
2014
US$m
6,755
1,346
1,061
69
167
2,086
2013
US$m
6,954
1,456
695
242
1
1,936
11,484
11,284
Present value of
finance lease liabilities
2014
US$m
36
48
84
36
48
84
2013
US$m
43
80
123
43
80
123
Minimum lease payments
2013
2014
US$m
US$m
38
50
88
(4)
84
46
83
129
(6)
123
100
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 30 Borrowings (continued)
Details of the bonds and notes outstanding at 31st December 2014 are as follows:
Maturity
Interest rates %
Nominal values
US$m
US$m
US$m
US$m
2014
2013
Current
Non-
current
Current
Non-
current
Hongkong Land
5.50% 10-year notes
3.65% 10-year notes
3.86% 8-year notes
4.135% 10-year notes
4.1875% 10-year notes
4.25% 10-year notes
4.22% 10-year notes
4.24% 10-year notes
3.43% 10-year notes
3.95% 10-year notes
4.28% 12-year notes
3.86% 10-year notes
4.50% 10-year notes
3.00% 10-year notes
2.90% 10-year notes
3.95% 10-year notes
3.95% 10-year notes
4.625% 10-year notes
4.10% 15-year notes
4.50% 15-year notes
3.75% 15-year notes
4.00% 15-year notes
4.04% 15-year notes
3.95% 15-year notes
3.15% 15-year notes
4.22% 15-year notes
4.40% 15-year notes
4.11% 20-year notes
4.125% 20-year notes
4.00% 20-year partly paid notes
5.25% 30-year notes
Astra Sedaya Finance
XI bonds
XII bonds
Berkelanjutan I Tahap I bonds
Berkelanjutan I Tahap II bonds
Berkelanjutan I Tahap III bonds
Berkelanjutan II Tahap I bonds
Berkelanjutan II Tahap II bonds
Berkelanjutan II Tahap III bonds
Berkelanjutan II Tahap IV bonds
Singapore Dollars Guaranteed
bonds
2014
2015
2017
2019
2019
2019
2020
2020
2020
2020
2021
2022
2022
2022
2022
2023
2023
2024
2025
2025
2026
2027
2027
2027
2028
2028
2029
2030
2031
2032
2040
2014
2015
2017
2014
2016
2016
2017
2018
2017
2017
US$500 million
5.50
S$375 million
3.65
S$50 million
3.86
HK$200 million
4.135
HK$300 million
4.1875
HK$300 million
4.25
HK$500 million
4.22
HK$500 million
4.24
S$150 million
3.43
HK$500 million
3.95
HK$500 million
4.28
HK$410 million
3.86
US$500 million
4.50
HK$305 million
3.00
2.90
HK$200 million
3.95 HK$1,100 million
HK$300 million
3.95
US$400 million
4.625
HK$300 million
4.10
US$600 million
4.50
HK$302 million
3.75
HK$785 million
4.00
HK$473 million
4.04
HK$200 million
3.95
HK$300 million
3.15
HK$325 million
4.22
HK$400 million
4.40
HK$800 million
4.11
HK$200 million
4.125
HK$240 million
4.00
HK$250 million
5.25
10.9
10.0
8.0 – 8.6
7.5
7.75
7.25 – 7.75
9.5 – 9.75
9.6 – 10.6
9.6 – 10.5
Rp270 billion
Rp580 billion
Rp4,250 billion
Rp941 billion
Rp1,120 billion
Rp1,050 billion
Rp1,255 billion
Rp1,950 billion
Rp2,500 billion
–
285
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
46
155
–
–
8
–
91
79
–
–
39
25
39
39
69
64
113
64
69
52
484
39
26
141
39
409
38
616
39
99
61
26
38
42
51
103
25
30
32
–
–
181
–
90
69
98
62
115
2.12
Rp942 billion
–
74
507
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22
61
–
77
29
53
44
–
–
–
–
297
42
25
39
39
68
64
118
64
67
52
462
39
26
141
39
–
38
617
39
99
61
26
38
42
–
103
25
20
32
–
47
343
–
92
78
100
–
–
–
101
Jardine Matheson | Annual Report 2014 30 Borrowings (continued)
Details of the bonds and notes outstanding at 31st December 2014 are as follows (continued):
Maturity
Interest rates %
Nominal values
US$m
US$m
US$m
US$m
2014
2013
Current
Non-
current
Current
Non-
current
Federal International Finance
X bonds
XI bonds
Berkelanjutan I Tahap I bonds
Berkelanjutan I Tahap II bonds
Berkelanjutan I Tahap III bonds
Shogun bonds
SAN Finance
I bonds
II bonds
Berkelanjutan I Tahap I bonds
Berkelanjutan I Tahap II bonds
Surya Artha Nusantara Finance
II notes
Serasi Auto Raya
II bonds
III bonds
2014
2014
2015
2016
2017
2014
2014
2015
2016
2017
2014
2015
2016
10.55
9.6
7.65
7.75
9.6 – 10.5
7.9 – 9.25
Rp500 billion
Rp1,869 billion
Rp1,635 billion
Rp1,690 billion
Rp1,550 billion
US$20 million
9.3
8.4
9.75
10.5
Rp294 billion
Rp807 billion
Rp391 billion
Rp1,000 billion
8.35
Rp200 billion
10.2
8.3 – 8.75
Rp470 billion
Rp289 billion
–
–
131
–
58
–
–
65
–
–
–
38
11
–
–
–
136
60
–
–
–
29
77
–
–
12
41
153
109
58
–
20
24
11
9
–
16
–
27
–
–
134
138
–
–
–
66
28
–
–
38
24
967
3,914
1,261
3,810
The Astra Sedaya Finance bonds were issued by a partly-owned subsidiary of Astra and are collateralized by fiduciary guarantee
over financing debtors of the subsidiary amounting to 60% of the total outstanding principal of the bonds.
The Federal International Finance bonds were issued by a wholly-owned subsidiary of Astra and are collateralized by fiduciary
guarantee over financing debtors of the subsidiary amounting to 60% of the total outstanding principal of the bonds.
The SAN Finance bonds were issued by a partly-owned subsidiary of Astra and are collateralized by fiduciary guarantee over net
investment in finance leases of the subsidiary amounting to 60% of the total outstanding principal of the bonds.
The Serasi Auto Raya bonds were unsecured and issued by a wholly-owned subsidiary of Astra.
102
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
31
Creditors
Trade creditors
– third parties
– associates and joint ventures
Accruals
Other amounts due to associates and joint ventures
Rental and other refundable deposits
Contingent consideration payable
Derivative financial instruments
Other creditors
Financial liabilities
Gross estimated losses on insurance contracts
Net amount due to customers for contract work
Proceeds from properties for sale received in advance
Rental income received in advance
Other income received in advance
Deferred warranty income
Unearned premiums on insurance contracts
Other
Non-current
Current
Analysis by geographical area of operation:
Greater China
Southeast Asia
United Kingdom
Rest of the world
2014
US$m
3,944
227
4,171
1,626
188
420
67
43
400
6,915
143
48
697
26
214
17
357
191
8,608
364
8,244
8,608
3,055
5,136
229
188
8,608
2013
US$m
3,826
224
4,050
1,592
207
361
66
59
363
6,698
110
38
678
26
193
24
341
203
8,311
390
7,921
8,311
3,125
4,799
221
166
8,311
Derivative financial instruments are stated at fair value. Other creditors are stated at amortized cost. The fair values of these
creditors approximate their carrying amounts.
103
Jardine Matheson | Annual Report 2014 32 Provisions
2014
At 1st January
Exchange differences
Additional provisions
Unused amounts
reversed
Utilized
At 31st December
Non-current
Current
2013
At 1st January
Exchange differences
New subsidiaries
Additional provisions
Unused amounts
reversed
Utilized
At 31st December
Non-current
Current
Motor
vehicle
warranties
Closure
cost
provisions
Obligations
under
onerous
leases
Reinstate-
ment and
restoration
costs
Statutory
employee
entitlements
US$m
US$m
US$m
US$m
US$m
Others
US$m
Total
US$m
32
(2)
9
–
(4)
35
–
35
35
29
(1)
–
7
–
(3)
32
–
32
32
9
–
2
(2)
(4)
5
1
4
5
6
–
–
6
(1)
(2)
9
–
9
9
10
(1)
3
–
–
12
10
2
12
3
–
–
9
(1)
(1)
10
6
4
10
46
(2)
4
(1)
(1)
46
41
5
46
40
(2)
4
7
–
(3)
46
40
6
46
96
(2)
9
–
(2)
101
75
26
101
106
(23)
4
9
–
–
96
80
16
96
12
–
7
(1)
(2)
16
11
5
16
10
(1)
–
4
–
(1)
12
8
4
12
205
(7)
34
(4)
(13)
215
138
77
215
194
(27)
8
42
(2)
(10)
205
134
71
205
Motor vehicle warranties are estimated liabilities that fall due under the warranty terms offered on sale of new and used
vehicles beyond that which is reimbursed by the manufacturers.
Closure cost provisions are established when legal or constructive obligations arise on closure or disposal of businesses.
Provisions are made for obligations under onerous operating leases when the properties are not used by the Group and the net
costs of exiting from the leases exceed the economic benefits expected to be received.
Other provisions principally comprise provisions in respect of indemnities on disposal of businesses and legal claims.
104
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
33 Notes to Consolidated Cash Flow Statement
(a) Depreciation and amortization
By business:
Jardine Pacific
Jardine Motors
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
(b) Other non-cash items
By nature:
Profit on sale of subsidiaries
Profit on sale of associates and joint ventures
Profit on sale of other investments
Profit on sale of tangible assets
Loss on sale of repossessed assets
Loss on sale of plantations and related assets
Decrease in fair value of plantations
Impairment of tangible assets
Impairment of other investments
Impairment of debtors
Write down of stocks and work in progress
Reversal of write down of stocks and work in progress
Reversal of write down of properties for sale
Change in provisions
Net foreign exchange losses
Options granted under employee share option schemes
Other
By business:
Jardine Pacific
Jardine Motors
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
2014
US$m
32
27
2
203
65
11
667
2013
US$m
26
21
2
197
60
10
723
1,007
1,039
2014
US$m
2013
US$m
–
(4)
(36)
(37)
52
4
34
231
–
129
57
(26)
(56)
14
27
11
3
403
2
(5)
(65)
4
2
14
462
(11)
403
(13)
–
(11)
(33)
56
1
15
1
55
117
59
(19)
(12)
14
68
11
–
309
8
(2)
(12)
–
(3)
14
244
60
309
105
Jardine Matheson | Annual Report 2014 33 Notes to Consolidated Cash Flow Statement (continued)
(c) Increase in working capital
Increase in properties for sale
Increase in stocks and work in progress
Increase in debtors
Increase in creditors
Increase in pension obligations
(d) Purchase of subsidiaries
Intangible assets
Tangible assets
Plantations
Associates and joint ventures
Non-current debtors
Deferred tax assets
Current assets
Deferred tax liabilities
Pension liabilities
Non-current provisions
Current liabilities
Non-current borrowings
Non-controlling interests
Fair value of identifiable net assets acquired
Adjustment for non-controlling interests
Goodwill
Total consideration
Payment for contingent consideration
Adjustment for deferred consideration
Payment for deferred consideration
Carrying value of associates and joint ventures
Cash and cash equivalents of subsidiaries acquired
Net cash outflow
2014
US$m
(340)
(449)
(1,039)
388
30
(1,410)
2014
Fair value
US$m
12
82
27
–
38
4
75
–
(3)
–
(125)
(80)
(1)
29
–
127
156
1
–
2
(95)
(11)
53
2013
US$m
(160)
(94)
(901)
867
30
(258)
2013
Fair value
US$m
59
82
–
9
5
–
89
(4)
(5)
(6)
(80)
–
–
149
(54)
69
164
2
(2)
1
–
(38)
127
For the subsidiaries acquired during 2014, the fair value of the identifiable assets and liabilities at the acquisition date is
provisional and will be finalized within one year after the acquisition dates.
The fair value of the identifiable assets and liabilities at the acquisition dates of certain subsidiaries acquired during 2013
as included in the comparative figures was provisional. The fair value was finalized in 2014. As the difference between the
provisional and the finalized fair value was not material, the comparative figures have not been adjusted.
Net cash outflow for purchase of subsidiaries in 2014 included US$23 million for Dairy Farm’s increased interest from 50%
to 66% in Rustan Supercenters, Inc. (‘Rustan’), which operates a supermarket and hypermarket chain in the Philippines,
in August 2014, and US$26 million for Astra’s acquisition of a 100% interest in PT Palma Plantasindo, an oil palm plantation
company, in July 2014.
106
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 33 Notes to Consolidated Cash Flow Statement (continued)
(d) Purchase of subsidiaries (continued)
The goodwill arising from the acquisition of Rustan amounted to US$125 million was attributable to its leading market position
and retail network in the Philippines.
Net cash outflow in 2013 included US$39 million for Jardine Pacific’s acquisition of a 100% interest in Birdland (Hong Kong)
Limited which operates the KFC franchised restaurants in Hong Kong and Macau (‘KFC Hong Kong’), in November 2013,
US$42 million and US$31 million for Astra’s acquisition of a 100% interest in PT Pelabuhan Penajam Banua Taka, a port
business in Indonesia, in January 2013, and a 51% interest in PT Pakoakuina, a producer of wheel rims for both motor cars and
motorcycles, in April 2013, respectively.
The goodwill arising from the acquisition of KFC Hong Kong amounted to US$42 million and was attributable to its market share
in quick service restaurants in Hong Kong and the benefit to strengthen the Group’s operating capability of KFC franchise in
the region.
None of the goodwill is expected to be deductible for tax purposes.
Revenue and loss after tax since acquisition in respect of subsidiaries acquired during the year amounted to US$178 million
and US$9 million, respectively. Had the acquisitions occurred on 1st January 2014, consolidated revenue and consolidated profit
after tax for the year ended 31st December 2014 would have been US$40,203 million and US$4,064 million, respectively.
(e) Purchase of associates and joint ventures in 2014 included US$36 million and US$150 million for Hongkong Land’s
investments in the Philippines and mainland China, respectively, US$92 million for Dairy Farm’s acquisition of a 49% interest
in Rose Pharmacy, Inc., which operates health and beauty business in the Philippines, and US$56 million and US$41 million
for Astra’s subscription to PT Bank Permata’s rights issue and capital injections into certain associates and joint ventures in
Indonesia, respectively.
Purchase in 2013 included US$394 million for Hongkong Land’s investments in new joint ventures mainly in China and
Indonesia, and US$65 million for Astra’s capital injections into certain associates and joint ventures in Indonesia.
(f ) Purchase of other investments in 2014 and 2013 mainly included acquisition of securities by Astra.
(g) Advance and repayment from associates, joint ventures and others in 2014 and 2013 mainly included advance and
repayment from Hongkong Land’s property joint ventures.
(h) Sale of subsidiaries in 2013 included US$25 million from Jardine Motors’ sale of its dealerships in North London and
Hampshire and US$9 million from Astra’s disposal of its 100% interest in PT Suryaraya Prawira.
(i) Sale of other investments in 2014 comprised US$119 million for Jardine Strategic’s sale of Tata Power and US$98 million for
Astra’s sale of securities. Sale in 2013 comprised Astra’s sale of securities.
107
Jardine Matheson | Annual Report 2014 33 Notes to Consolidated Cash Flow Statement (continued)
(j) Change in interests in subsidiaries
Increase in attributable interests
– Jardine Cycle & Carriage
– Jardine Strategic
– other
Decrease in attributable interests
2014
US$m
(120)
–
(21)
185
44
2013
US$m
(136)
(182)
(56)
260
(114)
Increase in attributable interests in other subsidiaries in 2014 included US$10 million for Jardine Motors’ acquisition of an
additional 40% interest in Dongguan Huaxing, increasing its controlling interest to 100% and US$5 million for Astra’s acquisition
of an additional 5% interest in PT Marga Harjaya Infrastruktur, increasing its controlling interest to 100%.
Increase in 2013 included US$51 million for Astra’s acquisition of an additional 15% interest in PT Asmin Bara Bronang,
increasing its controlling interest to 75%.
Decrease in attributable interests in 2014 comprised Astra’s sale of a 25% interest in PT Astra Sedaya Finance to PT Bank
Permata, reducing its controlling interest to 75%.
Decrease in 2013 comprised Astra’s reduction in its interest in PT Astra Otoparts from 96% to 80%.
(k) Analysis of balances of cash and cash equivalents
Bank balances and other liquid funds (refer note 23)
Bank overdrafts (refer note 30)
2014
US$m
5,315
(27)
5,288
2013
US$m
5,214
(25)
5,189
108
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 34 Derivative Financial Instruments
The fair values of derivative financial instruments at 31st December are as follows:
Designated as cash flow hedges
– forward foreign exchange contracts
– interest rate swaps
– cross currency swaps
Designated as fair value hedges
– interest rate swaps
– cross currency swaps
Non-qualifying as hedges
– interest rate caps
2014
2013
Positive
fair
value
US$m
Negative
fair
value
US$m
Positive
fair
value
US$m
Negative
fair
value
US$m
2
–
181
183
6
14
20
1
17
4
12
33
–
10
10
–
2
–
283
285
5
4
9
–
–
10
14
24
–
35
35
–
Forward foreign exchange contracts
The contract amounts of the outstanding forward foreign exchange contracts at 31st December 2014 were US$624 million
(2013: US$224 million).
Interest rate swaps and caps
The notional principal amounts of the outstanding interest rate swap and cap contracts at 31st December 2014 were
US$632 million (2013: US$888 million).
At 31st December 2014 the fixed interest rates relating to interest rate swaps and caps vary from 0.6% to 3.5%
(2013: 0.6% to 7.0%) per annum.
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from
0.2% to 2.0% (2013: 0.2% to 2.6%) per annum.
Cross currency swaps
The contract amounts of the outstanding cross currency swap contracts at 31st December 2014 totalled US$4,026 million
(2013: US$3,167 million).
109
Jardine Matheson | Annual Report 2014 35 Commitments
Capital commitments:
Authorized not contracted
– joint ventures
– other
Contracted not provided
– joint ventures
– other
2014
US$m
12
1,082
1,094
188
780
968
2013
US$m
–
1,348
1,348
387
429
816
2,062
2,164
In addition, Dairy Farm entered into an agreement in August 2014 to acquire, by way of subscription of new shares, 19.99%
of the enlarged share capital of Yonghui Superstores Co., Ltd (‘Yonghui’) for a consideration of RMB5.7 billion (approximately
US$925 million). Listed on the Shanghai Stock Exchange, Yonghui is a hypermarket and supermarket operator in mainland
China. The investment requires certain regulatory approvals in mainland China. The regulatory approval process is expected to
complete in the first half of 2015.
Operating lease commitments:
Total commitments under operating leases
– due within one year
– due between one and two years
– due between two and three years
– due between three and four years
– due between four and five years
– due beyond five years
2014
US$m
863
605
383
218
146
730
2013
US$m
809
575
343
200
143
766
2,945
2,836
Total future sublease payments receivable relating to the above operating leases amounted to US$48 million
(2013: US$50 million).
In addition, the Group has operating lease commitments with rentals determined in relation to sales. It is not possible to
quantify accurately future rentals payable under such leases.
36 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.
110
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued) 37 Related Party Transactions
In the normal course of business the Group undertakes a variety of transactions with certain of its associates and joint ventures.
The more significant of such transactions are described below.
The Group purchases motor vehicles and spare parts from its associates and joint ventures in Indonesia including PT Toyota-
Astra Motor, PT Astra Honda Motor and PT Astra Daihatsu Motor. Total cost of motor vehicles and spare parts purchased in 2014
amounted to US$7,059 million (2013: US$8,019 million). The Group also sells motor vehicles and spare parts to its associates
and joint ventures in Indonesia including PT Astra Honda Motor, PT Astra Daihatsu Motor and PT Tunas Ridean. Total revenue
from sale of motor vehicles and spare parts in 2014 amounted to US$1,071 million (2013: US$1,174 million).
The Group uses Jardine Lloyd Thompson to place certain of its insurance. Brokerage fees and commissions, net of rebates, paid
by the Group in 2014 to Jardine Lloyd Thompson were US$5 million (2013: US$5 million).
The Group manages five associate hotels (2013: five associate hotels). Management fees received by the Group in 2014 from
these managed hotels amounted to US$14 million (2013: US$15 million).
PT Bank Permata provides banking services to the Group. The Group’s deposits with PT Bank Permata at 31st December 2014
amounted to US$411 million (2013: US$652 million).
Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors, as appropriate
(refer notes 18 and 31).
Details of Directors’ remuneration (being the key management personnel compensation) are shown on page 117 under the
heading of Directors’ Appointment, Retirement, Remuneration and Service Contracts.
38 Summarized Balance Sheet of the Company
Included below is certain summarized balance sheet information of the Company disclosed in accordance with Bermuda law.
Subsidiaries
Share capital (refer note 24)
Share premium and capital reserves (refer note 26)
Revenue and other reserves
Shareholders’ funds
Current liabilities
Total equity and liabilities
Subsidiaries are shown at cost less amounts provided.
2014
US$m
789
173
39
562
774
15
789
2013
US$m
1,111
170
35
892
1,097
14
1,111
39 Post Balance Sheet Event
Mandarin Oriental announced its intention to raise US$300 million by way of a rights issue in April 2015. The proceeds of
the rights issue will be used to pay down debt, thereby providing the company with the capacity to finance renovation of its
London hotel and place it in a position to make further investments in line with its development strategy. Jardine Strategic has
committed to take up its entitlement and fully underwrite the offer.
111
Jardine Matheson | Annual Report 2014 40 Principal Subsidiaries
The Group’s principal subsidiaries at 31st December 2014 are set out below:
Proportion of ordinary
shares and voting powers at
31st December 2014 held by
Attributable
interests
2014
2013
the Group
Dairy Farm International
Holdings Ltd
Hongkong Land Holdings Ltd
Jardine Cycle & Carriage Ltd
Jardine Matheson Ltd
Jardine Motors Group
Holdings Ltd
Jardine Pacific Holdings Ltd
Country of
incorporation/
principal place of
business
Bermuda/
Greater China and
Southeast Asia
%
64
%
64
Nature of business
Supermarkets,
hypermarkets,
convenience stores,
health and beauty
stores, home
furnishings stores
and restaurants
Bermuda/
Greater China and
Southeast Asia
Property development
& investment, leasing
& management
Singapore/
Southeast Asia
A 50.1% interest in PT
Astra International Tbk
and motor trading
41
41
61
60
Bermuda/
Hong Kong
Bermuda/
Greater China and
United Kingdom
Bermuda/
Greater China and
Southeast Asia
Group management
100
100
100
Motor trading
100
100
100*
100
100
100
Engineering &
construction, transport
services, restaurants,
property and IT services
Jardine Strategic Holdings Ltd† Bermuda/
Holding
82
83
Mandarin Oriental
International Ltd
Matheson & Co., Ltd
Greater China and
Southeast Asia
Bermuda/
Worldwide
Hotel management &
ownership
61
61
England/
United Kingdom
Holding and
management
100
100
31
30
PT Astra International Tbk
Indonesia/
Indonesia
Automotive, financial
services, agribusiness,
heavy equipment and
mining, infrastructure
and logistics, and
information technology
All subsidiaries are included in the consolidation.
non-controlling
interests
%
22
50
26
–
–
–
18
27
–
50
%
78
50
74
82
73
100
50
Attributable interests represent the proportional holdings of the Company, held directly or through its subsidiaries, in the issued
share capitals of the respective companies, after the deduction of any shares held by the trustees of the employee share option
schemes of any such company and any shares in any such company owned by its wholly-owned subsidiaries.
*
Jardine Motors is directly held by the Company. All other subsidiaries are held through subsidiaries.
†
Jardine Strategic held 56% (2013: 56%) of the share capital of the Company.
112
Jardine Matheson | Annual Report 2014Notes to the Financial Statements (continued)
Independent Auditors’ Report
To the members of Jardine Matheson Holdings Limited
Report on the Consolidated Financial Statements
Our opinion
In our opinion, Jardine Matheson Holdings Limited’s consolidated financial statements (the ‘financial statements’) present fairly,
in all material respects, the financial position of the Group as at 31st December 2014 and its financial performance and its cash
flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) and The Companies Act
1981 (Bermuda).
What we have audited
Jardine Matheson Holdings Limited’s financial statements comprise:
• the Consolidated Balance Sheet as at 31st December 2014;
• the Consolidated Profit and Loss Account and the Consolidated Statement of Comprehensive Income for the year then ended;
• the Consolidated Cash Flow Statement for the year then ended;
• the Consolidated Statement of Changes in Equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law in
Bermuda and IFRSs as issued by the International Accounting Standards Board (‘IASB’).
In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example
in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered
future events.
Responsibilities for the Financial Statements and the Audit
Our responsibilities and those of the Directors
As explained more fully in the Responsibilities Statement on page 115, the Directors are responsible for the preparation and fair
presentation of the financial statements in accordance with IFRSs and The Companies Act 1981 (Bermuda).
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Section 90 of The Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving these opinions, 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.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and
adequately disclosed;
• the reasonableness of significant accounting estimates made by the Directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls,
substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with
the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
11th March 2015
(a) The maintenance and integrity of the Jardine Matheson Holdings Limited website is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred
to the financial statements since they were initially presented on the website.
(b) Legislation in Bermuda governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
113
Jardine Matheson | Annual Report 2014 Five Year Summary
Profit and Loss*
Revenue
Profit attributable to shareholders
Underlying profit attributable to
shareholders
Earnings per share (US$)
Underlying earnings per share (US$)
Dividends per share (US$)
Balance Sheet*
Total assets
Total liabilities
Total equity
Shareholders’ funds
Net debt (excluding net debt of financial
services companies)
Net asset value per share (US$)
Cash Flow
Cash flows from operating activities
Cash flows from investing activities
Net cash flow before financing
Cash flow per share from operating
activities (US$)
2014
US$m
39,921
1,710
1,534
4.62
4.14
1.45
2014
US$m
66,457
(21,652)
44,805
19,267
2,483
51.79
2014
US$m
3,354
(2,303)
1,051
2013
US$m
39,465
1,566
1,502
4.26
4.09
1.40
2013
US$m
63,835
(21,053)
42,782
18,386
2,601
49.84
2013
US$m
4,200
(2,372)
1,828
2012
US$m
39,593
1,671
1,462
4.58
4.01
1.35
2012
US$m
63,461
(21,088)
42,373
17,800
3,413
48.53
2012
US$m
2,729
(2,784)
(55)
2011
US$m
37,967
3,432
1,478
9.48
4.08
1.25
2011
US$m
58,297
(19,050)
39,247
16,352
2,432
45.08
2011
US$m
2,674
(2,675)
(1)
2010
US$m
30,053
3,068
1,348
8.54
3.75
1.15
2010
US$m
48,075
(16,132)
31,943
13,706
2,252
37.98
2010
US$m
2,210
(1,372)
838
9.06
11.42
7.48
7.38
6.15
*
Figures prior to 2013 have been restated due to a change in accounting policy upon adoption of IAS 19 (amended 2011) ‘Employee Benefits’.
114
Jardine Matheson | Annual Report 2014 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, Managing Director’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 Conduct Authority of the United Kingdom.
For and on behalf of the Board
Ben Keswick
James Riley
Directors
11th March 2015
115
Jardine Matheson | Annual Report 2014 Corporate Governance
Jardine Matheson Holdings Limited is incorporated in Bermuda. The majority of the Group’s business interests are in Asia. The
Company’s equity shares have a standard listing on the Main Market of the London Stock Exchange, and secondary listings
in Bermuda and Singapore. At a Special General Meeting held on 8th April 2014 shareholders approved the transfer of the
Company’s shares to a standard listing from a premium listing on the London Stock Exchange and this transfer took effect
on 27th May 2014. The Company’s share capital is 56%-owned by Jardine Strategic Holdings Limited (‘Jardine Strategic’),
a Bermuda incorporated 82%-owned subsidiary of the Company similarly listed in London, Bermuda and Singapore. The
Disclosure and Transparency Rules (the ‘DTRs’) issued by the Financial Conduct Authority of the United Kingdom (the ‘FCA’)
require that this Report address all relevant information about the corporate governance practices applied beyond the
requirements under Bermuda law.
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 based on its approach developed over many years.
At the time of its transfer from a premium listing to a standard listing the Company advised that it intended to maintain certain
governance principles, including in relation to significant transactions, related party transactions, pre-emption rights over the
issue of new shares and securities dealing rules, that would otherwise no longer apply to the Company. These are more fully
described in ‘Further Governance Principles’ below.
The Management of the Group
The Company is the parent company of the Jardine Matheson Group. Its management is therefore concerned both with the direct
management of Jardine Matheson’s own activities, and with the oversight of the operations of other listed companies within the
wider Group.
The structural relationship between the Group companies is considered to be a key element to the Group’s success. By
coordinating objectives, establishing common values and standards and sharing experience, contacts and business
relationships, the Group aims to optimize opportunities across the Asian countries in which it operates. The Company’s system
of governance is based on a well-tried approach to oversight and management, in which the individual subsidiaries and
affiliates benefit from the Group’s strategic guidance and professional expertise, while at the same time, the independence of
their boards is respected and clear operational accountability rests with their executive management teams.
The Directors have the full power to manage the business affairs of the Company, with the exception of matters reserved to be
exercised by the Company in general meeting under Bermuda legislation or the Company’s Bye-laws. Among the matters on
which the Board decides are the Group’s business strategy, its annual budget, dividends and major corporate activities.
Operational management is delegated to the appropriate level, and coordination with the Group’s listed subsidiaries is
undertaken by the board of the Group management company, Jardine Matheson Limited (‘JML’). The JML board meets regularly
in Hong Kong and is chaired by the Managing Director. It currently has six other members, whose names appear on page 124 of
this Report, which include the Deputy Managing Director, the Group Finance Director, the Group Strategy Director and the Group
General Counsel.
The Board
The Company currently has a Board of 14 Directors. Their names and brief biographies appear on page 27 of this Report. The
Board composition and operation provide stability, allowing the Company to take a long-term view as it seeks to grow its
business and pursue investment opportunities.
The Chairman’s role is to lead the Board as it oversees the Group’s strategic and financial direction. The role of Managing
Director, with the support of the Deputy Managing Director, is to implement the strategy set by the Board and to manage the
Group’s operations. An important part of this is undertaken by the Managing Director in his capacity as chairman of the board
of JML to which responsibility for implementing the Group’s strategy within designated financial parameters has been delegated.
The Board is scheduled to hold four meetings in 2015 and ad hoc procedures are adopted to deal with urgent matters. In 2014
one meeting was held in Bermuda and three were held in Asia. The Board receives high quality, up to date information for each
of its meetings. In addition, certain Directors who are not members of the board of JML and who are based outside Asia regularly
visit Asia and Bermuda to discuss the Group’s business, as well as to participate in the four annual Group strategic reviews that
precede the regular 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 at Board meetings.
116
Jardine Matheson | Annual Report 2014 Directors’ Appointment, Retirement, Remuneration and Service Contracts
Candidates for appointment as executive Directors of the Company or as executive directors of JML may be sourced internally
or externally, including by using the services of specialist executive search firms. The aim is to appoint individuals who combine
international best practice with familiarity of or adaptability to Asian markets. When appointing non-executive Directors, the
Board pays particular attention to the Asian business experience and relationships that they can bring.
Each new Director is appointed by the Board and, in accordance with the Company’s Bye-laws, each new Director is subject
to retirement at the first annual general meeting after appointment. Thereafter, Directors are subject to retirement by rotation
under the Bye-laws 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 does not extend to the Chairman or
Managing Director. On 5th March 2015 Michael Wei Kuo Wu was appointed as a Director of the Company. In accordance with
Bye-law 84, Anthony Nightingale, Y.K. Pang and Percy Weatherall retire by rotation at this year’s Annual General Meeting and,
being eligible, offer themselves for re-election. In accordance with Bye-law 91, Michael Wei Kuo Wu will also retire, and, being
eligible, offers himself for re-election. Y.K. Pang has a service contract with a subsidiary of the Company that has a notice period
of six months. Anthony Nightingale, Percy Weatherall and Michael Wei Kuo Wu do not have service contracts with the Company
or its subsidiaries.
Jenkin Hui, who had been a Director of the Company since 2003, passed away on 4th September 2014. Giles White is to retire
from the Board on 31st July 2015.
The Company’s policy is to offer competitive remuneration packages to its senior executives. It is recognized 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. Executive Directors joining from outside the
Group are normally offered an initial fixed-term service contract to reflect any requirement for them to relocate.
Recommendations and decisions on remuneration and other benefits payable or made available to executive Directors result
from consultations between the Chairman and the Managing Director as well as with other Directors as may be considered
appropriate. Directors’ fees which are payable to the Chairman and all other Directors (other than full-time salaried Directors)
are decided upon by shareholders in general meeting as provided for by the Company’s Bye-laws. A motion to increase the fees
payable to Directors (other than full-time salaried Directors) to US$55,000 each per annum and the fee for the Chairman to
US$80,000 per annum with effect from 1st January 2015 will be proposed at the forthcoming Annual General Meeting.
Certain Directors are discretionary objects under a trust created in 1947 (the ‘1947 Trust’) which holds 35,915,991 ordinary
shares in the Company representing 5.20% of the Company’s issued share capital. Under the terms of the 1947 Trust, its income
is to be distributed to senior executive officers and employees of the Company and its wholly-owned subsidiaries.
For the year ended 31st December 2014, the Directors received US$66.2 million (2013: US$64.3 million) in aggregate being
distributions from the 1947 Trust of US$48.8 million (2013: US$47.3 million) and Directors’ fees and employee benefits
from the Group of US$17.4 million (2013: US$17.0 million). Directors’ fees and employee benefits included US$0.3 million
(2013: US$0.3 million) in Directors’ fees, US$13.6 million (2013: US$13.4 million) in short-term employee benefits including
salary, bonuses, accommodation and deemed benefits in kind, US$1.6 million (2013: US$1.5 million) in post-employment
benefits and US$1.8 million (2013: US$1.8 million) in share-based payments.
Share-based long-term incentive plans have also been established to provide incentives for executive Directors and senior
managers. Share options are granted at the then prevailing market prices and they normally vest after the third anniversary of
the date of grant. Grants may be made in a number of instalments. Share options are not granted to non-executive Directors.
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.
117
Jardine Matheson | Annual Report 2014 Corporate Governance (continued)
Audit Committee
The Board has established an Audit Committee, the current members of which are Lord Leach of Fairford, Anthony Nightingale
and Percy Weatherall; they have extensive knowledge of the Group but are not directly involved in operational management. The
Company’s Managing Director, Deputy Managing Director, Group Finance Director, Group Strategy Director and Group General
Counsel, together with representatives of the internal and external auditors, also attend the Audit Committee meetings by
invitation. The Audit Committee meets and reports to the Board semi-annually.
Prior to completion and announcement of the half-year and year-end results, a review of the Company’s financial information
and any issues raised in connection with the preparation of the results, including the adoption of any new accounting policies,
is undertaken by the Audit Committee with the executive management and a report is received from the external auditors.
The external auditors also have access to the full Board and other senior executives, and to the boards of the Group’s
operating companies.
The Audit Committee also keeps under review the nature, scope and results of the audits conducted by the internal audit
function and the findings of the various Group audit committees. The Audit Committee’s responsibilities extend to reviewing the
effectiveness of both the internal and the external audit functions; considering the independence and objectivity of the external
auditors; and reviewing and approving the level and nature of non-audit work performed by the external auditors.
The terms of reference of the Audit Committee can be found on the Company’s website at www.jardines.com.
Risk Management and Internal Control
The Board has overall responsibility for the Group’s systems of risk management and internal control. The Board has delegated
to the Audit Committee responsibility for reviewing areas of risk and uncertainty, the operation and effectiveness of the Group’s
systems of internal control and the procedures by which these are monitored. The Audit Committee considers the systems and
procedures on a regular basis, and reports to the Board semi-annually. The systems of internal control are 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.
Executive management oversees the implementation of the systems of internal control within the Group’s operating companies,
the responsibility for which rests with each company’s board and its own executive management. The effectiveness of these
systems is monitored by the internal audit function, which is independent of the operating companies, and by a series of audit
committees that operate in each major business unit across the Group. The internal audit function also monitors the approach
taken by the business units to risk. The findings of the internal audit function and recommendations for any corrective action
required are reported to the relevant audit committee and, if appropriate, to the Audit Committee of the Company.
The Group has in place an organizational structure with defined lines of responsibility and delegation of authority. Across
the Group 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 is set out in the Group’s Code of Conduct, which is a set of guidelines to which every employee must
adhere, and is reinforced and monitored by an annual compliance certification process.
The Audit Committee 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.
The principal risks and uncertainties facing the Company are set out on page 122.
118
Jardine Matheson | Annual Report 2014 Directors’ Responsibilities in respect of the Financial Statements
The Directors are required under the Bermuda Companies Act 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 are required
to 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 judgments
and estimates, have been followed in preparing the financial statements. The financial statements have been prepared on a
going concern basis.
Code of Conduct
The Group conducts business in a professional, ethical and even-handed manner. Its ethical standards are clearly set out in
its Code of Conduct. 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 and establish procedures to ensure compliance at all levels within their
organizations. 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.
Directors’ Share Interests
The Directors of the Company in office on 11th March 2015 had interests (within the meaning of the DTRs) as set out below in
the ordinary share capital of the Company. These interests included 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).
Sir Henry Keswick
Ben Keswick
Adam Keswick
Simon Keswick
Lord Leach of Fairford
Dr Richard Lee
Anthony Nightingale
Y.K. Pang
James Riley
Percy Weatherall
Giles White
Notes:
(a) Includes 1,950,004 ordinary shares held by a family trust, the trustees of which are connected persons of Ben Keswick, Adam Keswick, Simon Keswick
11,020,432
42,103,007(a) (b) (c)
35,578,343(a) (b)
11,804,402(a) (c)
1,164,024
112,305
1,157,335
315,000
253,912
36,786,014(a) (b)
48,447
and Percy Weatherall.
(b) Includes 30,659,530 ordinary shares held by family trusts, the trustee of which is a connected person of Ben Keswick, Adam Keswick and Percy Weatherall.
(c) Includes 6,898,390 ordinary shares held by family trusts, the trustees of which are connected persons of Ben Keswick and Simon Keswick.
In addition, Ben Keswick, Adam Keswick, Mark Greenberg, Y.K. Pang, James Riley, Lord Sassoon and Giles White held options in
respect of 220,000, 80,000, 240,000, 100,000, 40,000, 75,000 and 40,000 ordinary shares, respectively, issued pursuant to the
Company’s Senior Executive Share Incentive Schemes.
119
Jardine Matheson | Annual Report 2014 Corporate Governance (continued)
Substantial Shareholders
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 following holdings of voting rights of 5% or more attaching to the Company’s issued
ordinary share capital: (i) Jardine Strategic and its subsidiary undertakings are directly and indirectly interested in 386,470,216
ordinary shares carrying 55.95% of the voting rights; and (ii) the 1947 Trust is interested in 35,915,991 ordinary shares carrying
5.20% of the voting rights. Apart from these shareholdings, 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 11th March 2015.
There were no contracts of significance with corporate substantial shareholders during the year under review.
Further Governance Principles
In May 2014 the Company’s primary listing on the London Stock Exchange was transferred from a premium listing to a standard
listing on the Main Market. Under a standard listing, the Company is subject to the UK Listing Rules (other than those which
apply only to companies with a premium listing), the DTRs, the UK Prospectus Rules and the market abuse provisions of the UK
Financial Services and Markets Act. The Company, therefore, is bound by the rules in relation to continuous disclosure, periodic
financial reporting, disclosure of interests in shares and market abuse, including the rules governing insider dealing, market
manipulation and the disclosure of price sensitive information. The Company is also subject to regulatory oversight from the
FCA, as the Company’s principal securities regulator, and is required to comply with the Admission and Disclosure Standards of
the Main Market of the London Stock Exchange.
The main areas of the UK Listing Rules that no longer apply to the Company are in respect of significant transactions, related
party transactions, pre-emption rights over the issue of new shares, share repurchases and the need to comply or explain non-
compliance with the UK Corporate Governance Code. At the time of the move to a standard listing, however, the Company stated
that it intended to maintain certain governance principles in the following areas:
1. When assessing a significant transaction, being a larger transaction which would be classified as a class 1 transaction under
the provisions of the UK Listing Rules (having regard to the basis on which such provisions were applied to the Company on the
date of transfer to a standard listing), the Company will engage an independent financial adviser to provide a fairness opinion
on the terms of the transaction.
2. In the event of a related party transaction, being a transaction with a related party which would require a sponsor to
provide a fair and reasonable opinion under the provisions of the UK Listing Rules (having regard to the basis on which such
provisions were applied to the Company on the date of transfer to a standard listing), the Company will engage an independent
financial adviser to confirm that the terms of the transaction are fair and reasonable as far as the shareholders of the Company
are concerned.
3. Further, as soon as the terms of a significant transaction or a related party transaction are agreed, an announcement will
be issued by the Company providing such details of the transaction as are necessary for investors to evaluate the effect of the
transaction on the Company.
4. At each annual general meeting, the Company will seek shareholder approval to issue new shares on a non-pre-emptive
basis for up to 33% of the Company’s issued share capital, of which up to 5% can be issued for cash consideration.
5. The Company will continue to adhere to its Securities Dealing Rules, which follow the UK Model Code as applied to the
Company on the date of transfer to a standard listing.
6. The Company will continue its policies and practices in respect of risk management and internal controls.
120
Jardine Matheson | Annual Report 2014 Related Party Transactions
Details of transactions with related parties entered into by the Company during the course of the year are included in note 37 to
the financial statements on page 111.
Securities Purchase Arrangements
The Directors have the power under the Bermuda Companies Act and the Company’s Memorandum of Association to purchase
the Company’s shares. Any shares so purchased shall be treated as cancelled. The Board considers on a regular basis the
possibility for share repurchases or the acquisition of further shares in Group companies, including shares in Jardine Strategic.
When doing so, it considers the potential for the enhancement of earnings or asset values per share.
At the Annual General Meeting held on 8th May 2014, shareholders approved a general mandate authorizing 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 in accordance with the UK Listing Rules applicable to the Company’s premium listing status at the time.
As such an authority is no longer required by the Company’s standard listing obligations, its renewal is not being sought at the
forthcoming Annual General Meeting. The Company will, however, remain subject to the UK market abuse regime.
Takeover Code
The Company is subject to a Takeover Code, based on London’s City Code on Takeovers and Mergers. The Takeover Code
provides an orderly framework within which takeovers can be conducted and the interests of shareholders protected. The
Takeover Code has statutory backing, being established under the Acts of incorporation of the Company in Bermuda.
Annual General Meeting
The 2015 Annual General Meeting will be held at Rosewood Tucker’s Point, Bermuda on 7th May 2015. 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. A corporate website is maintained containing a wide range of information of interest to investors at www.jardines.com.
Power to amend Bye-laws
The Bye-laws of the Company can be amended by the shareholders by way of a special resolution at a general meeting of
the Company.
121
Jardine Matheson | Annual Report 2014 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 118 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 Conduct Authority of the United Kingdom and are in addition to the matters referred to in the
Chairman’s Statement and Managing Director’s Review.
Economic Risk
Most of the Group’s businesses are exposed to the risk of negative developments in global and regional economies and
financial markets, either directly or through the impact on the Group’s joint venture partners, franchisors, bankers, suppliers or
customers. These developments can result in recession, inflation, deflation, currency fluctuations, restrictions in the availability
of credit, business failures, or increases in financing costs, oil prices and in the cost of raw materials. Such developments might
increase operating costs, reduce revenues, lower asset values or result in the Group’s businesses being unable to meet in full
their 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.
A number of the Group’s businesses make significant investment decisions in respect of developments or projects that take time
to come to fruition and achieve the desired returns and are, therefore, subject to market risks.
The Group’s businesses operate 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. Significant pressure from such competition may lead
to reduced margins. The quality and safety of the products and services provided by the Group’s businesses 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 26 and note 2
to the financial statements on pages 44 to 51.
Concessions, Franchises and Key Contracts
A number of the Group’s businesses and projects are reliant on concessions, franchises, management or other key contracts.
Cancellation, expiry or termination, or the renegotiation of any such concession, franchise, management or other key contracts,
could have an adverse effect on the financial condition and results of operations of certain subsidiaries, associates and joint
ventures of the Group.
Regulatory and Political Risk
The Group’s businesses are subject to a number of regulatory environments in the territories in which they operate. Changes in
the regulatory approach to such matters as foreign ownership of assets and businesses, exchange controls, planning controls,
emission regulations, tax rules and employment legislation have the potential to impact the operations and profitability of the
Group’s businesses. Changes in the political environment in such territories can also affect the Group’s businesses.
Terrorism, Pandemic and Natural Disasters
A number of the Group’s operations 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.
All Group businesses would be impacted by a global or regional pandemic which could be expected to seriously affect economic
activity and the ability of our businesses to operate smoothly. In addition, many of the territories in which the Group operates
can experience from time to time natural disasters such as earthquakes and typhoons.
122
Jardine Matheson | Annual Report 2014 Shareholder Information
Financial Calendar
2014 full-year results announced
Shares quoted ex-dividend on the Singapore Exchange
Shares quoted ex-dividend on the London Stock Exchange
Share registers closed
2014 final dividend scrip election period closes
Annual General Meeting to be held
2014 final dividend payable
2015 half-year results to be announced
Shares quoted ex-dividend on the Singapore Exchange
Shares quoted ex-dividend on the London Stock Exchange
Share registers to be closed
2015 interim dividend scrip election period closes
2015 interim dividend payable
*
Subject to change
5th March 2015
18th March 2015
19th March 2015
23rd to 27th March 2015
24th April 2015
7th May 2015
13th May 2015
31st July 2015*
19th August 2015*
20th August 2015*
24th to 28th August 2015*
25th September 2015*
14th October 2015*
Dividends
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 2014 final dividend
by notifying the United Kingdom transfer agent in writing by 24th April 2015. The sterling equivalent of dividends declared in
United States dollars will be calculated by reference to a rate prevailing on 29th April 2015. Shareholders holding their shares
through The Central Depository (Pte) Ltd (‘CDP’) in Singapore will receive United States dollars unless they elect, through CDP,
to receive Singapore dollars. Shareholders, including those who hold their shares through CDP, may also elect to receive a scrip
alternative to their dividends.
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 Ltd
P.O. Box HM 1068
Hamilton HM EX
Bermuda
Jersey Branch Registrar
Capita Registrars (Jersey) Ltd
12 Castle Street
St Helier, Jersey JE2 3RT
Channel Islands
United Kingdom Transfer Agent
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU, England
Singapore Branch Registrar
M & C Services Private Ltd
112 Robinson Road #05-01
Singapore 068902
Press releases and other financial information can be accessed through the internet at www.jardines.com.
123
Jardine Matheson | Annual Report 2014 Telephone
Email
Website
(852) 2843 8288
jml@jardines.com
www.jardines.com
Group Corporate Secretary
N.M. McNamara
48th Floor, Jardine House
G.P.O. Box 70
Hong Kong
Directors
Ben Keswick, Chairman
Adam Keswick, Deputy Chairman
Mark Greenberg
David Hsu
Y.K. Pang
James Riley
Giles White
3 Lombard Street
London EC3V 9AQ
United Kingdom
25th Floor, Devon House
Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
25th Floor, Devon House
Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
The St Botolph Building
138 Houndsditch
London EC3A 7AW
United Kingdom
8th Floor
One Exchange Square
Central
Hong Kong
11th Floor, Devon House
Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
7th Floor
281 Gloucester Road
Causeway Bay
Hong Kong
239 Alexandra Road
Singapore 159930
Jl. Gaya Motor Raya No. 8
Sunter II, Jakarta 14330
Indonesia
Telephone
Email
Website
(44 20) 7816 8100
enquiries@matheson.co.uk
www.matheson.co.uk
Lord Leach of Fairford
Telephone
Email
(852) 2579 2888
jpl@jardines.com
Ben Birks
Telephone
Email
(852) 2579 2888
jmg@jardines.com
Adam Keswick
Telephone
Email
Website
(44 20) 7528 4444
info@jltgroup.com
www.jltgroup.com
Dominic Burke
Telephone
Email
Website
(852) 2842 8428
gpobox@hkland.com
www.hkland.com
Y.K. Pang
Telephone
Email
Website
(852) 2299 1888
groupcomm@dairy-farm.com.hk
www.dairyfarmgroup.com
Graham D. Allan
Telephone
Email
Website
(852) 2895 9288
asia-enquiry@mohg.com
www.mandarinoriental.com
Edouard Ettedgui
Telephone
Email
Website
(65) 6473 3122
corporate.affairs@jcclgroup.com
www.jcclgroup.com
Alex Newbigging
Telephone
Email
Website
(62 21) 652 2555
purel@ai.astra.co.id
www.astra.co.id
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124
Jardine Matheson | Annual Report 2014 Bermuda
Jardine Matheson International Services Ltd
Cambodia
Jardine Matheson Ltd
(Representative Office)
Hong Kong SAR
Jardine Matheson Ltd
Indonesia
Jardine Matheson Ltd
(Representative Office)
Mainland China
Jardine Matheson (China) Ltd
(Representative Office)
Malaysia
Jardine Matheson (Malaysia) Sdn Bhd
Myanmar
Jardine Matheson Management (SEA) Pte. Ltd
Netherlands
Jardine Matheson Europe B.V.
4th Floor, Jardine House
33-35 Reid Street
Hamilton HM 12
P.O. Box HM 1068
Hamilton HM EX
1st Floor, Central Mansion I
No. 1A, Street 102
Sangkat Wat Phnom
Khan Daun Penh
Phnom Penh 12202
48th Floor, Jardine House
G.P.O. Box 70
Hong Kong
Level 17, World Trade Centre I
Jalan Jendral Sudirman Kav. 29-31
Jakarta 12920
Rm 3702, China World Office 1
China World Trade Centre
No. 1 Jianguomenwai Avenue
Chaoyang District
Beijing 100004
Suite 7.01, Level 7 Wisma E&C
No. 2 Lorong Dungun Kiri
Bukit Damansara
50490 Kuala Lumpur
No. 1/4 Parami Road, Level 2
Hlaing Township
Yangon
Atrium Building
Strawinskylaan 3007
1077 ZX Amsterdam
Telephone (1 441) 292 0515
John C. Lang
Telephone (855 23) 986 804
John Brinsden
Telephone (852) 2843 8288
Ben Keswick
Telephone (62 21) 522 8981/2
Jonathan Chang
Telephone (86 10) 6505 2801
David Hsu
Telephone (60 3) 2094 2168
Datuk Syed Tamim Mohamed
Telephone (95 1) 661 083
Peter Beynon
Telephone (31 20) 470 0258
Pim Bertels
Philippines
Jardine Matheson Ltd
(Representative Office)
2nd Floor, 111 Paseo de Roxas Building
Paseo de Roxas corner Legaspi Street
Legaspi Village, Makati City 1229
Telephone (63 2) 706 8503
A.B. Colayco
Singapore
Jardine Matheson (Singapore) Ltd
239 Alexandra Road, 3rd Floor
Singapore 159930
Telephone (65) 6220 4254
Y.C. Boon
Taiwan
Jardine, Matheson & Co., Ltd
Thailand
Jardine Matheson (Thailand) Ltd
United Kingdom
Matheson & Co., Ltd
Vietnam
Jardine Matheson Ltd
6th Floor, 39 Jinan Road
Section 2, Taipei 10059
21-03, 21st Floor, Times Square Building
246 Sukhumvit Road, KIong Toey
Bangkok 10110
Telephone (886 2) 2393 1166
Liang Chang
Telephone (66 2) 254 0674
Dr Pisit Leeahtam
3 Lombard Street
London EC3V 9AQ
5th Floor, CJ Building
6 Le Thanh Ton Street
District 1, Ho Chi Minh City
Telephone (44 20) 7816 8100
Lord Leach of Fairford
Telephone (84 8) 3822 2340
Alain Cany
www.jardines.com