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C M Y K SPAR Cover 1C 3 Mar 2012C M Y K SPAR Cover 1C with 97% White 3 Mar 2012
www.swireproperties.comThe Upper HouseHong Kong
Annual R
eport 2011
Stock Code: 1972
Annual Report
2011
We are a leading developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China, with a well-established record of creating long-term value by transforming urban areas.
Our business comprises three main areas:
Property Property Hotel Investment Trading Investment
C M Y K SPAR Cover 1C 3 Mar 2012C M Y K SPAR Cover 1C with 97% White 3 Mar 2012
www.swireproperties.comThe Upper HouseHong Kong
Annual R
eport 2011
Stock Code: 1972
Annual Report
2011
We are a leading developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China, with a well-established record of creating long-term value by transforming urban areas.
Our business comprises three main areas:
Property Property Hotel Investment Trading Investment
1972
IncorporationofSwirePropertiesinHongKongasawholly-ownedsubsidiaryofSwirePacific.
Our Portfolios
1975
CommencementofworkonTaikooShing,theCompany’sfirstresidentialdevelopmentinHongKong.
1985
CommencementofplanningforPacificPlace.
1998
CompletionofFestivalWalk.
2001
CompanyenterstheMainlandChinamarketandbeginsacquiringsitesintop-tiercitiesfordevelopment.
2001MAINLAND CHINA
1998 FESTIVAL WALK
1985 PACIFIC PLACE
1975 ISLAND EAST
1975 RESIDENTIAL PORTFOLIO
1998FestivalWalkopensforbusinessinKowloonTong.
1985TheVictoriaBarrackssiteispurchasedatauction.
1988PacificPlaceopenstofirsttenants.
1975CommencementofworkforTaikooShing,theresidentialareaofIslandEast.
1983StagedopeningofCityplaza,thelargestshoppingandentertainmentcentreonHongKongIsland.
1991-1992CityplazaFouropensin1991;CityplazaThreeiscompletedthefollowingyear.
1978DevelopmentofBrickellKey,auniquemixed-usecommunity,locatedoffDowntownMiami.
1975RedevelopmentbeginsoftheformerTaikooDockyardsiteintooneofHongKong’sfirstmajorprivatehousingestates,TaikooShing.
Company Milestones
2006
TransformationoftheretailcentreinTungChungintoCitygateOutlets,HongKong’sfirstoutletshoppingmall.
2008
LaunchofSwireHotelsbrandtocreateandmanageintriguingurbanhotelsinHongKong,MainlandChinaandtheUnitedKingdom.
2011
EstablishmentofarepresentativeofficeinSingapore.
CommencementofplanningfortheBrickellCitiCentreproject,amixed-usedevelopmentlocatedinMiami,Florida,U.S.A.
2001CompanyenterstheMainlandChinamarketandanagreementissignedwithGuangzhouDailyGrouptodevelopTaiKooHui,Guangzhou,thefollowingyear.
2006Acquisitionof50%interestinHKRInternational’sDazhongliprojectinShanghai.
2007Companyacquires80%interesttodevelopSanlitunVillageinBeijing.
2008Formationofa50:50jointventurewithSino-OceanLandtodeveloptheINDIGOprojectinBeijing.
OpeningofSanlitunVillageSouthandTheOppositeHouse.
2011OpeningofTaiKooHui.
OpeningofINDIGO’sofficetower,ONEINDIGO.
2010OpeningofSanlitunVillageNorth.
SuccessfullandacquisitioninDaciTemplearea,Chengdu.
2006Remaining50%interestispurchasedandFestivalWalkbecomeswhollyownedbySwireProperties.
2011SaleofFestivalWalktoMapletree,aSingapore-baseddeveloper.
2004OpeningofThreePacificPlace.
2007BeginningoftheHK$2.0billionPacificPlaceContemporisationProject.
2009OpeningofTheUpperHouse,PacificPlace’sfirstsmallluxuryhotel.
2011CompletionofthePacificPlaceContemporisationProject.
1993-2003DevonHouseiscompletedin1993.Inthenextdecade,DorsetHouse,PCCWTower,CityplazaOne,LincolnHouseandOxfordHousefollow.
TheIslandEastMatrix,adedicatedfibre-opticnetwork,iscompletedin2001.CambridgeHouseiscompletedin2003.
2008CompletionofOneIslandEast,SwireProperties’largestofficetowerinHongKongtodate.
2010OpeningofEAST,HongKong,thefirstofanewgroupoflifestylebusinesshotelslaunchedbySwireHotels.
1989CompletionofTheAlbany,Mid-Levels.
1994CompletionofRobinsonPlace,Mid-Levels.
2003Completionofresidencesat3CoombeRoadonthePeak.
2009CompletionofIslandLodge,NorthPoint.
2010SaleslaunchofAZURA,Mid-Levelsand5StarStreet,WanChai.
2011NameunveiledforOPUSHONGKONG,thePeak,thefirstresidentialprojectinAsiadesignedbyPritzkerPrize-winningarchitectFrankGehry.
2 CompanyProfile3 Ten-YearFinancialSummary6 Chairman’sStatement11 FinancialHighlights12 KeyBusinessStrategies
MANAGEMENT DISCUSSION & ANALYSIS
16 ReviewofOperations46 FinancialReview53 Financing
CORPORATE GOVERNANCE & SUSTAINABILITY
64 CorporateGovernance72 DirectorsandOfficer74 Directors’Report82 SustainableDevelopment
ContentsAUDITOR’S REPORT AND ACCOUNTS
88 IndependentAuditor’sReport89 ConsolidatedIncomeStatement90 ConsolidatedStatementofComprehensiveIncome91 ConsolidatedStatementofFinancialPosition92 CompanyStatementofFinancialPosition93 ConsolidatedStatementofCashFlows94 ConsolidatedStatementofChangesinEquity95 NotestotheAccounts136 PrincipalAccountingPolicies145 PrincipalSubsidiary,JointlyControlledand AssociatedCompanies
SUPPLEMENTARY INFORMATION
148 ScheduleofPrincipalGroupProperties159 Glossary160 FinancialCalendarandInformationforInvestors
CompanyProfile
2 SwirePropertiesAnnualReport|2011
SwirePropertiesisaleadingdeveloper,ownerandoperatorofmixed-use,principallycommercialpropertiesinHongKongandMainlandChina,withawell-establishedrecordofcreatinglong-termvaluebytransformingurbanareas.Ourbusinesscomprisesthreemainareas:propertyinvestment,propertytradingandhotelinvestment.
FoundedinHongKongin1972,SwirePropertiesislistedonTheStockExchangeofHongKongLimitedand,withitssubsidiaries,employsmorethan4,000people.
InHongKong,wehavespentnearly40yearsdevelopingIslandEastfromanindustrialareaintooneofHongKong’sbestplannedandmostefficientbusinessdistricts.PacificPlace,builtontheformerVictoriaBarrackssite,isnowoneofHongKong’spremierretailandbusinessaddresses.
InMainlandChina,SwirePropertieshasfivemajormixed-useprojectseitherinoperationorunderdevelopmentinBeijing,Guangzhou,ChengduandShanghai.SimilarinscaleandvisiontoourdevelopmentsinHongKong,ourMainlandpropertiesarelocatedincommercialdistrictsneartransporthubs.
SwirePropertiescontinuestoexpanditsactivitiesintheluxuryresidentialmarketinHongKong.UnderourSwireHotelsbrand,wedevelopandmanageurbanhotelsinHongKong,MainlandChinaandtheUnitedKingdom.
TheCompanyhasasignificantpresenceinMiami,Florida,whereitcommencedbusinessin1980.ItisintheprocessofdevelopingBrickellCitiCentre,alarge-scalemixed-useprojectintheBrickellfinancialdistrictinMiami.TheCompanyhasalsosetuparepresentativeofficeinSingaporetoexploreinvestmentopportunitiesinthecity.
2002HK$M
2003HK$M
2004HK$M
2005HK$M
2006HK$M
2007HK$M
2008HK$M
2009HK$M
2010HK$M
2011HK$M
INCOME STATEMENTTurnover Propertyinvestment 4,693 4,366 4,060 4,382 4,872 5,663 6,901 7,516 7,953 8,651 Propertytrading 565 2,366 2,506 1,339 554 10 889 643 400 213 Hotel – – – – 27 148 156 172 518 717
5,258 6,732 6,566 5,721 5,453 5,821 7,946 8,331 8,871 9,581
Profit Attributable to the Company’s Shareholder Propertyinvestment 2,125 2,046 1,459 1,917 2,592 3,066 3,336 3,970 4,589 4,656 Propertytrading (269) 278 667 264 198 (43) 95 23 87 7 Hotels 23 9 80 104 126 175 73 (332) (109) (33) Changeinfairvalueof investmentproperties (5,157) (2,688) 15,224 12,365 17,221 19,530 (236) 13,596 21,478 20,496
(3,278) (355) 17,430 14,650 20,137 22,728 3,268 17,257 26,045 25,126Interimandfinaldividends fortheyear 1,025 1,254 1,141 2,303 1,532 1,652 2,966 25 2,426 11,067
Retainedprofit/(loss) (4,303) (1,609) 16,289 12,347 18,605 21,076 302 17,232 23,619 14,059
STATEMENT OF FINANCIAL POSITIONNet Assets Employed Propertyinvestment 55,502 52,731 71,247 85,965 105,658 133,454 140,510 155,411 183,092 191,273 Propertytrading 4,855 3,593 1,555 701 1,448 2,762 3,496 3,772 6,303 6,581 Hotel 631 644 717 1,037 1,429 3,624 4,037 5,523 5,797 6,421
60,988 56,968 73,519 87,703 108,535 139,840 148,043 164,706 195,192 204,275
Financed by Equityattributabletothe Company’sshareholder 41,815 40,237 56,533 70,027 88,229 109,605 110,305 129,815 157,877 176,043 Non-controllinginterests 4,682 4,927 6,193 6,185 296 801 1,068 424 479 532 Netdebt 14,491 11,804 10,793 11,491 20,010 29,434 36,670 34,467 36,836 27,700
60,988 56,968 73,519 87,703 108,535 139,840 148,043 164,706 195,192 204,275
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
Earnings/(loss)pershare (0.60) (0.06) 3.17 2.67 3.67 4.14 0.60 3.14 4.58 4.40Dividendspershare 0.19 0.23 0.21 0.42 0.28 0.30 0.54 – 0.43 1.94Equityattributabletoshareholder pershare 7.61 7.33 10.29 12.75 16.06 19.96 20.08 23.61 27.75 30.09
RATIOSReturnonaverageequityattributable totheCompany’sshareholder -7.5% -0.9% 36.0% 23.2% 25.4% 23.0% 3.0% 14.4% 18.1% 15.0%Gearingratio 31.17% 26.14% 17.21% 15.08% 22.60% 26.66% 32.93% 26.46% 23.26% 15.69%Interestcover–times (2.80) 2.13 20.02 23.11 32.16 33.71 4.81 17.57 21.80 18.24Dividendcover–times (3.20) (0.28) 15.28 6.36 13.14 13.76 1.10 N/A 10.74 2.27
UNDERLYINGProfit(HK$M) 2,334 2,819 2,617 2,577 3,070 3,303 3,558 3,726 4,782 12,932EquityattributabletotheCompany’s shareholder(HK$M) 43,318 41,694 58,064 71,573 90,032 111,640 113,664 133,410 161,651 180,749Returnonaverageequityattributable totheCompany’sshareholder 5.18% 6.63% 5.25% 3.98% 3.80% 3.28% 3.16% 3.02% 3.24% 7.55%Earningspershare(HK$) 0.42 0.51 0.48 0.47 0.56 0.60 0.65 0.68 0.84 2.27Equityattributabletoshareholder pershare(HK$) 7.89 7.59 10.57 13.03 16.39 20.33 20.70 24.26 28.41 30.90Gearingratio 30.16% 25.30% 16.78% 14.78% 22.15% 26.18% 31.94% 25.75% 22.71% 15.28%Interestcover–times 6.42 7.21 4.25 5.58 6.09 5.95 4.50 4.33 5.38 12.02Dividendcover–times 2.28 2.25 2.29 1.12 2.00 2.00 1.20 N/A 1.97 1.17
Notes:1.TheinformationforallyearsisshowninaccordancewiththeGroup’scurrentaccountingpoliciesanddisclosurepractices.Consequentlyfiguresforyearspriorto
2010maybedifferentfromthoseoriginallypresented.2.TheequityattributabletotheCompany’sshareholderandthereturnsbysegmentfor2011and2010areshownintheFinancialReview–InvestmentAppraisaland
PerformanceReviewonpage52.3.Underlyingprofitandequityarediscussedonpages16to18.4.Theearningspershare,dividendspershareandequitypersharefortheyearspriorto2010havebeenrecalculatedbasedontheweightedaveragenumberof
ordinaryshareswhichreflecttheCompany’ssharesinissueforthoseyearsadjustedforthe1,108,132,451sharesissuedon25thJanuary2010asconsiderationtoacquireSwirePropertiesUSInc.andSwirePropertiesOneLLC,andthebonuselementinrespectofthe3,969,615,000sharesissuedatpar,whichwasbelowmarketvalue,issuedon31stDecember2009.
5.RefertoGlossaryonpage159fordefinitionsandratios.
Ten-YearFinancialSummary
4 SwirePropertiesAnnualReport|2011
Ten-YearFinancialSummary
Property investment
Property trading
Hotel
Turnover
02 03 04 05 06 07 08 09 10 11
10,000
HK$M
8,000
6,000
4,000
2,000
0
Property investment
Property trading
Hotel
Net Assets Employed
02 03 04 05 06 07 08 09 10 11
250,000
200,000
150,000
100,000
50,000
0
HK$M
Earnings/(loss) per share
Dividends per share
Underlying earnings per share
Earnings and Dividends Per Share
02 03 04 05 06 07 08 09 10 11
4
5
3
2
1
0
-1
HK$
SwirePropertiesAnnualReport|2011 5
Propertyinvestment
Propertytrading
Total attributablepro�t
Hotels
Change in fair value of investment properties
Total underlying pro�t
Pro�t Attributable to the Company’s Shareholder
02 03 04 05 06 07 08 09 10 11
30,000
25,000
20,000
15,000
10,000
5,000
0
-10,000
-5,000
0
HK$M
Total equity
Net debt
Underlying total equity
Total Equity and Net Debt
02 03 04 05 06 07 08 09 10 11
250,000
200,000
150,000
100,000
50,000
0
HK$M
Group
Group – underlying
Returns on Average Equity
02 03 04 05 06 07 08 09 10 11
40
30
20
10
0
-10
%
6 SwirePropertiesAnnualReport|2011
Chairman’sStatement
TheconsolidatedprofitattributabletotheCompany’sshareholderfor2011wasHK$25,126million,comparedtoHK$26,045millionin2010.UnderlyingprofitattributabletotheCompany’sshareholder,whichprincipallyadjustsforchangesinthevaluationofinvestmentproperties,increasedbyHK$8,150millionfromHK$4,782millionin2010toHK$12,932millionin2011.The2011underlyingprofitincludedaprofitofHK$8,615millionondisposaloftheinvestmentpropertyknownasFestivalWalk.
DividendsTheCompanyintendstopaydividendswhichwillaverageapproximately50%oftheunderlyingprofitattributabletoShareholdersovertheeconomiccycle.Wewillreevaluateourdividendpolicyinthelightofourfinancialpositionandtheprevailingeconomicclimate.
SpecialinterimdividendsofHK$10,014millionwerepaidin2011totheCompany’sthensoleshareholder,SwirePacificLimited.TheDirectorshaveapprovedaninterimdividend(inlieuofafinaldividend)ofHK¢18persharefor2011on15thMarch2012,payableon3rdMay2012toshareholdersregisteredatthecloseofbusinessontherecorddate,beingThursday,5thApril2012.SharesoftheCompanywillbetradedex-dividendasfromMonday,2ndApril2012.
TheregisterofmemberswillbeclosedonThursday,5thApril2012,duringwhichdaynotransferofshareswillbeeffected.Inordertoqualifyforentitlementtotheinterimdividend,alltransferformsaccompaniedbytherelevantsharecertificatesmustbelodgedwiththeCompany’sshareregistrars,ComputershareHongKongInvestorServicesLimited,17thFloor,HopewellCentre,183Queen’sRoadEast,HongKong,forregistrationnotlaterthan4:30p.m.onTuesday,3rdApril2012.
SwirePropertiesAnnualReport|2011 7
ListingonTheStockExchangeofHongKongLimitedInOctober2011,aproposalwassubmittedtoTheStockExchangeofHongKongLimitedforthespin-offandseparatelistingofsharesintheCompanybywayofintroduction.ThelistingoftheCompany’sshares,whichtookeffectinJanuary2012,wasachievedbyadistributioninspeciebySwirePacificLimitedofapproximately18%oftheCompany.
ThestockexchangelistingwillenabletheCompanytoraisecapitalfromtheequitymarketinthefutureshouldtheneedariseandthusbetterpositiontheCompanyforfurthergrowth.
KeyDevelopmentsInApril2011,theGroupacquiredtwoparcelsoflandadjoiningtheexistingBrickellCitiCentresiteinMiami,U.S.A.,forHK$215million.DevelopmententitlementshavebeenapprovedbytheCityofMiamiforaspecialareaplan,whichallowsforamixed-usedevelopmentofapproximately2.9millionsquarefeet(excludingcarparkandcirculationareas),comprisingretail,office,hotelandservicedapartments,andresidentialcomponentsovertwophasesofdevelopment.
AlsoinApril2011,theGroupcompletedtheacquisitionofapropertyat23TongChongStreet(neartotheexistingTaiKooPlaceproperties),whichwillberedevelopedintoservicedapartments.
InAugust2011,theGroupsolditsentireinterestinthepropertyinHongKongknownasFestivalWalkforHK$18.8billion.AnetgainofHK$595milliononthissalewasincludedintheattributableprofitfor2011.Theunderlyingprofitonthesale,whichiscalculatedbyreferencetotheoriginalcostoftheproperty,wasHK$8,615million.
InSeptember2011,theretailspaceatTaiKooHui,a3.8millionsquarefootmixed-usedevelopmentintheTianheDistrictofGuangzhou,opened.HandoveroftheofficespacetotenantscommencedinAugust2011.Thehotelandservicedapartmentsarescheduledtoopeninthesecondhalfof2012.TheGrouphasa97%economicinterestinthisdevelopment.
InOctober2011,thecontemporisationprojectforTheMallatPacificPlacewassubstantiallycompleted.Theprojectbeganin2007andincludestheadditionofafourthhotel(TheUpperHouse),newluxuryrestaurants,newinteriordecoration,designershopfacadesandageneralreconfigurationofthemall.
InDecember2011,theofficetoweroftheINDIGOdevelopment,aretail-led,mixed-useprojectinJiangTaiintheChaoyangDistrictofBeijing,opened.TheretailcomponentstartedtoopeninMarch2012.TheGrouphasa50%economicinterestinthisdevelopment,whichhasatotalareaof1.9millionsquarefeet.
AlsoinDecember2011,followingatender,theGroupacquiredtwoadjacentresidentialsitesinCheungShaonLantauIslandinHongKong.Thesiteswillbedevelopedintoluxuryresidentialpropertiesforsale.
Chairman’sStatement
8 SwirePropertiesAnnualReport|2011
InJanuary2012,theGroupsecuredplanningapprovaltoexpandThreePacificPlaceinHongKongbyredevelopingtwonearbybuildings.Theexpansionwillprovideanadditionalfloorareaofabout100,000squarefeet.ItissubjecttoobtainingleasemodificationandotherGovernmentapprovals.
TheCompanyissettinguparepresentativeofficeinSingaporeinordertoexploreinvestmentopportunitiesinSouthEastAsia.
OperatingPerformanceAdjustedunderlyingprofitincreasedin2011fromHK$3,833milliontoHK$4,372million.Adjustedunderlyingprofitexcludesprofitsfromthedisposalofinvestmentpropertiesandnetimpairmentlossesfromourhotelsandtradingproperties.TheincreaseprincipallyreflectspositiverentalreversionsandstrongerturnoverrentsinHongKong,improvedrentalperformanceatSanlitunVillage,andtheopeningoftheTaiKooHuidevelopment,resultinginanincreaseof9%ingrossrentalincome.TheoperatingperformanceoftheownedandmanagedhotelsinHongKongwasmuchimproved.ThepositiveeffectofthesefavourablefactorswasoffsetinpartbythelossofrentalincomefollowingthedisposalofFestivalWalkandamovefromprofitstolossesfromthepropertytradingportfolioasaresultoflowertradingvolumeandsalesandmarketingcostsincurredinconnectionwiththeresidentialdevelopmentsinHongKong.
GrossrentalincomewasHK$8,557millionin2011comparedtoHK$7,875millionin2010.PositiverentalreversionswererecordedintheHongKongofficeportfolio,reflectingstrongdemandinthefirsthalfoftheyear.Rentalreversionsremainedpositiveinthesecondhalfoftheyear,notwithstandingaslowdowninleasingactivity.RetailsalesandthedemandforretailspaceinHongKongcontinuedtoberobustthroughout2011.
InMainlandChina,netrentalcontributionsfromSanlitunVillage,particularlyVillageSouth,improvedsignificantlyfrom2010,asaresultofactivemanagementofthetenantportfolio,costreductioninitiativesandcapitalexpendituresdesignedtoenhancefootfallandcirculation.RentalcontributionsfromVillageNorthalsoincreasedduetohigheroccupancyandcostreductioninitiatives.TheTaiKooHuidevelopment,whichwascompletedduring2011,begantocontributerentalincomeinthefourthquarterof2011.
Wemadeanoperatinglossonpropertytrading.Thisreflectedfewersales(derivedfromtheremainingresidentialunitsatIslandLodgeinHongKongandASIAinMiami)andsalesandmarketingcostsincurredinconnectionwithresidentialdevelopmentsinHongKong.Sixtyofthe126unitsatAZURAwerepre-soldin2011,bringingthetotalnumberofpre-soldunitsto98at31stDecember2011.
TheoperatinglossinthehotelportfolioreflectsimpairmentchargesatourU.K.hotelsandpre-openingexpensesatthehotelinTaiKooHui,partiallyoffsetbyimprovedperformancesfromthetwoHongKonghotels,TheUpperHouseandEAST,HongKong,andTheOppositeHouseinBeijing,asthesehotelscontinuedtobenefitfrombuoyanteconomicconditions.Thenon-managedhotelsalsoperformedstrongly.
SwirePropertiesAnnualReport|2011 9
AdministrativeexpenseswereHK$118millionabovethoseof2010duetohigherexpensesassociatedwiththelistingofthesharesoftheCompanyonTheStockExchangeofHongKongLimited.
NetfinancechargeswereHK$1,477million,a19%increasefromHK$1,237millionin2010.Theincreasereflectedanincreaseinthefairvalueofaputoptionheldbytheownerofthenon-controllinginterestatSanlitunVillage,higherfinancechargesinMainlandChina(duetohigherdebtlevelsandareduction,followingthecompletionofprojects,intheamountofinterestcapitalised)partiallyoffsetbyloweraveragedebtlevelsinHongKongfollowingthedisposalofFestivalWalk.
Onanattributablebasis,thenetinvestmentpropertyvaluationgain,beforedeferredtaxrelatingtoinvestmentpropertiesinMainlandChinain2011,wasHK$21,066million,comparedtoanetgainin2010ofHK$22,373million.
FinanceNetdebtat31stDecember2011wasHK$27,700million,comparedwithHK$36,836millionat31stDecember2010.Thedecreaseprincipallyreflectstherepaymentofinter-groupfundingfromSwirePacificoutoftheproceedsfromthedisposalofFestivalWalkandcashfromoperations,partiallyoffsetbyhigherdebtlevelsinMainlandChina.Gearingdecreasedby7.6percentagepointsfrom23.3%to15.7%.CashandundrawncommittedfacilitiestotalledHK$9,183millionasat31stDecember2011,comparedwithHK$7,435millionat31stDecember2010.Uponmaturityoftheinter-groupfundingprovidedbySwirePacific,SwirePropertieswillobtainnewfunding(asnecessary)onastand-alonebasiswithoutrecoursetoSwirePacific.
SustainableDevelopmentTheCompanyrecognisestheimportanceofactingresponsiblytowardsitsstakeholders,includingemployeesandthecommunitiesinwhichweareinvolvedandtowardsthenaturalenvironmentinwhichweoperate.InSeptember2011,weestablishedaJointResearchCentreforBuildingEnergyEfficiencyandSustainabilitywiththeBuildingEnergyResearchCentreofTsinghuaUniversity,offeringUS$1millionperyearinfundingforaninitialthreeyears.
FurtherinformationabouttheCompany’sactivitiesinthisareaisonpages82to85.
ProspectsDemandforourofficespaceinHongKongislikelytobeaffectedbyuncertainmarketconditions.Lowvacancyratesandthefactthatsupplyofnewofficespacewillbemodestshouldmitigatetheeffectonrentalincome.Theavailableofficespacewillincreasein2012withthecompletionofthe145,390squarefootbuildingat28HennessyRoadandthe81,346squarefootbuildingat8Queen’sRoadEast,expectedtotakeplaceinthesecondhalfoftheyear.Weplantostartredevelopingoneofourtechno-centres,SomersetHouse,in2013uponobtainingvacantpossession,withaviewtotakingadvantageofthedemandforhighspecificationofficebuildingsinthatarea.
Chairman’sStatement
10 SwirePropertiesAnnualReport|2011
ConsumerdemandandaccordinglycompetitionforretailspaceareexpectedtoremainstronginHongKongin2012.Activemonitoringofthepreferencesofconsumersandmanagementofthemixoftenantsshouldencouragehigherretailsalesinourmalls.
RetailconditionsinMainlandChinaareexpectedtoremainstrongin2012astheeconomycontinuestorebalanceandgrow.ResultsfromSanlitunVillageareexpectedtocontinuetoimprovein2012,reflectingpastandplannedinvestmentsaimedatenhancingfootfallandcirculation.TaiKooHuiandINDIGOareexpectedtocontributetohigherrentalincomein2012,withTaiKooHuiinitsfirstfullyearofoperationsandtheretailcomponentatINDIGOstartingtoopeninMarch2012.
Propertytradingisexpectedtocontributesignificantprofitsin2012,withthecompletionofandsaleofunitsintheAZURAdevelopmentinHongKong.PricesofluxuryresidentialpropertiesinHongKongareexpectedtobesteady,underpinnedbylowinterestratesandlimitedsupply.
ThehotelsinHongKongandMainlandChinaareexpectedtocontinuetoperformwellin2012,benefittingfromincreasedbusinessandleisuretravelastheeconomiesofMainlandChinaandtherestofAsiacontinuetogrow.The263-roomhotel(operatedbyMandarinOriental)attheTaiKooHuidevelopmentisscheduledtoopeninthesecondhalfof2012.EAST,Beijing,whichispartoftheINDIGOdevelopment,isalsoscheduledtoopeninthelatterpartof2012.
2012marksthe40thanniversaryofourincorporation.TheCompanyisproudofitspastachievementsandwewillusethesestrongfoundationstodevelopourbusinessfurther.Despiteuncertaintiesintheglobaleconomy,thefundamentalsoftheHongKongandMainlandChinaeconomiesareexpectedtoremainstrong.Wearewellplacedtobenefitfromthis.
OnbehalfoftheshareholdersandfellowDirectors,Iwishtoexpressourappreciationtoallouremployees,whosecommitmentandhardworkhavebeencentraltoourcontinuingsuccess.
ChristopherPratt|Chairman
Hong Kong, 15th March 2012
4,782
20102011
949107
3,835
(109)
4,343
8,560
100
12,932
(71)
Underlying pro�t by segments
Property investment
Property trading
Capital pro�ts less impairments
Hotels
14,000
HK$M
12,000
8,000
6,000
10,000
4,000
2,000
0
-2,000
FinancialHighlights
Note2011
HK$M 2010
HK$MChange
%
Turnover 9,581 8,871 +8.0
Operatingprofit 26,945 26,969 -0.1
ProfitattributabletotheCompany’sshareholder 25,126 26,045 -3.5
Cashgeneratedfromoperations 7,396 4,753 +55.6
Netcashinflow/(outflow)beforefinancing 17,418 (2,361) N/A
Totalequity(includingnon-controllinginterests) 176,575 158,356 +11.5
Netdebt 27,700 36,836 -24.8
HK$ HK$
Earningspershare (a) 4.40 4.58 -3.9
Dividendspershare
Specialinterim 1.76 – N/A
Firstinterim 0.18 – N/A
Final – 0.43 N/A
EquityattributabletotheCompany’sshareholderpershare 30.09 27.75 +8.4
Underlying Profit and Equity
HK$M HK$M
UnderlyingprofitattributabletotheCompany’sshareholder (b) 12,932 4,782 +170.4
HK$ HK$
Underlyingearningspershare (a) 2.27 0.84 +170.2
UnderlyingequityattributabletotheCompany’s shareholderpershare (b) 30.90 28.41 +8.8
Notes:
(a)Refertonote15intheaccountsfortheweightedaveragenumberofshares.
(b)AreconciliationbetweenthereportedandunderlyingprofitandequityattributabletotheCompany’sshareholderisprovidedonpages16to17.
12 SwirePropertiesAnnualReport|2011
KeyBusinessStrategies
Asaleadingdeveloper,ownerandoperatorofmixed-usecommercialpropertiesinHongKongandMainlandChina,ourstrategicobjectiveissustainablegrowthinshareholdervalueinthelongterm.Toachievethisobjective,weemployfivestrategies:
1. Continuetocreatelong-termvaluebyconceiving,designing,developing,owningandmanagingtransformationalmixed-useandotherprojectsinurbanareas
Wewillcontinuetodesignprojectswhichwebelievewillhavethenecessaryscale,mixofusesandtransportlinkstobecomekeycommercialdestinationsandtotransformtheareasinwhichtheyaresituated.
2. Maximisetheearningsandvalueofourcompletedpropertiesthroughactiveassetmanagement,includingreinforcingourassetsthroughenhancement,redevelopmentandnewadditions
Weintendtomanageourcompletedpropertiesactively(includingbyoptimisingthemixofretailtenantsandearlyrenewalnegotiationswithofficetenants)andwithaviewtothelongterm,tomaintainconsistentlyhighlevelsofserviceandtoenhanceandreinforceourassets.Bydoingso,webelievethatwewillmaximisetheoccupancyandearningspotentialofourproperties.
Tenantsincreasinglyscrutinisethesustainabledevelopmentcredentialsoflandlordsandbuildings.Weaimtobeattheforefrontofsustainabledevelopmentbydesigningenergyefficientbuildingsthroughtheinnovativeuseofdesign,materialsandnewtechnology.
SwirePropertiesAnnualReport|2011 13
3. Continuetoexpandourluxuryresidentialpropertyactivities
Weintendtobroadenourbusinessbyexpandingourluxuryresidentialpropertyactivities.Wewilllooktoacquireappropriatesitesforthedevelopmentofluxuryresidentialprojectsforbothtradingandinvestmentineachofthekeymarketsinwhichweoperate.
4. RemainfocusedprincipallyonHongKongandMainlandChina
InHongKong,wewillcontinuetofocusonreinforcingourexistinginvestmentpropertyassetsandseekingnewsitessuitablefortransformationaldevelopmentsandforresidentialprojects.
WeaimtoreplicateinMainlandChinathesuccesswhichwehaveexperiencedinHongKong.WeintendtotakeameasuredapproachtolandpurchasesinMainlandChina,however,andwillfocusondevelopmentswherewecansecuresitesthroughearlyengagementwithlocalgovernmentswhorecogniseourstrengthsindevelopinglarge-scalemixed-useprojects.
WewillseekresidentialdevelopmentopportunitiesinMainlandChina.Thesearelikelytobeancillarytoourmixed-usedevelopments;however,intherightlocationsandcitieswemayalsoconsiderstandaloneresidentialdevelopmentopportunities.Ourresidentialdevelopmentswillbeaimedatbuyersofluxuryproperties,wherewebelievewehaveacompetitiveadvantage.
WhilewewillcontinuetoconcentrateonHongKongandMainlandChina,weintendtoexpandselectively.WeareworkingtodeveloptheBrickellCitiCentreprojectinMiami,Florida,U.S.A.andwearealsoexploringopportunitiesinSingapore.
5. Manageourcapitalbaseconservatively
Weintendtomaintainastrongbalancesheetwithaviewtoinvestinginandfinancingourprojectsinadisciplinedandtargetedmanner.
Weaimtomaintainexposuretoarangeofdebtmaturitiesandarangeofdebttypesandlenders.Ourcurrentdebtprofilereflectsamixofrevolvingandtermbankloans,mediumtermnotesandperpetualsecurities.
16 SwirePropertiesAnnualReport|2011
2011HK$M
2010HK$M
Turnover
Gross Rental Income derived from
Offices 4,537 4,222
Retail 3,710 3,357
Residential 310 296
Other Revenue (1) 94 78
Property Investment 8,651 7,953
Property Trading 213 400
Hotels 717 518
Total Turnover 9,581 8,871
Operating Profit/(Loss) derived from
Propertyinvestment 6,743 6,561
Valuationgainsoninvestmentproperties 20,345 20,480
Propertytrading (50) 72
Hotels (93) (144)
Total Operating Profit 26,945 26,969
Share of Post-tax Profits from Jointly Controlled and Associated Companies 1,007 1,686
Attributable Profit 25,126 26,045
(1)Otherrevenueismainlyestatemanagementfees.
AdditionalinformationisprovidedonthenextpagetoreconcilereportedandunderlyingprofitandequityattributabletotheCompany’sshareholder.ThesereconcilingitemsprincipallyreversetheimpactofHKAS40oninvestmentproperties,andtheamendedHKAS12ondeferredtax.Thereisafurtheradjustmenttoremovetheeffectofthemovementinthefairvalueoftheliabilityinrespectofaputoptioninfavouroftheownerofanon-controllinginterestinSanlitunVillage.Adjustedunderlyingprofitexcludesprofitsfromthedisposalofinvestmentpropertiesandnetimpairmentlossesfromourhotelsandtradingproperties.
ReviewofOperations
SwirePropertiesAnnualReport|2011 17
Note2011
HK$M2010
HK$M
Underlying Profit
ProfitattributabletotheCompany’sshareholderperaccounts 25,126 26,045
Adjustmentsreinvestmentproperties:
Revaluationofinvestmentproperties (a) (21,066) (22,373)
Deferredtaxonrevaluationmovements (b) 526 853
RealisedprofitonsaleofFestivalWalk/otherinvestmentproperties (c) 8,020 211
DepreciationofinvestmentpropertiesoccupiedbytheGroup (d) 22 16
Non-controllinginterests’shareofrevaluationmovementslessdeferredtax 45 42
Movementinthefairvalueoftheliabilityinrespectofaputoptioninfavour oftheownerofanon-controllinginterestinSanlitunVillage (e) 259 (12)
Underlying Profit Attributable to the Company’s Shareholder 12,932 4,782
Othersignificantitems:
GainsonremeasurementandprofitonsaleofshareholdingsinPCCWTower – (342)
ProfitonsaleofFestivalWalk/otherinvestmentproperties (8,615) (576)
Netimpairmentloss/(reversal) 55 (31)
Adjusted Underlying Profit 4,372 3,833
Underlying Equity
EquityattributabletotheCompany’sshareholderperaccounts 176,043 157,877
Deferredtaxonrevaluationofinvestmentproperties 3,285 2,766
Unrecognisedvaluationgainsonhotelsheldaspartofmixed-usedevelopments (f) 912 535
RevaluationofinvestmentpropertiesoccupiedbytheGroup 476 440
CumulativedepreciationofinvestmentpropertiesoccupiedbytheGroup 33 33
Underlying Equity Attributable to the Company’s Shareholder 180,749 161,651
Underlyingnon-controllinginterests 576 517
Underlying Equity 181,325 162,168
Notes:
(a)ThisrepresentsthenetrevaluationmovementsasshownintheconsolidatedincomestatementplustheGroup’sshareofnetrevaluationmovementsofjointlycontrolledandassociatedcompanies.
(b)ThisrepresentsdeferredtaxontheGroup’snetrevaluationmovementsplustheGroup’sshareofdeferredtaxonthenetrevaluationmovementsofjointlycontrolledandassociatedcompanies.AsaresultoftheamendedHKAS12,deferredtaxisnolongerprovidedonnetrevaluationmovementsinrespectofinvestmentpropertiesinHongKong.However,deferredtaxcontinuestobeprovidedonnetrevaluationmovementsinrespectofinvestmentpropertiesinMainlandChinaatthecorporateincometaxrateof25%.
(c)PriortotheimplementationofHKAS40,changesinthefairvalueofinvestmentpropertieswererecordedintherevaluationreserveratherthantheconsolidatedincomestatement.Onsale,therevaluationgainsweretransferredfromtherevaluationreservetotheconsolidatedincomestatement.
(d)PriortotheimplementationofHKAS40,nodepreciationwaschargedoninvestmentpropertiesoccupiedbytheGroup.
(e)Thevalueoftheputoptioninfavouroftheownerofanon-controllinginterestinSanlitunVillageiscalculatedprincipallybyreferencetotheestimatedfairvalueoftheportionsoftheSanlitunVillageinvestmentpropertyinwhichtheminoritypartnerisinterested.
(f) UnderHKAS40,hotelpropertiesarestatedintheaccountsatcostlessaccumulateddepreciationandanyprovisionforimpairmentlosses,ratherthanatfairvalue.IfHKAS40didnotapply,thosewholly-ownedorjointlycontrolledhotelpropertiesheldforthelongtermaspartofmixed-usepropertydevelopmentswouldbeaccountedforasinvestmentproperties.Accordingly,anyincreaseorwrite-downintheirvaluewouldberecordedintherevaluationreserveratherthantheconsolidatedincomestatement.
Completed
Under development
Valuation of Investment Properties
02 03 04 05 06 07 08 09 10 11
200,000
160,000
120,000
80,000
40,000
0
HK$M
ManagementDiscussion&Analysis|ReviewofOperations
18 SwirePropertiesAnnualReport|2011
UnderlyingProfit
Underlyingprofitin2011increasedbyHK$8,150million,fromHK$4,782milliontoHK$12,932million.Thisprincipallyreflectedanincreaseincapitalprofitslessimpairments(capitalprofitsarisingfromthedisposalofFestivalWalk,lessimpairmentchargesatourU.K.hotelsin2011,beinghigherthancapitalprofitsarisingfromthedisposalofPeelRiseandthechangesintheownershipofPCCWTowerin2010).RecurringprofitsfrompropertyinvestmentincreasedbyHK$672million,duetohigherrentalincomeinHongKong,animprovementinperformanceatSanlitunVillageinMainlandChinaandafirsttimecontributionfromtheTaiKooHuidevelopmentinMainlandChina,partlyoffsetbylossof
rentalincomefromFestivalWalkfollowingitsdisposal.Thehotelportfoliomovedfromalossin2010toaprofitin2011,duetosignificantimprovementsintheresultsofthemanagedhotelsandgoodgrowthintheprofitsofthenon-managedhotels.Thetradingportfoliomovedfromaprofitin2010toalossin2011(excludingimpairmentadjustments),duetofewersalesandtheinitialrecordingofsalesandmarketingexpensesassociatedwiththeAZURAandARGENTAluxuryresidentialdevelopments.Theincreaseinnon-recurringexpensesprincipallyreflectsthehigherfeesincurredin2011inconnectionwiththelistingofthesharesoftheCompanyonTheStockExchangeofHongKongLimited.
Increase in capital pro�ts less impairment adjustments
Increase in recurring pro�t from property investment
Decrease in pro�t from trading properties
Increase in pro�t from hotels
Non-recurring items
Underlying pro�t 2011
Movement in Underlying Pro�t
2010 2011
HK$M
14,000
12,000
10,000
6,000
8,000
4,000
4,782
+7,611
+672 -188 +209 -154 12,932
Underlying pro�t 2010
Hong Kong of�ce
Hong Kong retail
Hong Kong residential
Mainland China
U.S.A.
Gross Rental Income
02 03 04 05 06 07 08 09 10 11
10,000
8,000
6,000
4,000
2,000
0
HK$M
Property investment
Property trading
Hotels
Sale of investment properties
UnderlyingOperating Pro�t
02 03 04 05 06 07 08 09 10 11
16,000
12,000
14,000
8,000
10,000
4,000
2,000
6,000
0
-2,000
HK$M
Hong Kong
Mainland China
U.S.A. and U.K.
Attributable CompletedInvestment Property Portfolio by Location
11 12 13 14 15 16 17 18
30,000
24,000
18,000
12,000
6,000
0
GFA (000 sq.ft.)
SwirePropertiesAnnualReport|2011 19
Retail
Of�ce
Hotels/Residential/Serviced Apartments
Attributable Completed Investment Property Portfolio by Type
11 12 13 14 15 16 17 18
30,000
24,000
18,000
12,000
6,000
0
GFA (000 sq.ft.)
ManagementDiscussion&Analysis|ReviewofOperations
20 SwirePropertiesAnnualReport|2011
PortfolioOverviewTheaggregategrossfloorarea(“GFA”)attributabletotheGroupasat31stDecember2011wasapproximately29.1millionsquarefeet.
OutoftheaggregateGFAattributabletotheGroup,approximately25.1millionsquarefeetareinvestmentproperties,comprisingcompletedinvestmentpropertiesofapproximately19.4millionsquarefeetandinvestmentpropertiesunderdevelopmentorheldforfuturedevelopmentofapproximately5.7millionsquarefeet.InHongKong,thisinvestmentpropertyportfoliocomprisesapproximately
14.4millionsquarefeetattributabletotheGroupofprimarilyGradeAofficeandretailpremises,hotels,servicedapartmentsandotherluxuryresidentialaccommodation.InMainlandChina,SwirePropertieshasinterestsinfivemajorcommercialmixed-usedevelopmentsinprimelocationsinBeijing,Shanghai,GuangzhouandChengdu.Thesedevelopmentsareexpectedtocompriseapproximately8.4millionsquarefeetofattributableGFAoncompletion.OutsideHongKongandMainlandChina,theinvestmentpropertyportfoliocomprisestheBrickellCitiCentreprojectinMiamiandinterestsinhotelsintheU.S.A.andtheU.K.
ThetablesbelowillustratetheGFAattributabletotheGroupoftheinvestmentportfolioasat31stDecember2011.
Completed Investment Properties(GFA attributable to the Group in million square feet)
Office Retail Hotels (1)
Residential/Serviced
Apartments Total
HongKong 10.5 2.4 0.7 0.6 14.2
MainlandChina 2.0 2.5 0.2 – 4.7
U.S.A.andU.K. – – 0.5 – 0.5
Total 12.5 4.9 1.4 0.6 19.4
SwirePropertiesAnnualReport|2011 21
Investment Properties under Development or Held for Future Development(expected GFA attributable to the Group in million square feet)
Office Retail Hotels (1)
Residential/Serviced
Apartments Total
HongKong 0.1 – – 0.1 0.2
MainlandChina 0.9 1.6 1.1 0.1 3.7
U.S.A. 1.0 0.5 0.2 0.1 1.8
Total 2.0 2.1 1.3 0.3 5.7
Total Investment Properties (GFA (or expected GFA) attributable to the Group in million square feet)
Office Retail Hotels (1)
Residential/Serviced
Apartments Total
Total 14.5 7.0 2.7 0.9 25.1
(1)Hotelsareaccountedforunderproperty,plantandequipmentintheaccounts.
Thetradingpropertyportfoliocomprisesland,apartmentsandofficesunderdevelopmentinHongKong,inMiamiintheU.S.A.andinMainlandChina,togetherwiththeremainingunitsforsaleat5StarStreetinHongKongandattheASIAresidentialdevelopmentinMiamiintheU.S.A.
ThetablebelowillustratestheGFA(orexpectedGFA)attributabletotheGroupofthetradingpropertyportfolioasat31stDecember2011.
Trading Properties(GFA (or expected GFA) attributable to the Group in million square feet)
Completed
UnderDevelopment
orHeldforFuture
Development Total
HongKong – 1.0 1.0
MainlandChina – 0.6 0.6
U.S.A. 0.1 2.3 2.4
Total 0.1 3.9 4.0
ManagementDiscussion&Analysis|ReviewofOperations
22 SwirePropertiesAnnualReport|2011
InvestmentProperties–HongKongOffices
OverviewThecompletedofficeportfolioinHongKongcomprisesanaggregateof10.8millionsquarefeetofspaceona100%basis.TotalattributablegrossrentalincomefromourofficepropertiesinHongKongwasHK$4,659millionin2011.Asat31stDecember2011,ourofficepropertiesinHongKongwerevaluedatHK$113,790million.Ofthisamount,SwireProperties’attributableinterestrepresentedHK$110,458million.
Hong Kong Office PortfolioGrossFloorArea
(sq.ft.)(100%Basis)
Occupancy(asatDec2011)
AttributableInterest
PacificPlace 2,186,433 99% 100%Cityplaza 1,632,930 98% 100%TaiKooPlaceOfficeTowers(1) 3,136,541 99% 50%/100%OneIslandEast 1,537,011 100% 100%TechnoCentres(2) 1,816,667 95% 100%Others(3) 461,587 98% 20%/50%
Total 10,771,169
(1) IncludingPCCWTower,ofwhichSwirePropertiesowns50%.(2) ThevaluationofSomersetHousereflectsthefactthatitistoberedeveloped.(3)OtherscompriseOneCitygate(20%ownedbySwireProperties)and625King’sRoad(50%ownedbySwireProperties).
GrossrentalincomefromtheGroup’sofficeportfoliofor2011increasedby7%over2010,toHK$4,495million,reflectingpositiverentalreversionsandstrongdemandforofficespaceintheportfoliointhefirsthalfof2011.Thestrongdemandwasdrivenbyexistingtenantswantingmorespaceaswellasnewtenants.Althoughdemandreducedinthesecondhalfoftheyearinuncertainmarketconditions,rentalreversionsremainedpositive.At31stDecember2011,theoverallofficeportfoliowas98%let.
Thechartbelowshowsthemixoftenantsoftheofficepropertiesbytheprincipalnatureoftheirbusinesses(basedoninternalclassifications)asapercentageoftheofficeareaattributabletotheGroupasat31stDecember2011.
Asat31stDecember2011,thetoptenofficetenants(basedonrentalincomeinthetwelvemonthsended31stDecember2011)togetheroccupiedapproximately21%ofthetotalofficeareainHongKong.
Banking/Finance/Securities/Investment
Professional Services (Accounting/Legal/Management Consulting/Corporate Secretarial)
Insurance
Technology/Media/Telecoms
Real Estate/Construction/Development/Architecture
Trading
Advertising and Public Relations
Others
Of�ce Area Attributable to the Group by Tenants’ Trades(As at 31st December 2011)
31.3%
8.8%
8.2%16.2%
9.4%
8.9%
2.9%14.3%
SwirePropertiesAnnualReport|2011 23
Pacific Place TheofficesatOne,TwoandThreePacificPlaceperformedstronglyin2011.Theoccupancyratewas99%at31stDecember2011.Majornewlettingsconcludedin2011includeFidelity,DaiwaandRabobank,whileBankofNewYorkandTempleChambersrenewedtheirleases.
Island EastCityplazaOne,ThreeandFourperformedsatisfactorilyin2011.Theoccupancyratewas98%at31stDecember2011.Newtenantsin2011includeJardineLloydThompsonandDeloitte,whileAmericanExpress,HSBCandFujiXeroxrenewedtheirleases.
TheTaiKooPlaceOfficeTowerscomprisefiveofficetowers(includingPCCWTower,inwhichwehavea50%interest).Theoccupancyratewas99%at31stDecember2011.Leasingactivityin2011wasmainlyrenewalsandexistingtenantstakingmorespace,withmajorrenewalsincludingLVMH,IBM,Lenovo,PhilipMorris,PCCW,BNP,BankofAmericaMerrillLynchandChinaConstructionBank.
OneIslandEast,ourlandmarkpropertyinIslandEast,hadanoccupancyrateof100%at31stDecember2011.In2011,CitibanktookmorespaceandChinaShippingreneweditsexistinglease.
ThethreeTechnoCentresrecordedmodestgrowthinrentsin2011.Leasesexpiringin2011atSomersetHouse,whichwillberedevelopedintoaGradeAofficetowerstartingin2013,werenotrenewed(andthespacewasnotre-leased).
Hong Kong Office Market OutlookWeremaincautiousabouttheoutlookfor2012.Thefinancialservicesindustryisundergoingaperiodofconsolidation.ThishasaffecteddemandforspaceinCentral.Inthesechallengingconditions,sometenantsinCentralcontinuetobeinterestedintakingspaceinIslandEast.Lowvacancyratesandthefactthatthesupplyofnewofficespacewillbemodestshouldmitigatetheeffectofthechallengingconditionsonrentalincome.
Ourofficespaceavailablewillincreasein2012withthecompletionsof28HennessyRoad(145,390squarefeet)and8Queen’sRoadEast(81,346squarefeet),bothexpectedtotakeplaceinlate2012.
ThefollowingchartshowsthepercentageofthetotalrentalincomeattributabletotheGroupfromtheofficepropertiesinHongKong,forthemonthended31stDecember2011,derivedfromleasesexpiringintheperiodsindicatedbelow.Tenanciesaccountingforapproximately13%oftherentalincomeinthemonthofDecember2011areduetoexpirein2012,withafurther23%duetoexpirein2013.
OneIslandEastHongKong
ManagementDiscussion&Analysis|ReviewofOperations
24 SwirePropertiesAnnualReport|2011
Retail
OverviewThecompletedretailportfolioinHongKongcomprisesanaggregateof2.8millionsquarefeetofspaceona100%basis,principallyatTheMallatPacificPlace,CityplazainIslandEast,andCitygateOutletsatTungChung.Themallsarewholly-ownedbySwireProperties(exceptforCitygate
Outlets,inwhichSwirePropertieshasa20%interest)andaremanagedbySwireProperties.TotalattributablegrossrentalincomefromourretailpropertiesinHongKongwasHK$3,024millionin2011.Asat31stDecember2011,ourretailpropertiesinHongKongwerevaluedatHK$45,505million.Ofthisamount,SwireProperties’attributableinterestrepresentedHK$41,032million.
Hong Kong Retail Portfolio
GrossFloorArea(sq.ft.)
(100%Basis)Occupancy
(asatDec2011)Attributable
Interest
PacificPlaceMall 711,182 100% 100%
CityplazaMall 1,105,227 100% 100%
CitygateOutlets 462,439 100% 20%
Others(1) 530,467 100% 20%/60%/100%
Total 2,809,315
(1)OtherslargelycompriseTaikooShingneighbourhoodshopsandStarCrestretailpremises(whicharewholly-owned),IslandPlaceretailpremises(60%owned)andTungChungretailpremises(20%owned).
Notwithstandinguncertaintiesintheglobaleconomicenvironment,theretailmarketinHongKongremainedrobustin2011.TouristarrivalsinHongKongreachedanewrecordof42million,morethan16%above2010.Theretailpropertiesbenefittedfromincreasedspendingaccordingly.This,combinedwithpositivelocalconsumersentimentinHongKong,resultedinhealthysalesgrowthatretailoutletsinourproperties.
GrossrentalincomefromtheGroup’sretailportfoliowasHK$2,961millionin2011,adecreaseof2%from2010,duetotheabsenceofrentalincomefromFestivalWalkfollowingitsdisposal.RentalreversionsweregenerallypositiveandwereparticularlystrongatPacificPlace,reflectingstrongdemandforretailspaceandstrongretailsalesduringtheyear.RetailsalesinSwireProperties’mallsinHongKongincreasedby18%in2011.
OccupancyattheGroup’swholly-ownedmallswaseffectively100%throughouttheyear.
Of�ce Lease Expiry Pro�le(as at 31st December 2011)
2012 2013 2014 & Beyond
60%
70%
50%
40%
30%
10%
20%
0
SwirePropertiesAnnualReport|2011 25
Asat31stDecember2011,thetoptenretailtenants(basedonrentalincomeinthetwelvemonthsended31stDecember2011)togetheroccupiedapproximately33%ofthetotalretailareainHongKong.
TheMall,PacificPlaceHongKong
The Mall, Pacific PlaceTheMallatPacificPlaceisanintegralpartofthemixed-usePacificPlacedevelopment.TheofficesandthefourhotelsatPacificPlaceprovideasecureflowofshoppersfortheMall.RetailsalesatTheMallincreasedby18%in2011.ThePacificPlacecontemporisationproject,withatotalinvestmentcostofHK$2.0billion,wassubstantiallycompletedin2011andsignificantlyrejuvenatedthe23-yearoldMall.
TheMallremainedvirtuallyfullyletduringtheyear,withtheonlyvoidperiodsresultingfromtenantchanges,themost
notableofwhichwastheintroductionoftheHarveyNicholsAsiaflagshipstore.
Significantimprovementsareplannedfor2012.TheexteriorfaçadefacingQueenswayisbeingrefurbished,whilethespacepreviouslyoccupiedbyLaneCrawfordisbeingreconfigured.Abeautygallerywillbecreatedtohouseretailersofupscalecosmeticandskincarebrands.AnadditionalarcadewilllinkupthetwosidesofTheMallinordertoimprovetheflowofpedestriantraffic.
Thechartbelowshowsthemixoftenantsoftheretailpropertiesbytheprincipalnatureoftheirbusinesses(basedoninternalclassifications)asapercentageoftheretailareaattributabletotheGroupasat31stDecember2011.
Department Stores
Food & Beverages
Jewellery & Watches
Fashion & Accessories
Cinemas
Ice Rinks
Supermarket
Others
Retail Area Attributable to the Group by Tenants’ Trades(as at 31st December 2011)
26.2%
14.7%
1.7%20.9%
5.0%1.1%
3.9%
26.5%
ManagementDiscussion&Analysis|ReviewofOperations
26 SwirePropertiesAnnualReport|2011
Cityplaza MallCityplazaisoneofthemostpopularregionalshoppingcentresinHongKongandisthebiggestsuchcentreonHongKongIsland.ItprincipallyservesHongKongresidents,buttheopeningoftheadjacentEAST,HongKonghasresultedinhigherpatronagefromvisitorsfromoutsideHongKong.Retailsalesincreasedby8%in2011.Thepropertywasvirtuallyfullyoccupiedduring2011.
Citygate OutletsSalesatCitygateOutlets,theonlyoutletmallinHongKong,increasedbymorethan36%in2011.Afurther13,670squarefeetofspacewasallocatedtooutletretailersduringtheyear.Thetenthflooroftheadjacentofficeproperty,OneCitygate,wasconvertedtoretailuse,withtradingcommencinginDecember2011.CitygateOutletsremainedvirtuallyfullyletatalltimesin2011.
Hong Kong Retail Market OutlookStrongconsumerdemand(includingfromvisitorsfromMainlandChina)isexpectedtocontinuein2012andcompetitionforretailspaceisexpectedtoremainkeen.Wewillcontinuetomonitorconsumerpreferences,brandpopularityandtenantmixinanefforttoensurethatourmallscatertothechangingneedsofconsumersandfacilitateincreasesinretailsales.
ThefollowingchartshowsthepercentageofthetotalrentalincomeattributabletotheGroupfromtheretailpropertiesinHongKong,forthemonthended31stDecember2011,derivedfromleasesexpiringintheperiodsindicatedbelow.Tenanciesaccountingforapproximately20%oftherentalincomeinthemonthofDecember2011areduetoexpirein2012,withafurther30%duetoexpirein2013.
CitygateOutletsHongKong
Retail Lease Expiry Pro�le(as at 31st December 2011)
2012 2013 2014 & Beyond
60%
70%
50%
40%
30%
10%
20%
0
SwirePropertiesAnnualReport|2011 27
ResidentialThecompletedresidentialportfoliocomprisesPacificPlaceApartmentsatPacificPlaceinHongKongandasmallnumberofluxuryhousesandapartmentsonHongKongIsland,withatotalfloorareaof483,711squarefeet.
Occupancyattheresidentialportfoliowasapproximately91%at31stDecember2011.
Demandforourresidentialpropertiesisexpectedtoremainstrongin2012.
InvestmentPropertiesUnderConstruction
28 Hennessy RoadSuperstructureworkisprogressingatthe145,390square
footofficebuildingat28HennessyRoad,withcompletionexpectedinthesecondhalfof2012.
8 Queen’s Road East8Queen’sRoadEast,a19-storeycommercialbuildingwith81,346squarefeetofspace,isbeingrefurbished,withsubstantialcompletionscheduledforlate2012.
23 Tong Chong StreetThepropertyat23TongChongStreetinQuarryBaywillberedevelopedintoservicedapartmentsandisexpectedtobecompletedby2014.Theaggregatefloorareauponcompletionwillbeapproximately75,000squarefeet.
Property Portfolio (1) – Mainland ChinaGrossFloorArea(sq.ft.)(100%Basis)
TotalInvestmentProperties
Hotels,TradingPropertiesand
OthersYearof
OpeningAttributable
Interest
CompletedSanlitunVillage,Beijing 1,465,771 1,296,308 169,463 2008 (2) 80%(3)/100%TaiKooHui,Guangzhou(RetailandOffice) 3,208,167 3,208,167 – 2011 97%INDIGO,Beijing(Office) 595,464 595,464 – 2011 50%BeaumondeRetailPodium,Guangzhou 90,847 90,847 – 2008 100%Others(4) 29,584 – 29,584 N/A 100%
Sub-total 5,389,833 5,190,786 199,047
Under DevelopmentTaiKooHui,Guangzhou(HotelandServicedApartments) 641,028 52,797 588,231 2012 97%INDIGO,Beijing(RetailandHotel) 1,297,762 939,493 358,269 2012 50%DazhongliProject,Shanghai 3,469,398 2,872,653 596,745 2016 50%DaciTempleProject,Chengdu(5) 2,689,300 1,249,135 1,440,165 2014 50%
Sub-total 8,097,488 5,114,078 2,983,410
Total 13,487,321 10,304,864 3,182,457
(1) Includingthehotelandpropertytradingcomponentsoftheseprojects.(2) VillageNorthwasopenedin2010.(3) SwirePropertiesowns80%oftheretailcomponentofSanlitunVillage.(4) IncludingLongdeBuildingandTianheXinzuoresidentialapartments,whichwereacquiredbyusin2005and2006respectively.(5) TheofficeportionoftheDaciTempleprojectisintendedtobedevelopedfortradingpurposes.
InvestmentProperties–MainlandChinaOverviewThepropertyportfolioinMainlandChinacomprisesanaggregateof13.5millionsquarefeetofspace(9.1millionsquarefeetattributabletotheGroup),ofwhich5.4millionsquarefeetarecompletedpropertieswithanother8.1millionsquarefeetunderdevelopment.TotalattributablegrossrentalincomefromourinvestmentpropertiesinMainlandChinawasHK$775millionin2011.Asat31stDecember2011,ourinvestmentportfolioinMainlandChinawasvaluedatHK$40,626million.Ofthisamount,SwireProperties’attributableinterestrepresentedHK$28,890million.
ManagementDiscussion&Analysis|ReviewofOperations
28 SwirePropertiesAnnualReport|2011
ThechartbelowillustratesthegrowthinattributableareaofthecompletedpropertyportfolioinMainlandChina.
SanlitunVillageBeijing
CompletedInvestmentProperties
Sanlitun Village, BeijingSanlitunVillage,alow-densitycomplex,comprisestwoneighbouringretailsitesandahoteltotalling1.47millionsquarefeetintheChaoyangDistrictofBeijing.SanlitunVillagehasover200shopsandrestaurants,includingflagshipstores,shopssellinglifestylebrandsandrestaurantsservingregionalandinternationalcuisine.
VillageSouthconcentratesonglobalfashionandlifestylebrandswithayouthfulappeal,includingtheworld’slargest
adidasstoreandMainlandChina’slargestApplestore.During2011,SwirePropertiesintroduced33newtenantsinVillageSouthinanefforttooptimisethemixoftenants.VillageNorthfocusesoninternationalandChinesedesignerfashionbrands,aswellasrestaurantsandcafés.
SanlitunVillagehasseenasatisfactoryincreaseingrossrentalincomein2011,reflectingincreasesinbaserentsatVillageSouthandhigheroccupancyratesatVillageNorth.Asat31stDecember2011,occupancyrateswere93%atVillageSouthand90%atVillageNorth.
Sanlitun Village, BeijingGrossFloorArea
(sq.ft.)(100%Basis)
Occupancy(asatDec2011)
AttributableInterest
Retail–VillageSouth 776,909 93% 80%Retail–VillageNorth 519,399 90% 80%Hotel–TheOppositeHouse(1) 169,463 66% 100%
Total 1,465,771
(1) Thehotelisaccountedforunderproperty,plantandequipmentintheaccounts.
Sanlitun Village, Beijing
TaiKoo Hui, Guangzhou
INDIGO, Beijing
Beaumonde Retail Podium, Guangzhou
Others
Dazhongli Project, Shanghai
Daci Temple Project, Chengdu
Attributable Area of Completed Property Portfolio in Mainland China
2011 2012 2013 2014 2015 2016 & onwards
10,000
(000 sq.ft.)
8,000
6,000
2,000
4,000
0
SwirePropertiesAnnualReport|2011 29
SanlitunVillage,withitsopenplanarchitectureinspiredbytheconceptofcourtyardsandhutongsinBeijing,hasgainedsignificantattentionintheretailmarketinBeijing.Itisseenbyyoungpeopleandthefashionconsciousasashoppingandleisuredestination.SwirePropertieswillcontinuetoinvestinimprovementworksdesignedtoenhancefootfallandcirculation,andtoreinforcetheproperty’sposition.DemandfromretailersremainsstronginBeijing,withmoreretailersofinternationalbrandsenteringthemarket.Thiscanbeexpectedtoincreaseoccupancyratesandrentsingeneral.SanlitunVillagecanbeexpectedtobenefitfromthecontinuedstrengthofconsumerdemand,furtherrefinementofthetenantmixandcostreductions.
SwirePropertiesowns80%oftheretailcomponentofSanlitunVillagewiththeremaining20%interestheldbyGatewayChinaFundI,afundmanagedbyGawCapital.Thefundhasanoptiontosellits20%interesttoSwirePropertiesbeforetheendof2013.Asat31stDecember2011,SanlitunVillage(excludingTheOppositeHouse)wasvaluedatHK$8,975million.Ofthisamount,SwireProperties’80%attributableinterestrepresentedHK$7,180million.
Beijing Retail Market OutlookTheBeijingretailmarketremainsveryactive,withnewsupplybeingtakenupbyretailers.ThereisanincreasingnumberofnewentrantstotheBeijingmarket,asmanyretailersseeMainlandChinaasasourceofgrowthinthecomingyears.Rentappreciationinprimeretailshoppingcentrescontinues.
TaiKoo Hui, GuangzhouTaiKooHuiisourlargestinvestmentpropertyinMainlandChina.Itisalarge-scaleretail-ledcomplexintheTianheCentralBusinessDistrictofGuangzhou,withatotalareaofapproximately3.85millionsquarefeet.Locatedata
transportationhub,ithasdirectaccesstothecity’smetrosystem,incorporatesaprimeshoppingmall,twoGradeAofficetowers,a5-starhotelwithservicedapartmentstobemanagedbyMandarinOrientalHotelGroupandaculturalcentre,togetherwithover800carparkingspaces,allofwhichareinterconnected.
Theshoppingmallopenedon23rdSeptember2011and,asat31stDecember2011,approximately99%ofthefloorareawasleasedand84%oftheshopswereopen.Approximately70%ofthemallistenantedbyretailerssellinginternationalbrandnames,withanumberofbrandsmakingtheirdebutsinGuangzhou.SalesofluxurybrandswereencouragingwhilesomeofthemassmarketbrandswhicharenewtoGuangzhouarequicklygainingmomentum.Tenantshavecommittedtotake(orhaveagreedtermsinrelationto)approximately68%ofthefloorareaofthetwoofficetowers.HSBC,whichisthelargesttenant,hasleased29floors,representingapproximately47%ofthetotalofficefloorarea.Theremainingvacantareaislocatedinthehighzoneofofficetower1,whichisexpectedtocommandthebesttermsamongalltheofficefloors.
Retailsalesperformancein2012isexpectedtoimproveasmoreshopsopen,moreofficetenantsmoveinandtheMandarinOrientalHotelopens.The263-roomsand24servicedapartmentsintheMandarinOrientalHotelGuangzhouareexpectedtoopeninthelatterpartof2012.
SwirePropertieshasa97%stakeinTaiKooHui,whichisajointventurewithGuangzhouDaYangPropertiesInvestmentLimited(undertheGuangzhouDailyGroup).Asat31stDecember2011,thedevelopment(excludingthehotel)wasvaluedatHK$12,014million.Ofthisamount,SwireProperties’97%attributableinterestrepresentedHK$11,653million.
TaiKoo Hui, Guangzhou
GrossFloorArea(sq.ft.)
(100%Basis)Occupancy
(asatDec2011)Attributable
Interest
Retail 1,484,743 99% 97%
Office 1,723,424 68% 97%
Hotel(1) 588,231 N/A 97%
ServicedApartments 52,797 N/A 97%
Total 3,849,195 97%
(1) Thehotelisaccountedforunderproperty,plantandequipmentintheaccounts.
INDIGOBeijing
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30 SwirePropertiesAnnualReport|2011
Guangzhou Market OutlookIntheretailmarket,anumberofnewmallswereopenedinBaiyunDistrictandZhujiangNewTownin2011.TotalretailsalesinGuangzhougrewsteadilyduetostrongmarketdemand.
Intheofficemarket,althoughsupplyhasincreasedsignificantlyfollowingthecompletionofnewofficetowersinZhujiangNewTown,themarketremainedactive,withgrowingdemand,particularlyfromthefinanceandinsuranceindustries,inthefirsthalfof2011.However,inthefourthquarterin2011,demandforofficespacestartedtoweaken.
INDIGO, BeijingOursecondventureintheBeijingpropertymarket,INDIGO,isaretail-ledmixed-usedevelopmentinJiangTaiintheChaoyangDistrict.Itcomprisesanupmarketshoppingmall,aGradeAofficetower(ONEINDIGO)anda369-roomlifestylebusinesshotelEAST,Beijing.Inadditiontohavingmorethan
1,200carparkingspaces,INDIGOwillbeservedbytheBeijingMetroLine14,whichisnowunderconstructionandisduetoopenin2014.
Theshoppingmallandtheofficetowerarecompleted.Thehotelisunderconstruction.Theofficetowerstartedtoopeninlate2011andanumberofofficetenantshavemovedin.TheshoppingmallisbeingfittedoutandopenedgraduallyfromMarch2012.Asat31stDecember2011,committedtenants(includingthosewhohadsignedlettersofintent)accountedforapproximately77%oftheretailspaceandapproximately46%oftheofficespace.Thehotelisexpectedtoopeninthelatterpartof2012.
INDIGOisa50:50jointventurewithSino-OceanLandHoldingsLimited.Asat31stDecember2011,thedevelopment(excludingthehotel)wasvaluedatHK$4,650million.Ofthisamount,SwireProperties’50%attributableinterestrepresentedHK$2,325million.
INDIGO, Beijing
GrossFloorArea(sq.ft.)
(100%Basis)Occupancy
(asatDec2011)Attributable
Interest
Retail 939,493 77% 50%
Office 595,464 46% 50%
Hotel(1) 358,269 N/A 50%
Total 1,893,226 50%
(1) Thehotelisaccountedforunderproperty,plantandequipmentintheaccounts.
SwirePropertiesAnnualReport|2011 31
Beijing Office Market OutlookDemandintheBeijingofficemarketcontinuestoexceedsupply.Rentalincreasesandlimitedsupplyinthecentralbusinessdistrictarecausingtenantstorelocatetoemergingareas.
InvestmentPropertiesUnderDevelopment
Dazhongli Project, ShanghaiTheDazhongliprojectisalarge-scaleretail-ledmixed-usedevelopmentwhichwillcompriseapproximately3.47millionsquarefeet(excludingcarparkingspaces)uponcompletion.ItoccupiesaprimelocationwithsignificantfrontagetoNanjingWestRoad,oneofShanghai’smajorshoppingthoroughfares,
andhasexcellenttransportconnections,beingadjacenttoanexistingmetrolineandtwoplannedmetrostations.Theprojectcomprisesaretailmall,twoofficetowersandthreehotels,andisexpectedtobecomealandmarkdevelopmentinShanghai.
Siteclearanceandresettlementworkshavelargelybeencompleted.Foundationworkscommencedattheendof2011andthedevelopmentisexpectedtoopeninphasesfrom2016onwards.
TheDazhongliprojectisa50:50jointventurewithHKRInternationalLimited.Asat31stDecember2011,thedevelopment(excludingthehotel)wasvaluedatHK$12,442million.Ofthisamount,SwireProperties’50%attributableinterestrepresentedHK$6,221million.
Shanghai Market OutlookDemandforcommercialpropertyinShanghaiwasstrongin2011.LimitedsupplyofqualityGradeAofficespace,particularlyinthePuxiregion,shouldensurethatgrowthprospectscontinuetobegood.Theretailmarketremainsrobust,withnewentrantstoMainlandChinaoftenopeningfirstinShanghai.
Daci Temple Project, ChengduTheDaciTempleproject,locatedintheJinjiangDistrictofChengduandneartothepopularChunxiRoadshopping
Dazhongli Project, ShanghaiGrossFloorArea
(sq.ft.)(100%Basis)
AttributableInterest
Retail 1,062,719 50%Office 1,809,934 50%Hotels(1) 596,745 50%
Total 3,469,398 50%
(1) Thehotelsareaccountedforunderproperty,plantandequipmentintheaccounts.
district,willbeconvenientlyaccessiblefromafuturemetrointerchangestation.Withasiteareaof762,251squarefeet,theprojectwillformalarge-scaleurbandevelopmentcomprisingastreetstyleretailcomplex,aboutiquehotelwithabout100guestrooms,servicedapartmentsandaGradeAofficetower.
Consistingof2-3storeyretailblocksandopenspaceswithabasementconnectedtotheplannedmetro,theretailcomplexisdesignedtointegrateharmoniouslywiththeculturalheritageoftheancientDaciTempleandneighbouringhistoricbuildings.
Daci Temple Project, ChengduGrossFloorArea
(sq.ft.)(100%Basis)
AttributableInterest
Retail 1,174,465 50%Hotel(1) 156,090 50%ServicedApartments 74,670 50%Office(2) 1,284,075 50%
Total 2,689,300 50%
(1) Thehotelisaccountedforunderproperty,plantandequipmentintheaccounts.(2) TheofficeportionoftheDaciTempleprojectisintendedtobedevelopedfortradingpurposes.
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32 SwirePropertiesAnnualReport|2011
Sitepreparationworkshavestarted.Thedevelopmentisexpectedtoopeninphasesfrom2014onwards.
Theofficetowerisintendedtobedevelopedfortradingpurposes.
TheDaciTempledevelopmentisa50:50jointventurewithSino-OceanLandHoldingsLimited.InJanuary2012,theGroupenteredintoanagreementwithSino-OceanLandLimited,awholly-ownedsubsidiaryofSino-OceanLandHoldingsLimitedtofundthewholeoftheremaininglandpremium(andassociatedtaxes)payableinrespectoftheDaciTempleprojectandcertainworkingcapitalrequirementsinanaggregateamountofUS$230million.PleaserefertoNote44totheaccountsforfurtherdetails.
Asat31stDecember2011,theDaciTempledevelopment(excludingthehotelandofficetradingcomponents)wasvaluedatHK$2,071million.Ofthisamount,SwireProperties’50%attributableinterestrepresentedHK$1,036million.
Chengdu Market OutlookChengdu’sretailmarkethasbeenperformingstronglyoverthelastthreeyears.Therewasstrongdemandforofficespacein2011,withtradingandleasingbothbeingactiveinthefirstthreequartersof2011.
TherewillbenomajorsupplyofnewretailspaceinthedowntownareaofChengduin2012.Demandbyretailersforadditionalspaceshouldincreaserentalratesandabsorptionofexistingspace.
TherewillbeasubstantialsupplyofnewofficespaceintheNewSouthAreaofChengduin2012.However,thesupplyalongthemajorcommercialstreetsandwithinthecitycentreisstilllimited.Theofficeleasingandtradingmarketsinthisdowntownareaareexpectedtoremainpositive.
InvestmentProperties–U.S.A.Brickell CitiCentre, MiamiBrickellCitiCentreisamixed-usedevelopmentprojectintheBrickellfinancialdistrictinMiami,Floridaandcoversapproximatelyfourcityblocks.SituatedoneblockwestofBrickellAvenueandthreeblockswestofBrickellKey,theprojecthasasiteareaof393,678squarefeet(approximately9.1acres).
Partofthesitewasacquiredin2008.ThispartisboundedonthenorthandsouthbySW7thandSW8thStreets,whichareprimaryarteriesconnectingtheBrickelldistricttotheinterstatehighway(I-95)(whichisaboutthreequartersofamilewestofthesite).Thesubsequentacquisitionoftwoadjoiningsites,the2.1acreBrickellTennisCentreandthe1.3acreEasternNationalBankbuildingpermittedtheapplicationforaspecialareaplanundertheMiamizoningcode.DevelopmententitlementshavebeenapprovedbytheCityofMiami,allowingamixed-usedevelopmentofapproximately2.9millionsquarefeet(excludingcarparkandcirculationareas).
Brickell CitiCentre, Miami
GrossFloorArea(sq.ft.)
(100%Basis)Attributable
Interest
Retail 520,000 100%
Office 963,000 100%
ServicedApartments 108,000 100%
Hotel(1) 200,000 100%
Residential(1) 1,100,000 100%
Carpark/Circulation 2,538,000 100%
Total 5,429,000 100%
(1) TheresidentialportionoftheBrickellCitiCentreisintendedtobedevelopedfortradingpurposes.Thehotelandtheresidentialcomponentsarenotaccountedforasinvestmentpropertiesintheaccounts.
SwirePropertiesAnnualReport|2011 33
BrickellCitiCentreMiami
Anurban,mixed-usedevelopmentschemehasbeenplannedwhichincorporatesamulti-level,open-airshoppingcentrewithtwolevelsofbelowgroundparking.TheplanincorporatesalightrailMetromoverstation,whichrunsthroughthesite,asanintegralpartoftheproject.Thedevelopmentisscheduledtobecompletedintwophases,withPhaseIcomprisinga243-roomhotel,93servicedapartments,twoofficebuildingsandtworesidentialtowers.Subjecttomarketconditions,PhaseIIisplannedasahigh-riseofficebuildingwithcarparkingspaces.
Sitepreparation,foundationtestingandapplyingforconstructionpermitsfromgovernmentauthoritiesareunderway.ConstructionofPhaseIisexpectedtobecompletedin2015,whileconstructionofPhaseIIisexpectedtobecompletedin2018.
ThereislittleexistingorexpectedretailcompetitionintheareaofthescaleandqualityplannedforBrickellCitiCentre.Asaregionalcentre,itisbelievedthatBrickellCitiCentrewillgeneraterentalratescomparabletothoseatleadingshoppingcentresinGreaterMiami.
Asat31stDecember2011,theBrickellCitiCentredevelopment(excludingthehotelandresidentialtradingcomponents)wasvaluedatHK$391million.Thisdevelopmentiswholly-ownedbySwireProperties.
Miami Market OutlookNotwithstandingtheuncertaineconomicbackground,GreaterMiamidoesnothaveenoughshops,especiallyinthecitycentreandsellingmidtohighrangemerchandise.Theofficemarketcontinuestofavourtenants,althoughtenantconcessionpackagesaregettingsmaller.However,officevacancyratesremainatapproximately22%followingtheadditionof600,000squarefeetofofficespaceattherecentlycompletedBrickellWorldCenter.Competitionforofficetenantsremainskeenasaresult.
Intheresidentialmarket,DowntownMiamihasabsorbedthebulkofpropertiesbuiltfrom2005to2008andinsomesectorspricesarestartingtorise.ThesupplyofrentalunitsonofferintheDowntownandBrickellareasislow,withrentalratescontinuingtoincrease.
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34 SwirePropertiesAnnualReport|2011
ValuationofInvestmentPropertiesTheportfolioofinvestmentpropertieswasvaluedat31stDecember2011(96%byvaluehavingbeenvaluedbyDTZDebenhamTieLeung)onthebasisofopenmarketvalue.Theamountofthisvaluation,beforeassociateddeferredtaxinMainlandChina,wasHK$187,198millioncomparedtoHK$178,815millionat31stDecember2010andHK$198,314millionat30thJune2011.
Theincreaseinthevaluationoftheinvestmentpropertyportfolioprincipallyreflectshigherrentalincome.
UnderHKAS40,hotelpropertiesarenotaccountedforasinvestmentpropertiesbutareincludedwithinproperty,plantandequipmentatcostlessaccumulateddepreciationandanyprovisionforimpairmentlosses.
Translation differences
Change in composition of Group
Capital expenditure
Other net transfers from property, plant and equipment
Other net transfers from property under development for sale
Net valuation gain in Mainland China
Net valuation gain in Hong Kong
As at 31st December 2011
Movement in Investment Properties
1st January 2011 31st December 2011
HK$ Bn
200
190
180
160
170
150
178.8 +0.8 -18.3
+4.9 +0.3 +0.4+1.5
+18.8 187.2As at 1st January 2011
SwirePropertiesAnnualReport|2011 35
Audited Financial InformationInvestment Properties
Group
Completed HK$M
Under Development
HK$MTotal
HK$M
At1stJanuary2011 161,508 17,307 178,815
Translationdifferences 374 421 795
ChangeincompositionofGroup (18,263) – (18,263)
Additions 145 4,705 4,850
Transferuponcompletion 11,142 (11,142) –
Othernettransfersfromproperty,plantandequipment 265 38 303
Othernettransfersfrompropertiesheldfordevelopment 104 249 353
Fairvaluegains 19,676 669 20,345
174,951 12,247 187,198
Add:Initialleasingcosts 290 – 290
At31stDecember2011 175,241 12,247 187,488
At1stJanuary2010 141,832 12,183 154,015
Translationdifferences 287 245 532
Costwrittenback (11) – (11)
Additions 595 3,988 4,583
Disposals (593) (57) (650)
Transfersbetweencategory 23 (23) –
Othernettransfersfromproperty,plantandequipment 770 (7) 763
Othernettransferstopropertyunderdevelopmentforsale – (897) (897)
Fairvaluegains 18,605 1,875 20,480
161,508 17,307 178,815
Add:Initialleasingcosts 170 – 170
At31stDecember2010 161,678 17,307 178,985
Geographical Analysis of Investment Properties
Group
2011HK$M
2010HK$M
HeldinHongKong:
Onmedium-termleases(10to50years) 25,151 39,310
Onlong-termleases(over50years) 140,358 122,221
165,509 161,531
HeldinMainlandChina:
Onmedium-termleases(10to50years) 21,298 17,284
HeldinU.S.A.:
Freehold 391 –
187,198 178,815
ManagementDiscussion&Analysis|ReviewofOperations
36 SwirePropertiesAnnualReport|2011
PropertyTradingThetradingportfoliocomprisessevenluxuryresidentialprojectsinHongKong(fiveonHongKongIsland,oneinKowloonandoneonLantauIsland),aresidentialcomplexunderdevelopmentinBrickellCitiCentreinMiami,anofficepropertyunderdevelopmentintheDaciTempleprojectinChengdu,andtheremainingresidentialunitsatthecompleteddevelopmentsofASIAinMiamiand5StarStreetinHongKong.ThereisalsoalandbankinMiamiandFortLauderdaleinFlorida,theU.S.A.
Property Trading Portfolio
GrossFloorArea(sq.ft.)
(100%Basis)
Actual/ExpectedConstruction
CompletionDateAttributable
Interest
Completed
HongKong
–5StarStreet(remainingunsoldunits) 1,996 2010 100%
U.S.A.
–ASIA,Miami(remainingunsoldunits) 67,728 2008 100%
Under Development
HongKong
–AZURA 206,306 2012 87.5%
–ARGENTA 75,805 2013 100%
–33SeymourRoad 165,792 2014 100%
–92-102CaineRoad 195,531 2016 100%
–1-9and2-10SaiWanTerrace 151,944 2013 80%
–148ArgyleStreet 88,555 2013 50%
–CheungSha,SouthLantau 64,412 2015 100%
MainlandChina
–DaciTempleProject,Chengdu(officeportion) 1,284,075 2014 50%
U.S.A.
–BrickellCitiCentre,Miami,Florida 1,100,000 2015 100%
Held for Development
U.S.A.
–FortLauderdale,Florida 787,414 N/A 75%
–SouthBrickellKey,Miami,Florida 421,800 N/A 100%
Total 4,611,358
SwirePropertiesAnnualReport|2011 37
(1) MaximumGFAoftheCheungShadevelopment.
ThefollowingbarchartisagraphicalrepresentationoftheexpectedtimingofcompletionofourresidentialprojectsinHongKong.
Audited Financial InformationProperties Held for Development and for Sale
Group
2011HK$M
2010HK$M
PropertiesheldfordevelopmentFreeholdland 124 443
Propertiesforsale Completedproperties –developmentcosts 270 388 –freeholdland 7 9 –leaseholdland 4 4Propertiesunderdevelopment –developmentcosts 1,329 673 –freeholdland 175 – –leaseholdland 5,063 4,480
6,848 5,554
AZURA
1-9 and 2-10 Sai Wan TerraceARGENTA
148 Argyle Street
33 Seymour Road
Cheung Sha, Lantau Island (1)
92-102 Caine Road
Expected Attributable Residential GFA Completions in Hong Kong in 2012-2016
2012 2013 2014 2015 2016
300,000
GFA (sq.ft.)
250,000
200,000
150,000
50,000
100,000
0
AZURAHongKong
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38 SwirePropertiesAnnualReport|2011
HongKong
Residential Developments in Mid-Levels West, Hong KongSwirePropertiesownsfoursitesinMid-LevelsWest,aresidentialdistrictonHongKongIsland.Amapshowingthelocationsofthesesitesissetoutbelow:
(a) AZURA, 2A Seymour Road SwirePropertiesholdsa87.5%interestinthisdevelopment.Thesuperstructureworksareinprogress.Thedevelopmentisexpectedtobecompletedin2012,andwillconsistofa50-storeytowerof126unitsand45carparkingspaceswitha
totalGFAof206,306squarefeet.99ofthe126residentialunitshavebeenpre-sold.Thedevelopmentisscheduledtobehandedovertobuyersinthelatterpartof2012andwillbemanagedbySwireProperties.
Mid-Levels West, Hong Kong
AZURA
ARGENTA
33 Seymour Road
92-102 Caine Road
SwirePropertiesAnnualReport|2011 39
(b) ARGENTA, 63 Seymour Road ARGENTAiswholly-ownedbytheGroup.Thesuperstructureworksareinprogress.Thedevelopmentisexpectedtobecompletedin2013,andwillconsistofa37-storeytowerof30whole-floorresidentialunitsand28carparkingspaceswithanaggregateGFAof75,805squarefeet.
(c) 33 Seymour Road 33SeymourRoadiswholly-ownedbytheGroup.Foundationworksareinprogressandthedevelopmentisexpectedtobecompletedin2014.Itwillconsistofa48-storeytowerof127residentialunitswithanaggregateGFAof165,792squarefeetuponcompletion.
(d) 92-102 Caine Road92-102CaineRoadiswholly-ownedbytheGroup.Foundationworksareinprogressandthedevelopmentisexpectedtobecompletedin2016.Thedevelopmentconsistsofa50-storeytowerof197residentialunitsand43carparkingspaceswithanaggregateGFAof195,531squarefeet.
SwirePropertiesplanstoupgradecertainpedestrianwalkways,widenanumberofpavementsandbuildapedestrianstaircasewithinthesiteat92-102CaineRoad,inordertoimprovepedestrianflowbetweenCastleRoadandCaineRoad,subjecttothenecessaryapprovals.
1-9 and 2-10 Sai Wan Terrace TheGrouphasan80%interestin1-9and2-10SaiWanTerrace,aresidentialdevelopmentinQuarryBay,HongKong.Thesubstructureworksareinprogress.Thedevelopmentisexpectedtobecompletedin2013andwillconsistoftwo21-storeytowersof92residentialunitsand69basementcarparkingspaceswithanaggregateGFAof151,944squarefeetuponcompletion.
148 Argyle Street 148ArgyleStreetisaresidentialdevelopmentinHoManTin,Kowloon.TheGrouphasa50%interestinthedevelopment.Thesubstructureworksareinprogress.Constructionworksatthedevelopmentareexpectedtobecompletedin2013andthedevelopmentwillhaveanaggregateGFAofapproximately88,555squarefeetuponcompletion.Itwillconsistofa23-storeytowerwith53residentialunitsand56carparkingspaces.
Cheung Sha, South LantauTwoadjacentresidentialsitesatthejunctionofTungChungRoadandSouthLantauRoadinCheungSha,LantauIslandwereacquiredinDecember2011andarewholly-ownedbytheGroup.Thesiteswillbedevelopedinto30houseswithanaggregateGFAof64,412squarefeet.Thedevelopmentisexpectedtobecompletedin2015.
Hong Kong Residential Market OutlookHongKonggovernmentmeasuresandpolicychangeswillcontinuetoaffectHongKong’sresidentialpropertymarket.Despitecredittightening,interestratesareexpectedtoremainlow.ThesupplyofluxuryresidentialpropertyonHongKongIslandandinKowloonwillremainlimited.Luxuryresidentialpricesareexpectedtostaysteady.
U.S.A.ASIA,locatedonthenorthernedgeofBrickellKeyinDowntownMiami,isaluxuryhigh-riseresidentialcondominiumwith123units.Theaveragesizeoftheseunitsisapproximately2,300squarefeet.ThepropertywascompletedinApril2008.99unitshavebeensold.Afurther11unitshavebeenleased.
TheresidentialportionofBrickellCitiCentreisintendedtobedevelopedfortradingpurposes.Completionofthisdevelopmentisexpectedin2015.
HongKong
OPUSHONGKONG
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40 SwirePropertiesAnnualReport|2011
LeasingandManagementBusinessSwirePropertiesisresponsiblefortheredevelopmentaswellastheleasingandmanagementofapropertyownedbySwirePacificat53StubbsRoad,knownasOPUSHONGKONG.Thepropertyisaprimeresidentialdevelopmentconsistingofa12-storeyresidentialbuildingwithtenwhole-floorunitsandtwodouble-levelgardenapartmentsdesignedbyPritzkerPrize-winningarchitectFrankGehry.ConstructionwascompletedandtheoccupationpermitwasissuedinDecember2011.Marketingwillstartuponthecompletionoftheshowflatinthesecondquarterof2012.
EstateManagementThroughsubsidiaries,SwirePropertiesundertakesthemanagementof12estatesithasdeveloped,includingRobinsonPlace,TheOrchardsandTaikooShing.Theservicesincludeday-to-dayassistanceforoccupantsandcleaning,maintenanceandrenovationofcommonareasandfacilities.Weplacegreatemphasisonmaintaininggoodrelationshipswithouroccupants.WewillprovideahighqualityconciergeserviceatournewdevelopmentssuchasAZURA.
HotelsManagedHotels
OverviewSwireHotelsownsandmanageshotelsinHongKong,MainlandChinaandtheU.K.,comprisingthe“HouseCollection”,“EAST”,and“ChapterHotels”.TheHouseCollection,presentlycomprisingTheUpperHouseinHongKongandTheOppositeHouseinBeijing,isagroupofsmallanddistinctivehotelsinAsiaprovidingahighlypersonalisedexperienceforguests.TheEASTbrandcreateslifestylebusinesshotelswhilstChapterHotelsareacollectionoflocally-inspiredhotelsinregionaltownsandcitiesintheU.K.
The Upper HouseTheUpperHouse,a117-roomluxuryhotelatPacificPlace,continuedtoberecognisedforitscustomerserviceandachievedstrongmarketpenetrationandrevenuegrowthin2011,withrevenueperavailableroomincreasingby35%from2010.Itreceivedanumberofawardsincludingthe“BestOverseasBusinessHotel”awardfromCondéNastTraveller,anawardfromTheReaders’TravelAwards2011andaTripAdvisorTraveler’sChoiceAward.
TheUpperHouseHongKong
SwirePropertiesAnnualReport|2011 41
Major Hotels Portfolio (Managed by the Group)
No.ofRooms(100%Basis)
AttributableInterest
Completed
HongKong
–TheUpperHouse 117 100%
–EAST,HongKong 345 100%
–HeadlandHotel(1) 501 0%
MainlandChina
–TheOppositeHouse 99 100%
U.K.
–TheMontpellierChapter,Cheltenham (formerlycalledHotelKandinsky,Cheltenham) 61 100%
–AvonGorgeHotel,Bristol 75 100%
–TheMagdalenChapter,Exeter (formerlycalledHotelBarcelona,Exeter)(2) 59 100%
–HotelSeattle,Brighton 71 100%
Under Development
MainlandChina
–EAST,Beijing 369 50%
–DazhongliProject(Hotels),Shanghai 124 50%
–DaciTempleProject(Hotel),Chengdu 100 50%
Total 1,921
(1) HeadlandHotelisownedbyAirlineHotelLimited,awholly-ownedsubsidiaryofCathayPacificAirwaysLimited.(2) RefurbishmentofthehotelinExeterisexpectedtobecompletedin2012.
Beijing
TheOppositeHouse
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42 SwirePropertiesAnnualReport|2011
EAST, Hong KongEAST,HongKong,a345-roomhotelatIslandEast,hasestablishedaloyalfollowingfromofficetenantsinCityplazaandTaiKooPlace.Occupancyandaverageroomrateswerestrongin2011,withrevenueperavailableroomincreasingby51%byfrom2010.Itsrooftopbar,Sugar,wasre-launchedin2011followingarenovationoftheoutdoordeckarea.ThehotelwasrecommendedinHotList2011ofCondéNastTraveller.
The Opposite HouseTheOppositeHouse,a99-roomluxuryhotelatSanlitunVillage,Beijing,sawsignificantimprovementsinitsaccommodation,restaurantandbarbusinessesin2011,withrevenueperavailableroomincreasingby33%from2010.ThehotelappearsintheSmartTravelAsialistoftop25leisurehotelsandresortsandCondéNastTraveller’sGoldList2011.
U.K. HotelsSwirePropertiesownsfourhotelsintheU.K.,inCheltenham,Bristol,BrightonandExeter.ThehotelinExeterwasclosedforrefurbishmentin2011.AnimpairmentchargewasrecordedagainstthehotelsinDecember2011,reflectingadifficulttradingenvironment.Despitethechallengingoperatingconditions,ourhotelsperformedsatisfactorilyduringtheyear.
Hotels Market OutlookThehotelsinHongKongareexpectedtocontinuetobenefitfromgrowthinthenumberofvisitorsfromMainlandChinaandarewellpositionedinboththebusinessandtourismsectors.
InMainlandChina,TheOppositeHouseisexpectedtoseefurthergrowthinitsaccommodation,restaurantandbarbusinesses.EAST,Beijingisscheduledtoopeninthelatterpartof2012.
ThetradingenvironmentintheU.K.remainschallenging.TheMagdalenChapterHotelinExeterisscheduledtoreopenin2012.
Non-managedHotelsSwirePropertieshasownershipinterestsin(butdoesnotmanage)hotelswith3,166roomsinaggregate,andisdevelopingtheMandarinOriental,Guangzhou,whichwillbe97%owned.TheMandarinOriental,Guangzhouisexpectedtohaveatotalof263roomsand24servicedapartments.
SwirePropertiesAnnualReport|2011 43
Profile of Capital Commitments for Investment Properties and Hotels
Expenditure Forecast Year of Expenditure Commitments
2011HK$M
2012HK$M
2013HK$M
2014HK$M
2015&beyondHK$M
At 31st Dec 2011
HK$M
HongKongprojects 3,104 1,099 571 666 4,404 6,740
MainlandChinaprojects 3,180 3,321 1,628 2,062 1,419 8,430
U.K.hotels 95 38 – – – 38
U.S.A.projects 7 491 829 1,102 50 2,472
Total 6,386 4,949 3,028 3,830 5,873 17,680*
* ThecapitalcommitmentsrepresentstheGroup’scapitalcommitmentsplustheGroup’sshareofthecapitalcommitmentsofjointlycontrolledcompanies.TheGroupiscommittedtofundingHK$1,828millionofthecapitalcommitmentsofjointlycontrolledcompanies.
Major Hotels Portfolio (Not Managed by the Group)No.ofRooms(100%Basis)
AttributableInterest
CompletedHongKong–IslandShangri-LaHongKong 565 20%–JWMarriottHotelHongKong 602 20%–ConradHongKong 513 20%–NovotelCitygateHongKong 440 20%U.S.A.–MandarinOriental,Miami 326 75%
Under DevelopmentMainlandChina–MandarinOriental,Guangzhou(1) 287 97%–DazhongliProject(Hotels),Shanghai 433 50%
Total 3,166
(1) Including24servicedapartmentsinthesamebuilding.
Thenon-managedhotelsinHongKongperformedstronglyduringtheyear.TradingconditionsalsoimprovedattheMandarinOriental,Miamiin2011.
CapitalCommitments
CapitalExpenditureandCommitmentsforInvestmentPropertiesandHotelsCapitalexpenditurein2011onHongKonginvestmentpropertiesandhotels,includingcompletedprojects,amountedtoHK$3,104million(2010:HK$3,031million).Outstandingcapitalcommitmentsat31stDecember2011wereHK$6,740million(31stDecember2010:HK$1,488million).
Capitalexpenditurein2011onMainlandChinainvestmentpropertiesandhotels,includingtheGroup’sshareofthecapitalexpenditureofjointlycontrolledcompanies,amounted
toHK$3,180million(2010:HK$2,983million).Outstandingcapitalcommitmentsat31stDecember2011wereHK$8,430million(2010:HK$9,861million),includingtheGroup’sshareofthecapitalcommitmentsofjointlycontrolledcompaniesofHK$7,101million(2010:HK$6,952million).TheGroupiscommittedtofundingHK$1,828million(31stDecember2010:HK$2,459million)ofthecapitalcommitmentsofjointlycontrolledcompaniesinMainlandChina.
Capitalexpenditurein2011ontheinvestmentpropertiesandhotelsintheU.S.A.amountedtoHK$7million(2010:HK$14million).Outstandingcapitalcommitmentsat31stDecember2011wereHK$2,472million(2010:HK$6million).
FutureDevelopments
HongKong
MainlandChina
TaiKoo HuiGuangzhou
* Mandarin Oriental Hotel588,231 sf
* Serviced Apartments
52,797 sf
* Cultural Centre
Shopping Mall1,484,743 sf
Tianhe East Road
Tianhe Road
Shipaiqiao Station
TaiKoo Hui Towers 1 & 2 1,723,424 sf
Daci Temple ProjectChengdu, Mainland China
Chunxi Road Station(under construction)
Hotel156,090 sf
Office Tower 1,284,075 sf
Shopping Mall1,174,465 sfDacisi R
oad Serviced Apartments
74,670 sf
Hongxing Road
Dongda Street
Island East
Lincoln House333,353 sf
Dorset House609,540 sf
PCCW Tower620,148 sf
Oxford House501,253 sf
One Island East1,537,011 sf
Devon House803,452 sf
Cambridge House268,795 sf
Warwick House554,934 sf
Cornwall House338,369 sf
Cityplaza (Shopping Mall)
1,105,227 sf
Cityplaza Three447,714 sf
Cityplaza Four556,431 sf
Cityplaza One628,785 sf
EAST, Hong Kong199,633 sf
Island Eastern Corridor
Tai Koo Shing Road
King’s Road
Somerset House923,364 sf
Tai Koo Station
Quarry Bay Station
Westlands Road
Note:Thesediagramsarenottoscaleandareforillustrationpurposeonly.*Underdevelopment
ManagementDiscussion&Analysis|ReviewofOperations
Sanlitun VillageBeijing
Village South776,909 sf
The Opposite House
169,463 sf
Village North519,399 sf
Sanlitu
n North
Road
INDIGOBeijing
Shopping Mall939,493 sf
* EAST, Beijing358,269 sf
ONE INDIGO595,464 sf
Jiangtailu Station(under construction)
Jiuxianqiao Road
Dazhongli ProjectShanghai, Mainland China
Hotels596,745 sf
Office Towers1,809,934 sf
Shopping Mall1,062,719 sf
West Nanjing Road Station (under construction)
Shimenyi Road
West
Nanjin
g Road
Weihai Road
CitygateNovotel Citygate
Hong Kong 236,653 sf
One Citygate160,522 sf
Citygate Outlets462,439 sf
Tung Chung Station
Tat Tung Road
North Lantau Highway
Pacific PlaceIsland Shangri-La
Hong Kong605,728 sf
Conrad Hong Kong
555,590 sf
One Pacific Place
863,266 sf
The Upper House
158,738 sfThree Pacific Place627,657 sf
* 8 Queen’s Road East 81,346 sf
* 28 Hennessy Road
145,390 sf Three Pacific
Place LinkShopping Mall
711,182 sf
Pacific Place Apartments
443,075 sf
JW Marriott
Hong Kong
525,904 sf
Queensway
Hennessy Road
Queen’sRoad East
AdmiraltyStation
TwoPacific Place
695,510 sf
Brickell CitiCentreMiami, U.S.A.
Serviced Apartments
108,000 sf
Hotel200,000 sf
SW 8th Street
Brickell Plaza
SE 7th Street
Apartments1,100,000 sf
Shopping Mall520,000 sf
SW 1st
Avenue
South Miami Avenue
SE 6th Street
Miami River
Miami River
SE 5th Street
Office221,000 sf
MetromoverEighth
Street Station
Office (Phase 2)742,000 sf
MetrorailBrickell Station
SW 9th Street
46 SwirePropertiesAnnualReport|2011
FinancialReview
FinancialResultsReviewCommentaryonmajorbalancesandyearonyearvariancesintheAccounts.Referencesareto“NotestotheAccounts”onpages95to135.
ConsolidatedIncomeStatement
2011HK$M
2010HK$M Reference
TurnoverTheincreaseinturnoverofHK$710millioncomparedto2010wasprincipallyduetohigherrentalincomefromourinvestmentpropertiesandhigherturnoverfromourownedandmanagedhoteloperations,partiallyoffsetbylowerturnoverfrompropertytrading.
RentalincomefromourinvestmentpropertiesincreasedbyHK$682million.TherewerepositiverentalreversionsandhigherturnoverrentsinHongKong,particularlyatPacificPlaceandOneIslandEast.ThiswaspartiallyoffsetbythelossofrentalincomefromFestivalWalkafteritsdisposalinAugust2011.InMainlandChina,rentalincomeincreasedatSanlitunVillage(reflectingincreasesinbaserentsandhigheroccupancy)andtheTaiKooHuiproperty,whichwascompletedin2011,begantocontributerentalincomeinthesecondhalfoftheyear.
TurnoverfromourownedandmanagedhotelsincreasedbyHK$199millionduetoacombinationofhigheroccupancy,roomratesandnon-roomrevenuesatTheUpperHouse,EAST,HongKong,TheOppositeHouseandtheU.K.hotels.
TurnoverfrompropertytradingfellbyHK$187millioncomparedto2010,largelyduetotheabsenceofacontributionfromthesaleofresidentialunitsat5StarStreetinHongKong(whichaccountedforHK$281millioninturnoverin2010).ThiswaspartiallyoffsetbyhigherturnoverfromthesaleofresidentialunitsatASIAinMiamiandIslandLodgeinHongKong.
9,581 8,871 Note4
SwirePropertiesAnnualReport|2011 47
ConsolidatedIncomeStatement(continued)
2011HK$M
2010HK$M Reference
Gross ProfitTotalgrossprofitincreasedbyHK$637millioncomparedto2010.GrossprofitfromourinvestmentpropertiesincreasedbyHK$587million,principallyduetohighergrossrentalincome.Marginsincreasedfrom81.9%to82.3%.GrossprofitfromourownedandmanagedhotelswasHK$133millioncomparedwithagrosslossofHK$25millionin2010.Theimprovementatthehotelsreflectedhigherturnover.GrossprofitfrompropertytradingfellbyHK$119million,reflectinglowerturnover.
7,247 6,610
Operating ProfitThedecreaseinoperatingprofitofHK$24millioncomparedto2010wasprincipallyduetolowergainsfromthedisposalofandchangeininterestsininvestmentproperties,impairmentlosses,lowernetrevaluationgainsoninvestmentpropertiesandhigheradministrativeexpenses,partiallyoffsetbyhighergrossprofit.
ThegainfromthedisposalofFestivalWalkinHongKongafterdeductingimpairmentlossesfromourU.K.hotelsin2011waslowerthanthegainsin2010fromthedisposalofPeelRiseinHongKongandfromthechangesinourinterestinPCCWTower.
AnetrevaluationgainoninvestmentpropertiesofHK$20,345millionwasrecordedin2011,HK$135millionlowerthanin2010.InvestmentpropertiesinHongKongrecordedanetrevaluationgainofHK$18,766million,largelyduetohigherrentsatourcompletedproperties.InvestmentpropertiesinMainlandChinarecordedanetrevaluationgainofHK$1,546million,largelyduetohigherrentsatSanlitunVillageandlowercapitalisationratesatSanlitunVillageandattheTaiKooHuiproperty.TheinvestmentpropertycomponentoftheBrickellCitiCentredevelopmentinMiami,whichwasreclassifiedfrompropertyheldfordevelopmenttoinvestmentproperties,recordedanetrevaluationgainofHK$33million.
AdministrativeexpensesincreasedbyHK$118millioncomparedto2010largelyduetotheexpensesassociatedwiththelistingofthesharesoftheCompanyontheHongKongStockExchangeincurredin2011exceedingthoseincurredin2010,partiallyoffsetbytheabsenceofone-offexpensesrelatedtotherelocationofourheadofficefromPacificPlacetoOneIslandEastincurredin2010.
26,945 26,969 Notes7and9(a)
Net Finance ChargesTheincreaseinnetfinancechargesofHK$240millioncomparedto2010islargelyduetoaHK$259millionincreaseinthefairvalueofaputoptionheldbythenon-controllinginterestatSanlitunVillage,comparedtoaHK$12milliondecreaseinthefairvalueofthatputoptionin2010.NetfinancechargeswerehigherinMainlandChinaduetohigherdebtlevelsandareductionintheamountofinterestcapitalisedfollowingthecompletionoftheofficeandretailcomponentsattheTaiKooHuiproperty.NetfinancechargeswerelowerinHongKongduetolowerdebtlevelsfollowingthedisposalofFestivalWalk.
1,477 1,237 Note11
ManagementDiscussion&Analysis|FinancialReview
48 SwirePropertiesAnnualReport|2011
ConsolidatedIncomeStatement(continued)
2011HK$M
2010HK$M Reference
Share of Profits Less Losses of Jointly Controlled CompaniesThedecreaseofHK$610millioncomparedto2010islargelyduetolowerrevaluationgainsontheDazhongliandINDIGOinvestmentpropertiesinMainlandChina.ThesegainswerepartiallyoffsetbyincreasesinrentalincomefromandahigherrevaluationgainonPCCWTowerinHongKong(followingtheincreaseinourinterestinPCCWTowerfrom20%to50%in2010),thefirstrevaluationgainonourDaciTempleinvestmentpropertyinMainlandChina,higherrentalincomeandhigherrevaluationgainsonotherinvestmentpropertiesinHongKongandthereversalofapreviousimpairmentatanindustrialsiteinWongChukHang.
851 1,461 Note9(a)
Share of Profits Less Losses of Associated CompaniesThedecreaseofHK$69millioncomparedto2010aroseprincipallyfromtheabsenceofacontributionfromPCCWTower(followingitsreclassificationasajointlycontrolledcompanyin2010).Thiswaspartiallyoffsetbyhigherprofitsfromthenon-managedhotelsatPacificPlace.
156 225 Note9(a)
TaxationThedecreaseintaxationofHK$28millioncomparedto2010isduetoloweroperatingprofit,afterexcludingthenon-assessableincome(principallyrevaluationgainsonHongKonginvestmentpropertiesandthegainfromthedisposalofFestivalWalk)andaddingbackthenon-deductibleexpensesrelatedtothelistingofthesharesoftheCompanyontheHongKongStockExchangeandthefairvaluemovementofaputoptioninrelationtothenon-controllinginterestatSanlitunVillage.
1,296 1,324 Note12
Profit Attributable to the Company’s ShareholderThedecreaseofHK$919millioncomparedto2010arosefromalowershareofprofitslesslossesfromjointlycontrolledentities,lowerrevaluationgainsfrominvestmentproperties,lowerprofitfromthedisposalofinvestmentproperties,highernetfinancechargesandhigheradministrativeexpenses,partiallyoffsetbyhighergrossprofitandlowertaxation.
25,126 26,045 Note9(a)
ConsolidatedStatementofFinancialPosition
2011HK$M
2010HK$M Reference
Property, Plant and EquipmentTheincreaseinproperty,plantandequipmentofHK$282millionwasduetocapitalexpenditureontheMandarinOrientalHotelattheTaiKooHuipropertyinMainlandChinaandonthehotelinExeterintheU.K.,andthetransferofthehotelcomponentofthelandatBrickellCitiCentrefrompropertiesheldfordevelopmenttoproperty,plantandequipment,partiallyoffsetbyimpairmentprovisionsattheU.K.hotels,andthetransferofcertainpreviouslyowner-occupiedspacetoinvestmentproperties.
6,615 6,333 Note16
SwirePropertiesAnnualReport|2011 49
ConsolidatedStatementofFinancialPosition(continued)
2011HK$M
2010HK$M Reference
Investment PropertiesTheincreaseininvestmentpropertiesofHK$8,503millionislargelyduetoarevaluationgainofHK$20,345million,additionsduringtheyearofHK$4,850million(largelyattheTaiKooHuipropertyinMainlandChinaandatinvestmentpropertiesinHongKong),aforeignexchangetranslationgainofHK$795millionfrominvestmentpropertiesinMainlandChina,thetransferofpartofthelandatBrickellCitiCentreinMiamifrompropertiesheldfordevelopmenttoinvestmentpropertiesandthetransferofcertainpreviouslyowner-occupiedspacetoinvestmentproperties,partiallyoffsetbythedisposalofFestivalWalk(whichreducedinvestmentpropertiesbyHK$18,263million).
187,488 178,985 Note17
Properties Held for DevelopmentThedecreaseofHK$319millioncomparedto2010isduetothetransferofthelandatBrickellCitiCentreinMiamitoinvestmentproperties,property,plantandequipmentandpropertiesunderdevelopment.
124 443 Note20
Investment in Jointly Controlled CompaniesTheincreaseofHK$2,060millioncomparedto2010reflectsadditionalnetinvestmentofHK$1,125million(predominantlyattheDaciTemple,DazhongliandINDIGOprojectsinMainlandChina),ourshareofprofitsofjointlycontrolledcompanies,includingrevaluationgains,andanincreaseinourshareoftheforeignexchangetranslationgainofthejointlycontrolledcompaniesinMainlandChina,partiallyoffsetbydividendsreceivedfromjointlycontrolledcompanies.
13,000 10,940 Note22
Investment in Associated CompaniesThedecreaseofHK$66millioncomparedto2010reflectsthepaymentofdividendsofHK$223millionbytheassociatedcompaniesowningthePacificPlacehotels,partiallyoffsetbyourshareofprofitslesslossesofassociatedcompanies.
639 705 Note23
Properties Under Development and for SaleTheincreaseofHK$1,294millioncomparedto2010islargelyduetoHK$656milliondevelopmentexpenditureonourtradingpropertydevelopments,principallyatMid-LevelsWestinHongKong(includingAZURAandARGENTA),theacquisitionoftwositesatCheungShaonLantauIslandinHongKong,increaseinlandpremiumsoncertaindevelopments,thetransferofthetradingcomponentofthelandatBrickellCitiCentreinMiamifrompropertiesheldfordevelopmenttopropertiesunderdevelopment,partiallyoffsetbythesaleoftheremainingresidentialunitsatASIAinMiamiandIslandLodgeinHongKong.
6,848 5,554 Note26
ManagementDiscussion&Analysis|FinancialReview
50 SwirePropertiesAnnualReport|2011
ConsolidatedStatementofFinancialPosition(continued)
2011HK$M
2010HK$M Reference
Trade and Other ReceivablesTheincreaseofHK$777millioncomparedto2010comprisesaHK$80millionincreaseintradedebtors,aHK$98millionincreaseinprepaymentsandaccruedincomeandaHK$599millionincreaseinotherreceivables.TheincreaseintradedebtorswasduetohighergrossrentsattheHongKonginvestmentpropertiesandrentalreceivablesfromthenewlyopenedTaiKooHuiproperty,partiallyoffsetbytheabsenceofrentalreceivablesfromFestivalWalk.Theincreaseinprepaymentsisduetoprepaidagencyfeesonthepre-saleofresidentialunitsattheAZURAdevelopment.Theincreaseinotherreceivablesisduetoanincreaseinthestakeholder’saccountarisingfromthepre-saleofresidentialunitsattheAZURAdevelopment,adjustmentstotakeaccountofrent-freeperiodsattheTaiKooHuiproperty,receivablesfromthesaleoftheremainingresidentialunitsatIslandLodge,andanincreaseinreceivablesfromajointlycontrolledcompanyinMainlandChinainrespectofpaymentsmadebytheCompanyonitsbehalf.
1,945 1,168 Note28
Trade and Other PayablesTheincreaseofHK$2,889millioncomparedto2010largelycomprisesaHK$1,244millionincreaseintradecreditors,aHK$1,213millionincreaseinotherpayablesandaHK$259millionincreaseinthefairvalueofaputoptioninfavouroftheownerofthenon-controllinginterestinSanlitunVillage.Theincreaseintradecreditorsislargelyduetoaccrualsinrespectoflandacquisitioncosts,accrualoflandpremiumpaymentsanddevelopmentexpenditureontradingproperties.Theincreaseinotherpayablesislargelyduetothereceiptofdepositsinrelationtothepre-saleofresidentialunitsattheAZURAdevelopmentandaccrualsinrespectofexpensesassociatedwiththelistingofthesharesoftheCompanyontheHongKongStockExchange.
8,088 5,199 Note31
Long-Term Bank Loans (including the component due within one year)TheincreaseofHK$1,798millioncomparedto2010isduetoahigherlevelofborrowingsinMainlandChina(incurredtofundcapitalexpenditureattheTaiKooHuiandSanlitunVillageproperties)andhigherborrowingstofundexpenditureattheBrickellCitiCentredevelopmentinMiami.
6,483 4,685 Note32
Loans Due to a Fellow Subsidiary CompanyTheloansduetoafellowsubsidiarycompanyfellbyHK$10,828millioncomparedto2010.ThisprincipallyreflectsrepaymentofloansoutoftheproceedsfromthedisposalofFestivalWalkandcashgeneratedfromoperations,partiallyoffsetbyborrowingstofinanceexpendituresontradingandinvestmentdevelopmentsandpaymentofdividendstotheCompany’sshareholder.
21,374 32,202 Note33
Deferred Tax LiabilitiesTheincreaseofHK$346millioncomparedto2010largelyreflectsdeferredtaxonrevaluationgainsoninvestmentpropertiesinMainlandChina,partiallyoffsetbythereversalofcertaindeferredtaxliabilitiesuponthedisposalofFestivalWalk.
4,246 3,900 Note34
SwirePropertiesAnnualReport|2011 51
ConsolidatedStatementofFinancialPosition(continued)
2011HK$M
2010HK$M Reference
Equity Attributable to the Company’s ShareholderTheincreaseinequityattributabletotheCompany’sshareholderin2011representsthetotalcomprehensiveincomefortheyearattributabletotheCompany’sshareholder(HK$26,105million),thesubscriptionforadditionalsharesintheCompanybytheCompany’sshareholder(amountingtoHK$4,500million),partiallyoffsetbydividendspaidtotheCompany’sshareholder.
176,043 157,877 Notes36and37
Non-Controlling InterestsTheincreaseinnon-controllinginterestsofHK$53millionarosefromhigherprofits(derivedfromtheTaiKooHuiandIslandPlaceproperties)andcapitalcontributionsatpropertytradingdevelopments,partiallyoffsetbydividendspaidtonon-controllinginterests.
532 479 Note38
ConsolidatedStatementofCashFlows
2011HK$M
2010HK$M Reference
Cash Generated from OperationsTheincreaseofHK$2,643millioncomparedto2010islargelyduetoaHK$3,045millionincreaseintradeandotherpayablesandanincreaseinoperatingprofitafterdeductingnon-cashitems,partiallyoffsetbyanincreaseintradereceivables.
7,396 4,753 Note43(a)
Interest PaidTheincreaseofHK$195millioncomparedto2010islargelyduetohigherborrowingsinMainlandChina,partiallyoffsetbylowerborrowingsinHongKong.
1,664 1,469
Dividends Received from Jointly Controlled and Associated Companies and Available for Sale AssetsTheincreaseofHK$367millioncomparedto2010largelyreflectsdividendsfromtheGroup’sassociatedcompaniesowningthePacificPlacehotels.
415 48
Purchase of Property, Plant and EquipmentThisincreasecomparedto2010largelyreflectscapitalexpenditureonTheMandarinOrientalHotelattheTaiKooHuipropertyandonthehotelinExeterintheU.K.
548 507 Note43(b)
Additions to Investment PropertiesTheadditionstoinvestmentpropertiesin2011reflectcapitalexpenditureonthepropertiesatTaiKooHui,TheMallatPacificPlace,28HennessyRoadand8Queen’sRoadEast,andacquisitionsofinvestmentpropertiesinHongKongforfuturedevelopment.
4,717 4,234
Loans (Net of Repayment) to Jointly Controlled CompaniesTheincreaseofHK$444millioncomparedto2010aroseprincipallyfromshareholderloanstothecompaniesundertakingtheprojectsatDaciTemple,DazhongliandINDIGOinMainlandChina,partiallyoffsetbyrepaymentofloansbythecompaniesowningtheCitygateand625King’sRoadpropertiesinHongKong.
1,125 681
ManagementDiscussion&Analysis|FinancialReview
52 SwirePropertiesAnnualReport|2011
ConsolidatedStatementofCashFlows(continued)
2011HK$M
2010HK$M Reference
Bank Loans Drawn and Refinancing (Net of Repayment)Loansdrawnin2011compriseborrowingsdrawntofinanceexpenditureattheTaiKooHuiandSanlitunVillagepropertiesinMainlandChinaandborrowingsdrawnintheU.S.A.tofinancetheBrickellCitiCentredevelopment.RefertoFinancingsectiononpages53to57forfurtherdetails.
1,578 1,473
(Decrease)/Increase in Loans Due to a Fellow Subsidiary CompanyThedecreasein2011principallyreflectedtherepaymentofloansoutoftheproceedsfromthedisposalofFestivalWalk,thesubscriptionforadditionalsharesintheCompanybySwirePacificLimitedandrepaymentsfromcashgeneratedfromoperations,partiallyoffsetbyborrowingstofinancetradingandinvestmentdevelopmentsandpaymentofdividendstotheCompany’sshareholder.
(10,875) 882
InvestmentAppraisalandPerformanceReview
NetAssetsEmployed CapitalCommitments*
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Propertyinvestment 191,273 183,092 16,589 10,487
Propertytrading 6,581 6,303 – –
Hotels 6,421 5,797 1,091 1,005
Totalnetassetsemployed 204,275 195,192 17,680 11,492
Lessnetdebt (27,700) (36,836)
Lessnon-controllinginterests (532) (479)
EquityattributabletotheCompany’sshareholder 176,043 157,877
EquityAttributabletotheCompany’sShareholder**
ReturnonAverageEquityAttributabletothe
Company’sShareholder**
2011HK$M
2010HK$M 2011 2010
Propertyinvestment 168,892 150,818 15.7% 19.0%
Propertytrading 1,248 1,791 0.5% 5.5%
Hotels 5,903 5,268 -0.6% -2.3%
Total 176,043 157,877 15.0% 18.1%
* ThecapitalcommitmentsrepresenttheGroup’scapitalcommitmentsplustheGroup’sshareofthecapitalcommitmentsofjointlycontrolledcompanies.
**RefertoGlossaryonpage159fordefinition.
SwirePropertiesAnnualReport|2011 53
Financing
•CapitalStructure•FinancingArrangementswiththeSwirePacificGroup•ChangesinFinancing•NetBorrowings•SourcesofFinance –Loans –BankBalancesandShort-termDeposits•MaturityProfileandRefinancing•CurrencyProfile•FinanceCharges•InterestCoverandGearingRatios•CapitalManagement•AttributableNetDebt•DebtinJointlyControlledandAssociatedCompanies
CapitalStructureTheGroupaimstomaintainacapitalstructurewithaviewtoinvestinginandfinancingprojectsinadisciplinedandtargetedmanner.
TheGroup’sprimaryobjectiveswhenmanagingcapitalaretosafeguardtheGroup’sabilitytooperateasagoingconcern,sothatitcancontinuetoprovidereturnsforshareholdersandbenefitstootherstakeholders,andtosecureaccesstofinanceatareasonablecost.
TheGroupconsidersanumberoffactorsinmonitoringitscapitalstructure,whichprincipallyincludethegearingratio,cashinterestcoverandthereturncycleofitsvariousinvestments.
Audited Financial Information
On31stMarch2010,SwireProperties(Finance)Limited,theCompanyandSwireFinanceLimited(“SwireFinance”,awholly-ownedsubsidiaryofSwirePacificLimited),enteredintofiveloanagreements(“LoanAgreements”)(asamendedon31stOctober2011)torecordthetermsoftheborrowingsbytheGroupfromSwireFinance.TheLoanAgreementssubstantiallymirrorthetermsandmaturityprofile(currentlyranging,disregardingtheperpetualelementofthefinancingarrangements,uptosevenyears)oftheunderlyingborrowingsofSwireFinancefromthirdpartiesandtheseborrowingsbearinterestattheinterestratesillustratedinthesectiononFinanceChargesonpage58.Theunderlyingborrowingsareintheformoftermloans,revolvingcreditfacilities,bondsissuedunderSwirePacificgroup’sUS$3.5billionmediumtermnoteprogramme,andperpetualcapitalsecurities.NosecurityhasbeengivenbytheGroupinrespectoftheLoanAgreements.UponmaturityofthefinancingarrangementsprovidedbySwireFinance,theGroupwillobtainnewfunding(asnecessary)onastand-alonebasiswithoutrecoursetotheSwirePacificgroup.
Asat31stDecember2011,therewasaloanfacilityofUS$85millioninrespectoftheMandarinOrientalHotelinMiamiwhichisguaranteedbySwirePacificLimited.(2010:US$85million)
Asat31stDecember2011,theGroupalsomaintainedotherloanarrangementswiththeSwirePacificgroupanditsjointlycontrolledcompaniesforatotalfacilityamountofRMB380million.(2010:RMB50million)
FinancingArrangementswiththeSwirePacificGroupThereareanumberoffinancingarrangementsbetweentheGroupandtheSwirePacificgroup.
ManagementDiscussion&Analysis|Financing
54 SwirePropertiesAnnualReport|2011
ChangesinFinancingDuringtheyear,theGroupraisedHK$4,555millionofnewfacilities.Thiscomprised:•three3-yearbilateralrevolvingcreditfacilitiestotalling
HK$1,500millionwithmaturityinyear2013throughtheLoanAgreements
•four5-yearbilateralrevolvingcreditfacilitiestotallingHK$2,500millionwithmaturityinyear2015throughtheLoanAgreements
•anincreaseofRMB300millionintherefinancingofa3-yearsyndicatedloanfacilitytoRMB2,700million
•two3-yearbilateraltermloanfacilitiestotallingRMB100million
•anetincreaseofRMB50millionuponrenewalofarevolvingloanandoverdraftfacility
SignificantdebtrepaymentsundertheLoanAgreementsincludedtherepaymentoftwomedium-termnotestotallingHK$700millionuponmaturityandtherepaymentofamedium-termnoteofHK$3,882millionandfivebilateraltermloanfacilitiestotallingHK$2,900million.TheserepaymentsweremainlyfundedbyproceedsfromthesaleofFestivalWalk.Duringtheyear,tworevolvingcreditfacilitiestotallingHK$4,500millionundertheLoanAgreementsexpired.
NetBorrowingsOurborrowingsareprincipallydenominatedinHongKongdollars,RenminbiandU.S.dollars.Outstandingborrowingsasat31stDecember2011and2010areasfollows:
Audited Financial Information2011
HK$M2010
HK$M
Borrowings included in non-current liabilities
Bankborrowings–unsecured 5,819 1,582
BorrowingsfromSwireFinance–unsecured 14,431 26,974
Borrowings included in current liabilities
Bankborrowings–unsecured 1,687 4,094
BorrowingsfromSwireFinance–unsecured 6,943 5,228
Total borrowings 28,880 37,878
Less:cashandcashequivalents (1,180) (1,042)
Net borrowings 27,700 36,836
Audited Financial Information2011
HK$M2010
HK$M
Bankloansandloansfromfellowsubsidiarycompanies
At1stJanuary 37,859 35,533
Bankloansdrawnandrefinancing 2,206 1,822
Repaymentofbankloans (628) (349)
Loans(repaidto)/drawnfromfellowsubsidiarycompanies (10,875) 882
Othernon-cashmovements 317 (29)
28,879 37,859
Overdrafts 1 19
At31stDecember 28,880 37,878
SwirePropertiesAnnualReport|2011 55
SourcesofFinanceAt31stDecember2011,committedloanfacilitiesanddebtsecuritiesamountedtoHK$35,703million,ofwhichHK$8,003million(22.4%)remainedundrawn.Inaddition,theGrouphadundrawnuncommittedfacilitiestotallingHK$1,446million.Sourcesoffundsat31stDecember2011comprisedthefollowing:
Audited Financial InformationAvailable
HK$MDrawnHK$M
UndrawnExpiring
WithinOne Year
HK$M
UndrawnExpiringBeyond
One YearHK$M
Facilities from third parties
Long-termloans 7,239 6,286 60 893
Facilities from Swire Finance
Revolvingcreditandshort-termloans 9,000 1,950 3,050 4,000
Termloans 5,000 5,000 – –
Medium-termnotes 12,135 12,135 – –
Perpetualcapitalsecurities 2,329 2,329 – –
Total Committed Facilities 35,703 27,700 3,110 4,893
Total Uncommitted Facilities 2,710 1,264 1,446 –
Total Loan Facilities 38,413 28,964 4,556 4,893
Loans
Foraccountingpurposes,theloans(includingthoseborrowedfromSwireFinanceundertheLoanAgreements)areclassifiedasfollows:
2011 2010
Audited Financial Information
Drawn, Before
Unamortised Loan Fees
HK$M
Unamortised Loan Fees
HK$M
Carrying Value
HK$M
Drawn,Before
UnamortisedLoanFees
HK$M
UnamortisedLoanFees
HK$M
CarryingValue
HK$M
Group
Bankoverdraftsandshort-termloans
–unsecured 1,023 – 1,023 991 – 991
Long-termloansatamortisedcost 27,941 (84) 27,857 37,017 (130) 36,887
Less:amountduewithinoneyear includedundercurrentliabilities (7,614) 7 (7,607) (8,331) – (8,331)
20,327 (77) 20,250 28,686 (130) 28,556
ManagementDiscussion&Analysis|Financing
56 SwirePropertiesAnnualReport|2011
BankBalancesandShort-TermDeposits
TheGrouphadbankbalancesandshort-termdepositsofHK$1,180millionat31stDecember2011,comparedtoHK$1,042millionat31stDecember2010.
MaturityProfileandRefinancingBankloansandotherborrowingsarerepayableonvariousdatesupto2018(2010:upto2019).TheweightedaveragetermandcostoftheGroup’sdebtis:
2011 2010
Weightedaveragetermofdebt 2.9 years 3.7years
Weightedaveragetermofdebt(excludingperpetuals) 2.8 years 3.5years
Weightedaveragecostofdebt 4.6% 4.1%
Weightedaveragecostofdebt(excludingperpetuals) 4.4% 3.8%
ThematurityprofileoftheGroup’savailablecommittedfacilitiesissetoutbelow:
∆ FacilitiesfromSwireFinanceundertheLoanAgreements.
* Theperpetualcapitalsecuritieshavenofixedmaturitydate.Intheabovegraphtheirmaturityhasbeenpresentedastheirfirstcalldate,13thMay2017.
Audited Financial Information
IncludedundertheLoanAgreementsareperpetualcapitalsecuritiesissuedbyawholly-ownedsubsidiary(the“Issuer”)ofSwirePacificLimitedon13thMay1997,amountingtoUS$300millionandbearingcumulativeinterestat8.84%perannum.ThisissuehasnoscheduledmaturitybutisredeemableattheoptionofSwirePacificLimitedortheIssuereither(i)atanytimeonorafter13thMay2017or(ii)atanytimeuponamendmentorimpositionofcertaintaxesand,inanycase,becomesdueintheeventofSwirePacificLimited’sortheIssuer’swindingup.Theperpetualcapitalsecuritiesareunconditionallyandirrevocablyguaranteed,onasubordinatedbasis,bySwirePacificLimited.
At31stDecember2011thefairvaluewasHK$2,471million(2010:HK$2,565million).TheperpetualcapitalsecuritiesarelistedontheLuxembourgStockExchange.
12,000
HK$M
10,000
6,000
8,000
4,000
2,000
0
Long-term loans from third parties
Revolving credit and term loans∆
Medium-term notes∆
Total Available Committed Facilities by Maturity
12 13 14 15 16 17 18
Perpetual capital securities*∆
SwirePropertiesAnnualReport|2011 57
ThetablebelowsetsforththematurityprofileoftheGroup’sborrowings:
Audited Financial Information2011
HK$M2010
HK$M
Bank borrowings: Within1year 1,687 4,094 1-2years 93 – 2-5years 5,726 1,582 Over5years – –Borrowings from Swire Finance: Within1year 6,943 5,228 1-2years 2,296 7,128 2-5years 4,638 3,800 Over5years 7,497 16,046
28,880 37,878Amountduewithinoneyearincludedundercurrentliabilities (8,630) (9,322)
20,250 28,556
CurrencyProfileAnanalysisoftheoutstandingborrowingsbycurrencyisshownbelow:
2011 2010
Audited Financial Information HK$M HK$M
CurrencyHongKongdollar 20,598 71% 31,426 83%UnitedStatesdollar 1,182 4% 926 3%Renminbi 7,040 25% 5,466 14%Others 60 0% 60 0%
Total 28,880 100% 37,878 100%
FinanceChargesAnanalysisoftheoutstandingborrowingsbyfloatingorfixedinterestratebasesisshownbelow:
2011 2010
Audited Financial Information HK$M HK$M
Fixed 19,164 66% 25,146 66%Floating 9,800 34% 12,734 34%
Sub-total 28,964 100% 37,880 100%
Interest-free – 128Unamortisedloanfee (84) (130)
Total 28,880 37,878
ManagementDiscussion&Analysis|Financing
58 SwirePropertiesAnnualReport|2011
TheexposureoftheGroup’sborrowingstointerestratechangescanbeillustratedasfollows:
Fixed Interest Rate Maturing in:
Audited Financial Information
Interest- free
HK$M
FloatingInterest Rate
HK$M
1 yearor LessHK$M
1 to 5Years
HK$M
Over 5Years
HK$MTotal
HK$M
At 31st December 2011 – 9,738 4,997 6,648 7,497 28,880
At31stDecember2010 128 12,654 2,100 6,950 16,046 37,878
Interestchargedandearnedduringtheyearwasasfollows:
Audited Financial Information2011
HK$M2010
HK$M
Interest charged on:Bankloansandoverdrafts (418) (265)Loansfromfellowsubsidiarycompanies (1,096) (1,202)Loanfromajointlycontrolledcompany (2) –Otherfinancingcosts (104) (95)Lossonthemovementinthefairvalueoftheliabilityinrespectofaputoption infavouroftheownerofanon-controllinginterestinasubsidiary (259) –Capitalisedon: Investmentproperties 197 180 Propertiesunderdevelopmentandforsale 155 101 Hotelandotherproperties 23 17
(1,504) (1,264)
Interest Income on:Short-termdepositsandbankbalances 12 9Loantoafellowsubsidiarycompany 2 –Loanstojointlycontrolledcompanies 9 3Gainonthemovementinthefairvalueoftheliabilityinrespectofaputoption infavouroftheownerofanon-controllinginterestinasubsidiary – 12Others 4 3
27 27
Net Finance Charges (1,477) (1,237)
Thecapitalisedinterestratesonfundsbothborrowedgenerallyandusedforthedevelopmentofinvestmentproperties,hotelsandpropertiesunderdevelopmentandforsalewerebetween3.65%and6.20%perannum(2010:3.68%and5.60%perannum).
Theinterestratesperannum,attheyear-enddatewereasfollows:
2011 2010
Audited Financial Information
HK$%
US$%
RMB%
Others%
HK$%
US$%
RMB%
Others%
Bankoverdraftsand short-termloans – – 3.14-7.93 – – – 4.37-4.59 –Long-termloans 0.53-5.35 1.11 5.60-7.87 2.05 0.49-5.35 1.11 4.86-5.94 1.89
Perpetualcapitalsecurities – 7.22-8.84 – – – 7.22-8.84 – –
SwirePropertiesAnnualReport|2011 59
InterestCoverandGearingRatiosThefollowinggraphsillustratetheunderlyinginterestcoverandthegearingratiosforeachofthelastfiveyears:
2011 2010
Gearingratio*
Peraccounts 15.7% 23.3%
Underlying 15.3% 22.7%
Interestcover–times*
Peraccounts 18.2 21.8
Underlying 12.0 5.4
Cashinterestcover–times*
Peraccounts 14.5 17.6
Underlying 9.2 4.3
* RefertoGlossaryonpage159fordefinition.
Underlying operating pro�t
Net �nance charges
Capitalised interest
Underlying interest cover
Underlying Interest Cover
07 08 09 10 11
12,500
15,000
10,000
7,500
5,000
2,500
0Underlying cash interest cover
HK$M
10
12
8
6
4
2
0
Times
Total equity
Net debt
Gearing ratio
Gearing Ratio
07 08 09 10 11
200,000
240,000
160,000
120,000
80,000
40,000
0
HK$M
30
36
24
18
12
6
0
Ratio (%)
ManagementDiscussion&Analysis|Financing
60 SwirePropertiesAnnualReport|2011
CapitalManagement
Audited Financial Information
TheGroup’sprimaryobjectiveswhenmanagingcapitalaretosafeguardtheGroup’sabilitytooperateasagoingconcern,sothatitcancontinuetoprovidereturnsforshareholdersandbenefitstootherstakeholders,andtosecureaccesstofinanceatareasonablecost.
TheGroupconsidersanumberoffactorsinmonitoringitscapitalstructure,whichprincipallyincludethegearingratio,cashinterestcoverandthereturncycleofitsvariousinvestments.Forthepurposeofthegearingratio,theGroupdefinesnetdebtastotalborrowingslessshort-termdepositsandbankbalances.Capitalcomprisestotalequity,asshownintheconsolidatedstatementoffinancialposition.
Inordertomaintainoradjustthegearingratio,theGroupmayadjusttheamountofdividendspaidtoshareholders,repurchaseshares,raisenewdebtfinancingorsellassetstoreducedebt.Thegearingratiosat31stDecember2011and31stDecember2010wereasfollows:
2011HK$M
2010HK$M
Totalborrowings 28,880 37,878
Less:Short-termdepositsandbankbalances (1,180) (1,042)
Netdebt 27,700 36,836
Totalequity 176,575 158,356
Gearingratio 15.7% 23.3%
Thedecreaseinthegearingratioduring2011principallyreflectsrepaymentofdebtfollowingthedisposalofFestivalWalk.
AttributableNetDebt
Thechartbelowillustrates,byentity,theGroup’sattributablenetdebt(inHK$M):
Swire Properties(267)
Swire Properties (Finance)21,374
H.K. Entities(146)
Mainland China Entities6,401
U.K. Entities4
U.S. Entities334
H.K. JCC/Asso931
Mainland China JCC/Asso
397
U.S. JCC/Asso455
Attributable Net Debt of Jointly Controlled and
Associated Companies (“JCC/Asso”)
1,783
Consolidated Net Debt27,700
SwirePropertiesAnnualReport|2011 61
DebtinJointlyControlledandAssociatedCompanies
InaccordancewithHongKongFinancialReportingStandards,thenetdebtofSwirePropertiesreportedintheconsolidatedstatementoffinancialpositiondoesnotincludethenetdebtofitsjointlycontrolledandassociatedcompanies.Thesecompanieshadthefollowingnetdebtpositionsattheendof2011and2010:
Total Net Debt/(Cash) of Jointly Controlled and Associated Companies
Portion of Net Debt/ (Cash) Attributable
to the Group
Debt Guaranteed by Swire Properties or
its Subsidiaries
2011HK$M
2010HK$M
2011HK$M
2010HK$M
2011HK$M
2010HK$M
H.K.Entities 1,618 2,026 931 906 – –
MainlandChinaEntities 794 (191) 397 (95) – –
U.S.Entities 606 628 455 471 – –
3,018 2,463 1,783 1,282 – –
IftheattributableportionofthenetdebtinjointlycontrolledandassociatedcompaniesweretobeaddedtotheGroup’snetdebt,gearingwouldriseto16.7%andunderlyinggearingwouldriseto16.3%.
64 SwirePropertiesAnnualReport|2011
GovernanceCultureSwirePropertiesiscommittedtoensuringthatitsaffairsareconductedinaccordancewithhighethicalstandards.Thisreflectsitsbeliefthat,intheachievementofitslong-termobjectives,itisimperativetoactwithprobity,transparencyandaccountability.Bysoacting,SwirePropertiesbelievesthatshareholderwealthwillbemaximisedinthelongtermandthatitsemployees,itsbusinesspartnersandthecommunitiesinwhichitoperateswillallbenefit.
CorporategovernanceistheprocessbywhichtheBoardinstructsmanagementoftheGrouptoconductitsaffairswithaviewtoensuringthatitsstrategiesarefulfilled.TheBoardiscommittedtomaintaininganddevelopingrobustcorporategovernancepracticesthatareintendedtoensure:
•satisfactoryandsustainablereturnstoshareholders•thattheinterestsofstakeholdersaresafeguarded•thatoverallbusinessriskisunderstoodandmanaged
appropriately•thathighstandardsofethicsaremaintained
CorporateGovernancePracticesTheCodeonCorporateGovernancePractices(the“Code”)aspublishedbyTheStockExchangeofHongKongLimited(the“StockExchange”)setsouttheprinciplesofgoodcorporategovernance.ThesharesoftheCompanywerelistedontheStockExchangewitheffectfrom18thJanuary2012.AstheCompanywasnotalistedcompanyduringtheyearended31stDecember2011,theCodewasnotapplicabletoitduringthatperiod.TheCodewillbeapplicabletothe
Companywitheffectfromtheyearending31stDecember2012.TheCompanysupportstheprinciples-basedapproachoftheCodeandtheflexibilitythisprovidesfortheadoptionofcorporatepoliciesandprocedureswhichrecognisetheindividualityofcompanies.Corporategovernancedoesnotstandstill;itevolveswitheachbusinessanditsoperatingenvironment.TheCompanyisalwaysreadytolearnandadoptbestpractices.
BoardofDirectors
RoleoftheBoardTheCompanyisgovernedbyaBoardofDirectors,whichhasresponsibilityforthestrategicleadershipandcontroloftheGroupinitsefforttomaximiseshareholdervalue,whiletakingdueaccountofthebroadrangeofstakeholderinterests.
ResponsibilityforachievingtheCompany’sobjectivesandrunningthebusinessonaday-to-daybasisisdelegatedtomanagement.TheBoardexercisesanumberofreservedpowerswhichinclude:
•maintainingandpromotingthecultureoftheCompany•formulationoflong-termstrategy•approvingpublicannouncements,includingaccounts•committingtomajoracquisitions,divestmentsand
capitalprojects•authorisingsignificantchangestothecapitalstructureand
materialborrowings•anyissue,orbuy-back,ofequitysecuritiesunderthe
relevantgeneralmandates•approvingtreasurypolicy•settingdividendpolicy
CorporateGovernance
SwirePropertiesAnnualReport|2011 65
•approvingappointmentstotheBoard•ensuringthatappropriatemanagementdevelopmentand
successionplansareinplace•settingtheGroupremunerationpolicy•approvingannualbudgetsandforecasts•reviewingoperationalandfinancialperformance•reviewingtheeffectivenessofinternalcontrolandrisk
management,includingtheadequacyoftheresources,qualificationsandexperienceofthestaffresponsiblefortheCompany’saccountingandfinancialreporting,andtheirtrainingprogrammesandbudgets
Toassistitinfulfillingitsduties,theBoardhasestablishedtwoprimarycommittees,theAuditCommittee(seepage69)andtheRemunerationCommittee(seepage68).
ChairmanandChiefExecutiveTheCoderequiresthattherolesofChairmanandChiefExecutivebeseparateandnotperformedbythesameindividualtoensurethereisacleardivisionofresponsibilitiesbetweentherunningoftheBoardandtheexecutiveswhorunthebusiness.
TheChairmanisresponsiblefor:
•leadershipoftheBoard•settingitsagendaandtakingintoaccountanymatters
proposedbyotherDirectorsforinclusionintheagenda•facilitatingeffectivecontributionsfromanddialoguewith
allDirectorsandconstructiverelationsbetweenthem•ensuringthatallDirectorsareproperlybriefedonissues
arisingatBoardmeetingsandthattheyreceiveaccurate,timelyandclearinformation
•obtainingconsensusamongsttheDirectors•ensuring,throughtheBoard,thatgoodcorporate
governancepracticesandproceduresarefollowed
TheChiefExecutiveisresponsibleforimplementingthepoliciesandstrategiessetbytheBoardinordertoensurethesuccessfulday-to-daymanagementoftheGroup’sbusiness.
Throughouttheyear,therewasacleardivisionofresponsibilitiesbetweentheChairmanandtheChiefExecutive.
BoardCompositionTheBoardisstructuredwithaviewtoensuringitisofahighcalibreandhasabalanceofkeyskillsandknowledgesothatitworkseffectivelyasateamandindividualsorgroupsdonotdominatedecision-making.
TheBoardcomprisestheChairman,fiveotherExecutiveDirectorsandeightNon-ExecutiveDirectors.Their
biographicaldetailsaresetoutonpages72and73ofthisreportandarepostedontheCompany’swebsite.
TheNon-ExecutiveDirectorsbringindependentadvice,judgementand,throughconstructivechallenge,scrutinyofexecutivesandreviewofperformanceandrisks.TheBoardconsidersthatfiveoftheeightNon-ExecutiveDirectorsareindependentincharacterandjudgementandfulfiltheindependenceguidelinessetoutinRule3.13oftheListingRules.ConfirmationhasbeenreceivedfromallfiveIndependentNon-ExecutiveDirectorsthattheyareindependentassetoutinRule3.13oftheListingRules.
TheIndependentNon-ExecutiveDirectors:
•provideopenandobjectivechallengeofmanagementandtheBoardmembers
•raiseintelligentquestionsandchallengeconstructivelyandwithvigour
•bringoutsideknowledgeofthebusinessesandmarketsinwhichtheGroupoperates,providinginformedinsightandresponsestomanagement
ThenumberofIndependentNon-ExecutiveDirectorsrepresentedtherecommendedproportion(atleastone-third)oftheBoardofDirectors.
TheAuditandRemunerationCommitteesoftheBoardarecomprisedonlyofNon-ExecutiveDirectors.
AppointmentandRe-electionPotentialnewDirectorsareidentifiedandconsideredforappointmentbytheBoard.ADirectorappointedbytheBoardissubjecttoelectionbyshareholdersatthefirstannualgeneralmeetingafterhisorherappointment,andallDirectorsaresubjecttore-electionbyshareholderseverythreeyears.
PotentialnewBoardmembersareidentifiedonthebasisofskillsandexperiencewhich,intheopinionoftheDirectors,willenablethemtomakeapositivecontributiontotheperformanceoftheBoard.
ResponsibilitiesofDirectorsOnappointment,theDirectorsreceiveinformationabouttheGroupincluding:
•theroleoftheBoardandthemattersreservedforitsattention
•theroleandtermsofBoardCommittees•theGroup’scorporategovernancepracticesandprocedures•thepowersdelegatedtomanagementand•thelatestfinancialinformation
CorporateGovernance&Sustainability|CorporateGovernance
66 SwirePropertiesAnnualReport|2011
Directorsupdatetheirskills,knowledgeandfamiliaritywiththeGroupthroughtheirongoingparticipationatmeetingsoftheBoardanditscommitteesandthroughregularmeetingswithmanagementattheheadofficeandinthedivisions.DirectorsareregularlyupdatedbytheCompanySecretaryontheirlegalandotherdutiesasDirectorsofalistedcompany.
ThroughtheCompanySecretary,Directorsareabletoobtainappropriateprofessionaltrainingandadvice.
EachDirectorensuresthathecangivesufficienttimeandattentiontotheaffairsoftheGroup.AllDirectorsdisclosetotheBoardontheirfirstappointmenttheirinterestsasaDirectororotherwiseinothercompaniesororganisationsandsuchdeclarationsofinterestsareupdatedregularly.
DetailsofDirectors’otherappointmentsareshownintheirbiographiesonpages72to73.
BoardProcessesAllcommitteesoftheBoardfollowthesameprocessesasthefullBoard.
Thedatesofthe2011Boardmeetingsweredeterminedin2010andanyamendmentstothisschedulewerenotifiedtoDirectorsatleast14daysbeforeregularmeetings.SuitablearrangementsareinplacetoallowDirectorstoincludeitemsintheagendaforregularBoardmeetings.
AgendasandaccompanyingBoardpapersarecirculatedwithsufficienttimetoallowtheDirectorstopreparebeforemeetings.
TheChairmantakestheleadtoensurethattheBoardactsinthebestinterestsoftheCompany,thatthereiseffectivecommunicationwiththeshareholdersandthattheirviewsarecommunicatedtotheBoardasawhole.
BoarddecisionsaremadebyvoteatBoardmeetingsandsupplementedbythecirculationofwrittenresolutionsbetweenBoardmeetings.
MinutesofBoardmeetingsaretakenbytheCompanySecretaryand,togetherwithanysupportingpapers,aremadeavailabletoallDirectors.TheminutesrecordthemattersconsideredbytheBoard,thedecisionsreached,andanyconcernsraisedordissentingviewsexpressedbyDirectors.DraftandfinalversionsoftheminutesaresenttoallDirectorsfortheircommentandrecordsrespectively.
Boardmeetingsarestructuredsoastoencourageopendiscussion,frankdebateandactiveparticipationbyDirectorsinmeetings.
AtypicalBoardmeetingwouldconsistof
•areviewofareportbytheChiefExecutiveontheresultssincethelastmeetingandanexplanationofchangesinthebusinessenvironmentandtheirimpactonbudgetsandthelonger-termplan
•theraisingofnewinitiativesandideas•thepresentationofpaperstosupportdecisionsrequiring
Boardapproval•anupdateoflegalandcompliancemattersforDirectors’
consideration•anydeclarationsofinterest
TheexecutivemanagementprovidestheBoardwithsuchinformationandexplanationsasarenecessarytoenableDirectorstomakeaninformedassessmentofthefinancialandotherinformationputbeforetheBoard.QueriesraisedbyDirectorsareansweredfullyandpromptly.
Whennecessary,theIndependentNon-ExecutiveDirectorsmeetprivatelytodiscussmatterswhicharetheirspecificresponsibility.
TheChairmanmeetsatleastannuallywiththeNon-ExecutiveDirectorswithouttheExecutiveDirectorsbeingpresent.
FourmeetingsoftheBoardwereheldduringtheyearandtheattendanceofDirectorsissetoutinthetableonpage67.TheAuditCommitteeandRemunerationCommitteedidnotmeetin2011(whentheCompanywasnotyetalistedcompany)andwillholdmeetingsfrom2012onwards.
Directors’andOfficers’InsuranceTheCompanyhasarrangedappropriateinsurancecoverinrespectofpotentiallegalactionsagainstitsDirectorsandOfficers.
ConflictsofInterestIfaDirectorhasamaterialconflictofinterestinrelationtoatransactionorproposaltobeconsideredbytheBoard,theindividualisrequiredtodeclaresuchinterestandabstainfromvoting.ThematterisconsideredataBoardmeetingandvotedonbyDirectorswhohavenomaterialinterestinthetransaction.
DelegationbytheBoardResponsibilityfordeliveringtheCompany’sstrategiesandobjectives,asestablishedbytheBoard,andresponsibilityforday-to-daymanagementisdelegatedtotheChiefExecutive.TheChiefExecutivehasbeengivenclearguidelinesanddirectionsastohispowersand,inparticular,the
SwirePropertiesAnnualReport|2011 67
Meetings Attended/Held
Directors Board
Executive DirectorsC.D.Pratt 4/4M.Cubbon 4/4M.M.S.Low 4/4J.C.G.Bremridge(resignedwitheffectfrom12thSeptember2011) 2/2G.M.C.Bradley 4/4D.C.Y.Ho 4/4G.J.Ongley 3/4
Non-Executive DirectorsJ.W.J.Hughes-Hallett 3/4P.A.Kilgour 4/4M.B.Swire 2/4
Independent Non-Executive DirectorsS.E.Bradley 3/4J.C.C.Chan 4/4H.C.Cheng 4/4P.K.Etchells 4/4S.C.Liu 4/4
Averageattendance 92%
circumstancesunderwhichheshouldreportbackto,andobtainpriorapprovalfrom,theBoardbeforemakingcommitmentsonbehalfoftheCompany.
TheBoardmonitorsmanagement’sperformanceagainsttheachievementoffinancialandnon-financialmeasures,theprincipalitemsmonitoredbeing:
•detailedmonthlymanagementaccountsconsistingofincomestatementsandstatementsoffinancialpositionandcashflowscomparedtobudgetandforecast
•internalandexternalauditreports•significantcontrolbreakdowns•feedbackfromexternalpartiessuchascustomers,those
withwhomtheGroupdoesbusiness,tradeassociationsandserviceproviders
SecuritiesTransactionsTheCompanyhasadoptedacodeofconduct(the“SecuritiesCode”)regardingsecuritiestransactionsbyDirectorsandofficersontermsnolessexactingthantherequiredstandardsetoutintheModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuerscontainedinAppendix10totheListingRules.TheserulesareavailableontheCompany’swebsite.
AcopyoftheSecuritiesCodehasbeensenttoeachDirectoroftheCompanyandwillbesenttoeachDirectortwiceannually,immediatelybeforethetwofinancialperiodends,withareminderthattheDirectorcannotdealinthesecuritiesandderivativesoftheCompanyduringtheblackoutperiodbeforetheGroup’sinterimandannualresultshavebeenpublished,andthatalltheirdealingsmustbeconductedinaccordancewiththeSecuritiesCode.
UndertheSecuritiesCode,DirectorsandseniorexecutivesoftheCompanyarerequiredtonotifytheChairmanandreceiveadatedwrittenacknowledgementbeforedealinginthesecuritiesandderivativesoftheCompanyand,inthecaseoftheChairmanhimself,hemustnotifytheChairmanoftheAuditCommitteeandreceiveadatedwrittenacknowledgementbeforeanydealing.
Onspecificenquiriesmade,alltheDirectorsoftheCompanyhaveconfirmedthattheyhavecompliedwiththerequiredstandardsetoutintheSecuritiesCode.
Directors’interestsasat18thJanuary2012inthesharesoftheCompanyanditsassociatedcorporations(withinthemeaningofPartXVoftheSecuritiesandFuturesOrdinance)aresetoutonpages77to79.
CorporateGovernance&Sustainability|CorporateGovernance
68 SwirePropertiesAnnualReport|2011
RemunerationCommitteeFulldetailsofDirectors’remunerationareprovidedinnote10totheaccounts.
TheRemunerationCommitteecomprisesthreeNon-ExecutiveDirectors,twoofwhomareindependent.ThetermsofreferenceoftheRemunerationCommitteehavebeenreviewedwithreferencetotheCodeandarepostedontheCompany’swebsite.
AServicesAgreementexistsbetweentheCompanyandJohnSwire&Sons(H.K.)Limited,awholly-ownedsubsidiaryofJohnSwire&SonsLimited,whichistheparentcompanyoftheSwiregroup.ThisagreementhasbeenconsideredindetailandapprovedbytheIndependentNon-ExecutiveDirectorsoftheCompany.Underthetermsoftheagreement,staffatvariouslevels,includingExecutiveDirectors,aresecondedto
theCompany.ThesestaffreporttoandtakeinstructionsfromtheBoardoftheCompanybutremainemployeesoftheSwiregroup.AsasubstantialindirectshareholderoftheCompany,itisinthebestinterestsoftheSwiregrouptoensurethatexecutivesofhighqualityaresecondedtoandretainedwithintheSwirePropertiesgroup.
Inordertobeabletoattractandretainstaffofsuitablecalibre,theSwiregroupprovidesacompetitiveremunerationpackagedesignedtobecommensurate,overall,withthoseofitspeergroup.Thistypicallycomprisessalary,housing,retirementfund,leave-passageandeducationallowancesand,afterthreeyears’service,abonusrelatedtotheoverallprofitoftheSwiregroup.
NoDirectortakespartinanydiscussionabouthisorherownremuneration.
ThefollowingfeelevelswereapprovedbytheBoard:
Fee2011HK$
2012HK$
Director’sFee 500,000 500,000
FeeforAuditCommitteeChairman 200,000 200,000
FeeforAuditCommitteeMember 150,000 150,000
FeeforRemunerationCommitteeChairman 65,000 65,000
FeeforRemunerationCommitteeMember 50,000 50,000
AccountabilityandAuditFinancialReportingTheBoardacknowledgesitsresponsibilityfor:
•theproperstewardshipoftheCompany'saffairs,toensuretheintegrityoffinancialinformation
•preparingannualandinterimaccountsandotherrelatedinformationthatgiveatrueandfairviewoftheGroup’saffairsandofitsresultsandcashflowsfortherelevantperiods,inaccordancewithHongKongFinancialReportingStandardsandtheHongKongCompaniesOrdinance
•selectingappropriateaccountingpoliciesandensuringthattheseareconsistentlyapplied
•makingjudgementsandestimatesthatareprudentandreasonable;and
•ensuringthattheapplicationofthegoingconcernassumptionisappropriate
InternalControlsTheBoardacknowledgesitsresponsibilitytoestablish,maintainandreviewtheeffectivenessoftheGroup'ssystemofinternalcontrolswithaviewtoensuringthatshareholders’investmentsandtheCompany'sassetsaresafeguarded.ThisresponsibilityisprimarilyfulfilledonitsbehalfbytheAuditCommittee.
Thefoundationofastrongsystemofinternalcontrolisdependentontheethicsandcultureoftheorganisation,thequalityandcompetenceofitspersonnel,thedirectionprovidedbytheBoard,andtheeffectivenessofmanagement.
Sinceprofitsare,inpart,therewardforsuccessfulrisktakinginbusiness,thepurposeofinternalcontrolsistohelpmanageandcontrol,ratherthaneliminate,risk.Consequently,internalcontrolscanonlyprovidereasonable,andnotabsolute,assuranceagainstmisstatementorloss.
SwirePropertiesAnnualReport|2011 69
andsegregationofduties.Controlactivitiescanbedividedintooperations,financialreportingandcompliance,althoughtheremay,onoccasion,besomeoverlapbetweenthem.Thetypicalcontrolactivitiesinclude:
•analyticalreviews:forexample,conductingreviewsofactualperformanceversusbudgets,forecasts,priorperiodsandcompetitors
•directfunctionaloractivitymanagement:reviewsofperformancereports,conductedbymanagersinchargeoffunctionsoractivities
•information-processing:performingcontrolsintendedtochecktheauthorisationoftransactionsandtheaccuracyandcompletenessoftheirreporting,forexample,exceptionreports
•physicalcontrols:ensuringequipment,inventories,securitiesandotherassetsaresafeguardedandsubjectedtoperiodicchecks
•performanceindicators:carryingoutanalysesofdifferentsetsofdata,operationalandfinancial,examiningtherelationshipsbetweenthem,andtakingcorrectiveactionwherenecessary
•segregationofduties:dividingandsegregatingdutiesamongdifferentpeople,withaviewtostrengtheningchecksandminimisingtheriskoferrorsandabuse
TheCompanyhasinplaceeffectiveprocessesandsystemsfortheidentification,captureandreportingofoperational,financialandcompliance-relatedinformationinaformandtime-frameintendedtoensurethatstaffcarryouttheirdesignatedresponsibilities.
Internal audit:Independentofmanagement,theInternalAuditdepartmentreportsdirectlytotheChairmanandperformsregularreviewsofkeyriskareasandmonitorscompliancewithGroupaccounting,financialandoperationalprocedures.TheroleofInternalAuditisdiscussedfurtheronpage70.
AuditCommitteeTheAuditCommitteeconsistsofthreeNon-ExecutiveDirectors,twoofwhomareindependent.ThetermsofreferenceoftheAuditCommitteefollowtheguidelinessetoutbytheHongKongInstituteofCertifiedPublicAccountantsandcomplywiththeCode.TheyareavailableontheCompany’swebsite.
TheAuditCommitteehasmettwicesincethesharesoftheCompanybecamelistedontheStockExchangeon
ThekeycomponentsoftheGroup’scontrolstructureareasfollows:
Culture:TheBoardbelievesthatgoodgovernancereflectsthecultureofanorganisation.Thisismoresignificantthananywrittenprocedures.
TheCompanyaimsatalltimestoactethicallyandwithintegrity,andtoinstilthisbehaviourinallitsemployeesbyexamplefromtheBoarddown.
TheCompanyiscommittedtodevelopingandmaintaininghighprofessionalandethicalstandards.Thesearereflectedintherigorousselectionprocessandcareerdevelopmentplansforallemployees.Theorganisationpridesitselfonbeingalong-termemployerwhichinstilsinindividuals,astheyprogressthroughtheGroup,athoroughunderstandingoftheCompany’sphilosophy.
Channelsofcommunicationareclearlyestablished,allowingemployeesameansofcommunicatingtheirviewsupwardswithawillingnessonthepartofmoreseniorpersonneltolisten.Employeesareawarethat,whenevertheunexpectedoccurs,attentionshouldbegivennotonlytotheeventitself,butalsotodeterminingthecause.
Risk assessment:TheBoardofDirectorsandthemanagementeachhavearesponsibilitytoidentifyandanalysetherisksunderlyingtheachievementofbusinessobjectives,andtodeterminehowsuchrisksshouldbemanagedandmitigated.
Management structure:TheGrouphasaclearorganisationalstructurethat,totheextentrequired,delegatestheday-to-dayresponsibilityforthedesign,documentationandimplementationofproceduresandongoingmonitoringofrisk.Individualsappreciatewheretheywillbeheldaccountableinthisprocess.
Acontrolself-assessmentprocessrequiresmanagementtoassess,throughtheuseofdetailedquestionnaires,theadequacyandeffectivenessofcontrolsoverthereliabilityoffinancialreporting,theeffectivenessandefficiencyofoperationsandcompliancewithapplicablelawsandregulations.ThisprocessanditsresultsarereviewedbyinternalauditorsandformpartoftheAuditCommittee’sannualassessmentofcontroleffectiveness.
Controls and review:Thecontrolenvironmentcomprisespoliciesandproceduresintendedtoensurethatrelevantmanagementdirectivesarecarriedoutandactionsthatmaybeneededtoaddressrisksaretaken.Thesemayincludeapprovalsandverifications,reviews,safeguardingofassets
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70 SwirePropertiesAnnualReport|2011
18thJanuaryin2012.RegularattendersatthemeetingsweretheFinanceDirectoroftheCompanyandtheexternalauditors.Theindependentpropertyvaluersandarepresentativeoftheinternalauditalsoattendedoneofthemeetings.
TheworkoftheCommitteetodatein2012includedreviewsoftherevaluationoftheinvestmentpropertyportfolioat31stDecember2011,theinternalauditworkdonein2011andthatproposedfor2012,amemorandumbytheexternalauditorsontheauditstrategyfor2011andtheindependenceoftheexternalauditors.TheAuditCommitteehasalsoreviewed,andrecommendedtotheBoardforapproval,the2011accounts.
AssessingtheEffectivenessof InternalControlsTheAuditCommitteehastheresponsibilitytoreviewannually,onbehalfoftheBoard,theeffectivenessoftheCompany’ssystemsofinternalcontrolsdealingwithriskandfinancialaccountingandreporting,theeffectivenessandefficiencyofoperations,compliancewithlawsandregulations,andriskmanagementfunctions.Inrelationto2011(whenthesharesoftheCompanywerenotlistedonTheStockExchangeofHongKongLimited),theAuditCommitteereliedforthispurposeontheassessmentcarriedoutbytheauditcommitteeofSwirePacificLimited,insofarasitrelatedtothepropertydivision(ofwhichtheCompanywastheprincipalcomponent)ofSwirePacificLimited.Thatassessmentconsidered,inrelationtotheSwirePacificgroup:
•thescopeandqualityoftheSwirePacificLimitedmanagement'smonitoringofrisksandofthesystemsofinternalcontrol,theworkoftheSwirePacificLimitedInternalAuditDepartmentandtheassurancesprovidedbytheGroupFinanceDirectorofSwirePacificLimited
•thechangesinthenatureandextentofsignificantriskssincethepreviousreviewandtheSwirePacificgroup’sabilitytorespondtochangesinitsbusinessandtheexternalenvironment
•theextentandfrequencywithwhichtheresultsofmonitoringarecommunicated,enablingtheSwirePacificAuditCommitteetobuildupacumulativeassessmentofthestateofcontrolintheSwirePacificgroupandtheeffectivenesswithwhichriskisbeingmanaged
•theincidenceofanysignificantcontrolfailingsorweaknessesthathavebeenidentifiedatanytimeduringtheperiodandtheextenttowhichtheyhaveresultedin
unforeseenoutcomesorcontingenciesthathavehad,couldhavehad,ormayinthefuturehave,amaterialimpactonSwirePacificLimited’sfinancialperformanceorposition
•theeffectivenessoftheSwirePacificLimited’sprocessesinrelationtofinancialreportingandstatutoryandregulatorycompliance
•areasofriskidentifiedbymanagement•significantrisksreportedbytheSwirePacificLimited
InternalAuditDepartmentandgroupriskmanagementcommittee
•workprogrammesproposedbytheSwirePacificLimitedInternalAuditDepartmentandtheexternalauditorsofSwirePacificLimited
•significantissuesarisingfromSwirePacificLimited’sinternalandexternalauditreports
•theresultsofthecontrolselfassessmentexerciseundertakenbythemanagementofSwirePacificLimited.
Havingconsideredtheaboveassessment,theBoardconfirmsthattheCompany’sinternalcontrolsystemsareadequateandeffective.
InternalAuditDepartmentTheSwiregrouphashadanInternalAuditDepartment(“IA”)inplacefor16years.IAplaysacriticalroleinmonitoringthegovernanceoftheGroup.Thedepartmentisstaffedby18auditprofessionalsandconductsauditsoftheGroupandothercompaniesintheSwiregroup.The18professionalsincludeateambasedinMainlandChinawhichreportstoIAinHongKong.
IAreportsdirectlytotheChairmanoftheBoardand,withouttheneedtoconsultwithmanagement,totheChairmanoftheAuditCommitteeandviahimtotheBoard.IAhasunrestrictedaccesstoallareasoftheGroup’sbusinessunits,assets,recordsandpersonnelinthecourseofconductingitswork.
TheannualIAworkplanandresourcesarereviewedandagreedwiththeAuditCommittee.
ScopeofWorkBusinessunitauditsaredesignedtoprovideassurancethattheinternalcontrolsystemsofSwirePropertiesareimplementedproperlyandoperatingeffectively,andthattherisksassociatedwiththeachievementofbusinessobjectivesarebeingproperlyidentified,monitoredandmanaged.
SwirePropertiesAnnualReport|2011 71
ThefrequencyofeachauditisdeterminedbyIAusingitsownriskassessmentmethodology,whichisbasedontheCOSO(CommitteeofSponsoringOrganizationsoftheTreadwayCommission)internalcontrolframework,consideringsuchfactorsasrecognisedrisks,organisationalchange,overallmaterialityofeachunit,previousIAresults,externalauditors’comments,outputfromtheworkoftheSwirePacificGroupRiskManagementCommitteeandmanagement’sviews.Eachbusinessunitistypicallyauditedatleastonceeverythreeyears.Acquiredbusinesseswouldnormallybeauditedwithin12months.EightassignmentswereconductedforSwirePropertiesin2011.
IAspecificallyassiststheAuditCommitteeinassessingtheeffectivenessoftheGroup'sinternalcontrolsthroughitsreviewoftheprocessbywhichmanagementhascompletedtheannualControlSelfAssessment,andtheresultsofthisassessment.
IAconductsad-hocprojectsandinvestigativeworkasmayberequiredbymanagementortheAuditCommittee.
AuditConclusionandResponseCopiesofIAreportsaresenttotheChairmanoftheBoard,theFinanceDirectorandtheexternalauditors.TheresultsofeachreviewarealsopresentedtotheAuditCommittee.
ManagementiscalledupontopresentactionplansinresponsetoIA’srecommendations.TheseareagreedbyIA,includedinitsreportsandfollowedupwithaviewtoensuringthattheyaresatisfactorilyundertaken.
ExternalAuditorsTheAuditCommitteeactsasapointofcontact,independentfrommanagement,withtheexternalauditors(the“auditors”).TheauditorshavedirectaccesstotheChairmanoftheAuditCommittee,whomeetswiththemperiodicallywithoutmanagementpresent.
TheAuditCommittee’sdutiesinrelationtotheauditorsinclude:
•recommendingtotheBoard,forapprovalbyshareholders,theauditors’appointment
•approvaloftheauditors’termsofengagement•considerationofthelettersofrepresentationtobe
providedtotheauditorsinrespectoftheinterimandannualaccounts
•reviewofreportsandotherad-hocpapersfromtheauditors•annualappraisalofthequalityandeffectivenessof
theauditors
•assessmentoftheauditors’independenceandobjectivity,includingthemonitoringofnon-auditservicesprovided,withaviewtoensuringthattheirindependenceandobjectivityisnot,andisnotseentobe,compromised
•approvalofauditandnon-auditfees
Auditors’IndependenceIndependenceoftheauditorsisofcriticalimportancetotheAuditCommittee,theBoardandshareholders.TheauditorswriteannuallytothemembersoftheAuditCommitteeconfirmingthattheyareindependentaccountantswithinthemeaningoftheInternationalEthicsStandardsBoardforAccountantsCodeofEthicsandthattheyarenotawareofanymatterswhichmayreasonablybethoughttobearontheirindependence.TheAuditCommitteeassessestheindependenceoftheauditorsbyconsideringanddiscussingeachsuchletter(andhavingregardtothefeespayabletotheauditorsforauditandnon-auditworkandthenatureofthenon-auditwork)atameetingoftheAuditCommittee.
ProvisionofNon-auditServicesIndecidingwhethertheauditorsshouldprovidenon-auditservicesthefollowingkeyprinciplesareconsidered:
•theauditorsshouldnotaudittheirownfirm’swork•theauditorsshouldnotmakemanagementdecisions•theauditors’independenceshouldnotbeimpaired•qualityofservice
Inaddition,anyserviceswhichmaybeconsideredtobeinconflictwiththeroleoftheauditorsmustbesubmittedtotheAuditCommitteeforapprovalpriortoengagement,regardlessoftheamountsinvolved.
Feespaidtotheauditorsaredisclosedinnote8totheaccounts.
InvestorRelationsAllcommunicationsforshareholdersincludingreports,announcementsandtheresultsofpollsofshareholdersatshareholdermeetingsarepostedontheCompany’swebsite:www.swireproperties.com.Copiesoftheannualandinterimreportswillalsobemadeavailabletoshareholdersinprintedorelectronicform.Briefingsfortheinvestmentcommunitywillbeheldshortlyaftertheinterimandfinalresultsannouncements.
Keyshareholderdatesfor2012aresetoutonpage160ofthisreport.
72 SwirePropertiesAnnualReport|2011
ExecutiveDirectorsPRATT, Christopher Dale,CBE,aged55,hasbeenaDirectoroftheCompanysinceFebruary2003andChairmanoftheCompanysinceJune2009.HeisalsoChairmanofJohnSwire&Sons(H.K.)Limited,SwirePacificLimited,CathayPacificAirwaysLimitedandHongKongAircraftEngineeringCompanyLimited,andaDirectorofAirChinaLimitedandTheHongkongandShanghaiBankingCorporationLimited.HejoinedtheSwiregroupin1978andhasworkedwiththegroupinHongKong,AustraliaandPapuaNewGuinea.
CUBBON, Martin,aged54,hasbeenaDirectoroftheCompanysinceMarch2000andChiefExecutiveoftheCompanysinceJune2009.HeisalsoaDirectorofJohnSwire&Sons(H.K.)LimitedandSwirePacificLimited,withresponsibilityforgroupfinancefromSeptember1998toMarch2009.HejoinedtheSwiregroupin1986.
LOW, Mei Shuen Michelle,aged51,hasbeenaDirectoroftheCompanysinceSeptember2010whenshewasappointedHumanResourcesDirectoroftheCompany.InSeptember2011,shewasappointedDirector,Finance&HumanResourcesoftheCompanywithresponsibilityforthefinancialinterestsandhumanresourcesmanagementoftheCompany.SheisalsoaDirectorofJohnSwire&Sons(H.K.)Limited.ShejoinedtheSwiregroupin1987.
BRADLEY, Guy Martin Coutts,aged46,hasbeenaDirectoroftheCompanysinceJanuary2008.HewasappointedChiefExecutiveOfficer–MainlandChinainJune2011andis
responsiblefortheCompany’sMainlandChinabusiness.HeisalsoaDirectorofJohnSwire&Sons(China)LimitedandchiefrepresentativeofitsrepresentativeofficeinBeijing.HejoinedtheSwiregroupin1987andhasworkedwiththegroupinHongKong,PapuaNewGuinea,Japan,theU.S.A.,Vietnam,MainlandChina,TaiwanandtheMiddleEast.
HO, Cho Ying Davy,aged64,hasbeenaDirectoroftheCompanysinceApril2010.HeisresponsibleforrelationswithjointventurepartnersandgovernmentauthoritiesinHongKongandMainlandChina.HejoinedtheSwiregroupin1970andhasworkedwiththegroupinHongKong,MainlandChinaandTaiwan.
ONGLEY, Gordon James,aged58,hasbeenaDirectoroftheCompanysinceFebruary2003.HewasappointedChiefOperatingOfficer–HongKonginJune2011andisresponsiblefortheCompany’sHongKongbusiness.HejoinedtheCompanyin1995andhasworkedwiththeCompanyinHongKongandMainlandChina.
Non-ExecutiveDirectorsHUGHES-HALLETT, James Wyndham John,SBS,aged62,hasbeenaDirectoroftheCompanysinceJuly1998.HeisChairmanofJohnSwire&SonsLimitedandaDirectorofSwirePacificLimited,CathayPacificAirwaysLimited,SteamshipsTradingCompanyLimitedandHSBCHoldingsplc.HejoinedtheSwiregroupin1976andhasworkedwiththegroupinHongKong,Taiwan,Japan,AustraliaandLondon.
DirectorsandOfficer
SwirePropertiesAnnualReport|2011 73
KILGOUR, Peter Alan,aged56,hasbeenaDirectoroftheCompanysinceFebruary2001.HeisalsoFinanceDirectorofSwirePacificLimited,andaDirectorofCathayPacificAirwaysLimitedandJohnSwire&Sons(H.K.)Limited.HejoinedtheSwiregroupin1983.
SWIRE, Merlin Bingham,aged38,hasbeenaDirectoroftheCompanysinceJanuary2009.HejoinedtheSwiregroupin1997andhasworkedwiththegroupinHongKong,Australia,MainlandChinaandLondon.HeisaDirectorandshareholderofJohnSwire&SonsLimitedandSwirePacificLimited,aDirectorofCathayPacificAirwaysLimitedandHongKongAircraftEngineeringCompanyLimited,andanAlternateDirectorofSteamshipsTradingCompanyLimited.
IndependentNon-ExecutiveDirectorsBRADLEY, Stephen Edward,aged53,hasbeenaDirectoroftheCompanysinceApril2010.HeisSeniorRepresentative(China)ofGrosvenorLimited,ChairmanofCSSMobilePromotions,ViceChairman(AsiaPacific)ofICAP(HongKong)Limited,andaDirectorofHuskyEnergyInc.HeisalsoanadvisortoRioTintogroup.
Dr. CHAN, Cho Chak John, GBS, JP,aged68,hasbeenaDirectoroftheCompanysinceApril2010.HeisChairmanofRoadShowHoldingsLimitedandanIndependentNon-ExecutiveDirectorofGuangdongInvestmentLimited,HangSengBankLimitedandTransportInternationalHoldingsLimited.HeisalsoaDirectorofCommunityChestofHongKong.
CHENG, Hoi Chuen, GBS, OBE, JP,aged63,hasbeenaDirectoroftheCompanysinceApril2010.HeisAdvisertotheGroupChiefExecutiveofHSBCHoldingsplc.HeisanIndependentNon-ExecutiveDirectorofCLPHoldingsLimited,GreatEagleHoldingsLimited,HuiXianAssetManagementLimitedandMTRCorporationLimited.HeisVice-ChairmanoftheChinaBankingAssociationandHonoraryAdvisoryPresidentoftheHongKongInstituteofBankers.HeisChairmanoftheIndependentCommissiononRemunerationforMembersoftheExecutiveCouncilandtheLegislature,andOfficialsunderthePoliticalAppointmentSystemoftheHKSARGovernmentandtheCouncilofTheChineseUniversityofHongKong.Mr.ChengwasappointedasaNon-ExecutiveDirectoroftheCompanyon14thApril2010andwasre-designatedasanIndependentNon-ExecutiveDirectoroftheCompanyon16thDecember2011.
ETCHELLS, Paul Kenneth,aged61,hasbeenaDirectoroftheCompanysinceApril2010.HeisanIndependentNon-ExecutiveDirectorofSamsoniteInternationalS.A.HewasemployedbytheSwiregroupinHongKongfrom1976to1998.HewasemployedbyTheCoca-ColaCompanyfromJuly1998toJune2010,andworkedintheU.S.A.,MainlandChinaandHongKong.
LIU, Sing Cheong, JP,aged56,hasbeenaDirectoroftheCompanysinceApril2010.HeisChairmanofMyTopHome(China)HoldingsLimited,andaDirectorofPradaS.p.A.,HongKongScienceandTechnologyParksCorporationandHongKongUniversityofScienceandTechnologyRandDCorporationLimited.
SecretaryFU, Yat Hung David,aged48,hasbeenCompanySecretarysinceFebruary2010.HejoinedtheSwiregroupin1988.
Notes:1.TheAuditCommitteecomprisesP.K.Etchells(committee
chairman),J.C.C.ChanandP.A.Kilgour.2.TheRemunerationCommitteecomprisesJ.W.J.Hughes-Hallett
(committeechairmanuntil31stMarch2012),S.E.BradleyandS.C.Liu.
3.G.M.C.Bradley,M.Cubbon,J.W.J.Hughes-Hallett,P.A.Kilgour,M.M.S.Low,C.D.PrattandM.B.SwireareemployeesoftheJohnSwire&SonsLimitedgroup.
74 SwirePropertiesAnnualReport|2011
TheDirectorssubmittheirreporttogetherwiththeauditedaccountsfortheyearended31stDecember2011,whicharesetoutonpages89to147.
PrincipalActivitiesTheprincipalactivitiesofSwirePropertiesLimited(the“Company”)anditssubsidiaries(together,the“Group”)are:(i)propertyinvestment,thatisthedevelopment,leasingandmanagementofcommercial,retailandsomeresidentialproperties;(ii)propertytrading,thatisthedevelopmentandconstructionofproperties,principallyresidentialapartments,forsale;and(iii)investmentinandoperationofhotels.
TheprincipalactivitiesoftheCompany’smajorsubsidiary,jointlycontrolledandassociatedcompaniesareshownonpages145to147.AnanalysisoftheGroup’sperformancefortheyearbyreportablebusinesssegmentandgeographicalareaissetoutinnote9totheaccounts.
ListingoftheCompanyOn7thOctober2011,SwirePacificLimited(“SwirePacific”)submittedaspin-offproposaltoTheStockExchangeofHongKongLimited(the“StockExchange”)pursuanttoPracticeNote15oftheRulesGoverningtheListingofSecuritiesonTheStockExchangeofHongKongLimited(“ListingRules”)inrelationtotheproposedspin-offoftheCompany(“Spin-off”)bywayofaseparatelistingoftheordinarysharesofHK$1.00eachoftheCompany(the“SwirePropertiesShares”)ontheMainBoardoftheStockExchange.
On27thOctober2011,theCompanysubmittedalistingapplicationform(FormA1)totheStockExchangeinordertoapplyforthelistingof,andpermissiontodealin,theSwirePropertiesSharesontheMainBoardoftheStockExchange.ThelistingoftheSwirePropertiesShareswouldbebywayofintroductionachievedbyadistributioninspeciebySwirePacificofapproximately18%oftheSwirePropertiesShares.
On21stDecember2011,theboardofSwirePacificdeclaredconditionalspecialinterimdividends(“ConditionalSwirePacificDividend”)fortheyearended31stDecember2011of7SwirePropertiesSharesforevery10‘A’sharesheldinSwirePacificand7SwirePropertiesSharesforevery50‘B’sharesheldinSwirePacifictotheshareholdersonSwirePacific’sregisterofmembersasatthecloseofbusinesson6thJanuary2012.Fractionalentitlementsweredisregarded.TheConditionalSwirePacificDividendbecameunconditionaluponthelistingoftheSwirePropertiesSharesunderstockcode1972ontheMainBoardoftheStockExchangeon18thJanuary2012andwassatisfiedwhollybywayofadistributioninspecieofanaggregateof1,053,234,165SwirePropertiesShares,representingapproximately18%ofthetotalof5,850,000,000SwirePropertiesSharesinissue,on18thJanuary2012.
WitheffectfromthelistingoftheSwirePropertiessharesontheMainBoardoftheStockExchangeon18thJanuary2012,SwirePacific’sshareholdingintheCompanydecreasedfrom100%toapproximately82%.
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SwirePropertiesAnnualReport|2011 75
DividendsSwirePacificwasthesoleshareholderoftheCompanyuntilthelistingoftheSwirePropertiesSharesontheMainBoardoftheStockExchangeon18thJanuary2012.
Inrespectoftheyearended31stDecember2010,afinaldividendofHK$2,424,921,000waspaidtoSwirePacificon9thJune2011asrecommendedbytheDirectors.
Inrespectoftheyearended31stDecember2011,afirstspecialinterimdividendofHK$4,513,877,000waspaidtoSwirePacificon30thSeptember2011andasecondspecialinterimdividendofHK$5,500,000,000waspaidtoSwirePacificon8thNovember2011,ineachcaseasrecommendedbytheDirectors.
TheDirectorshavedeclaredafirstinterimdividendofHK¢18pershareon15thMarch2012fortheyearended31stDecember2011.Thisinterimdividendwillbeinlieuofafinaldividend.Togetherwiththefirstandsecondspecialinterimdividendspaidin2011,thisrepresentsatotaldistributionfortheyearofHK$11,067million.
Thefirstinterimdividendwillbepaidon3rdMay2012toshareholdersregisteredatthecloseofbusinessontherecorddate,beingThursday,5thApril2012.SharesoftheCompanywillbetradedex-dividendasfromMonday,2ndApril2012.
Infuture,theCompanyintendstopaytwointerimdividendsinsteadofaninterimdividendandafinaldividend.Asecondinterimdividendwillbeinlieuofafinaldividend.Thetotalamountofdividendspaidtoshareholdersforayearwillbethesamewithtwointerimdividendsasitwouldhavebeenwithaninterimdividendandafinaldividend.
ClosureofRegisterofMembersTheregisterofmemberswillbeclosedonThursday,5thApril2012,duringwhichdaynotransferofshareswillbeeffected.Inordertoqualifyforentitlementtothefirstinterimdividend,alltransferformsaccompaniedbytherelevantsharecertificatesmustbelodgedwiththeCompany’sshareregistrars,ComputershareHongKongInvestorServicesLimited,17thFloor,HopewellCentre,183Queen’sRoadEast,HongKong,forregistrationnotlaterthan4:30p.m.onTuesday,3rdApril2012.
Tofacilitatetheprocessingofproxyvotingfortheannualgeneralmeetingtobeheldon10thMay2012,theregisterofmemberswillbeclosedfrom7thMay2012to10thMay
2012,bothdaysinclusive,duringwhichperiodnotransferofshareswillbeeffected.Inordertobeentitledtoattendandvoteattheannualgeneralmeeting,alltransferformsaccompaniedbytherelevantsharecertificatesmustbelodgedwiththeCompany’sshareregistrars,ComputershareHongKongInvestorServicesLimited,17thFloor,HopewellCentre,183Queen’sRoadEast,HongKong,forregistrationnotlaterthan4:30p.m.onFriday,4thMay2012.
ReservesMovementsinthereservesoftheGroupandtheCompanyduringtheyeararesetoutinnote37totheaccounts.
ShareCapitalDuringtheyearunderreview,theGroupdidnotpurchase,sellorredeemanysharesintheCompanyandtheGrouphasnotadoptedanyshareoptionscheme.
On30thNovember2011,theCompanyallotted160,000,000ordinarysharesofHK$1.00eachoftheCompany,fullypaid,toSwirePacificforanaggregatecashconsiderationofHK$4,500,000,000.
Asat31stDecember2011,5,850,000,000shareswereinissue(31stDecember2010:5,690,000,000shares).Detailsofthemovementofsharecapitalcanbefoundinnote36totheaccounts.
AccountingPoliciesTheprincipalaccountingpoliciesoftheGrouparesetoutonpages136to144.
AuditorsPricewaterhouseCoopersretireand,beingeligible,offerthemselvesforre-appointment.Aresolutionforthere-appointmentofPricewaterhouseCoopersasauditorsoftheCompanyistobeproposedattheforthcomingAnnualGeneralMeeting.
FinancialReviewAreviewoftheconsolidatedresults,financialpositionandcashflowsisshownonpages46to52.Aten-yearfinancialsummaryoftheresultsandoftheassetsandliabilitiesoftheGroupisshownonpages3to5.
CorporateGovernance&Sustainability|Directors’Report
76 SwirePropertiesAnnualReport|2011
CorporateGovernanceAstheCompanywasnotalistedcompanyduringtheyearended31stDecember2011,theCodeonCorporateGovernancePracticessetoutinAppendix14totheListingRules(the“Code”)wasnotapplicabletoitduringthatperiod.TheCodewillbeapplicabletotheCompanywitheffectfromtheyearending31stDecember2012.DetailsoftheCompany’scorporategovernancepracticesaresetoutonpages64to71.
DonationsDuringtheyear,theGroupmadedonationsforcharitablepurposesofHK$18millionanddonationstowardsvariousscholarshipsofHK$1million.
FixedAssetsFordetailsofmovementsinfixedassetsrefertonotes16and17totheaccounts.
TheannualvaluationoftheGroup’sinvestmentpropertyportfolio,whethercompleteorinthecourseofdevelopment,wascarriedoutbyprofessionallyqualifiedvaluers(96%byvaluehavingbeenvaluedbyDTZDebenhamTieLeung)onthebasisofopenmarketvalueat31stDecember2011.ThisvaluationresultedinanincreaseofHK$20,345millioninthecarryingvalueoftheinvestmentpropertyportfolio.
AscheduleoftheprincipalpropertiesoftheGroupanditsjointlycontrolledandassociatedcompaniesisgivenonpages148to158.
BorrowingsFordetailsoftheGroup’sborrowingsrefertopages53to61.
InterestRefertopage58fordetailsoftheamountofinterestcapitalisedbytheGroup.
MajorCustomersandSuppliersDuringtheyear,lessthan30%oftheGroup’ssalesandlessthan30%oftheGroup’spurchaseswereattributabletotheGroup’sfivelargestcustomersandsuppliersrespectively.
DirectorsTheDirectorsoftheCompanyasatthedateofthisreportarelistedonpages72and73.Allofthemservedthroughoutthecalendaryear2011.Duringtheyear,J.C.G.BremridgeservedasanExecutiveDirectoruntilhisresignationwitheffectfrom12thSeptember2011.H.C.Cheng,whowasappointedasaNon-ExecutiveDirectoron14thApril2010,wasre-designatedasanIndependentNon-ExecutiveDirectoron16thDecember2011.
IndependenceConfirmation
TheCompanyhasreceivedfromallofitsIndependentNon-ExecutiveDirectorslistedonpage73confirmationoftheirindependencepursuanttoListingRule3.13andconsidersallofthemtobeindependent.TheconfirmationfromH.C.Chengreferstohisre-designationfromaNon-ExecutivedirectortoanIndependentNon-ExecutiveDirectoron16thDecember2011andhisbeingAdvisertotheGroupChiefExecutiveofHSBCHoldingsplc,whichismentionedunder“DirectorsandOfficer–IndependentNon-ExecutiveDirectors”onpage73.
TheBoardconsidersthatallofitsIndependentNon-ExecutiveDirectorsareindependentincharacterandjudgementandfulfiltheindependenceguidelinessetoutinRule3.13oftheListingRules.
H.C.ChengjoinedTheHongkongandShanghaiBankingCorporationLimited(“HSBC”)in1978andwasChairmanandaDirectorofHSBCuntil1stFebruary2010.HewasanExecutiveDirectorofHSBCHoldingsplc,theholdingcompanyofHSBC,until27thMay2011.HSBC,togetherwithBOCIAsiaLimited,GoldmanSachs(Asia)L.L.C.andMorganStanleyAsiaLimited,wereengagedbytheCompanyandSwirePacificasjointsponsorsinrespectoftheSpin-offandlistingofsharesintheCompanywhichtookplaceon18thJanuary2012.
TheBoardconsidersthatH.C.Cheng’spreviousdesignationasaNon-ExecutiveDirectoroftheCompanyandhiscurrentadvisoryroletotheGroupChiefExecutiveofHSBCHoldingsplcshouldnotaffecthisindependenceasanIndependentNon-ExecutiveDirectorsince(a)hehasneverheldanyexecutiveoffice,norhashebeeninvolvedinanyexecutivecapacity,intheCompanyandhisroleasaNon-ExecutiveDirectoroftheCompanyhasbeennodifferentfromthatofanIndependentNon-ExecutiveDirectorand(b)hehasnot,at
SwirePropertiesAnnualReport|2011 77
leastinthepast21months,beenadirector,anemployeeoraprincipalofHSBC(whichisajointsponsor,asdescribedinthepreviousparagraph)andinhiscurrentadvisoryroletotheGroupChiefExecutiveofHSBCHoldingsplc,heisnotinvolvedintheday-to-dayoperationsofHSBCHoldingsplcoritssubsidiariesand,inparticular,hehasnotbeeninvolvedinHSBC’sroleinprovidingservicestotheCompanyasajointsponsor.
TermofAppointment
Article93oftheCompany’sArticlesofAssociationprovidesforallDirectorstoretireatthethirdAnnualGeneralMeetingfollowingtheirelectionbyordinaryresolution.NoneoftheDirectorswillretirethisyear.
EachoftheDirectorshasenteredintoaletterofappointment,whichconstitutesaservicecontract,withtheCompanyforatermofuptothreeyearsuntilretirementunderArticle91orArticle93oftheArticlesofAssociationoftheCompany,whichwillberenewedforatermofthreeyearsuponeachelectionorre-election.NoDirectorhasaservicecontractwiththeCompanywhichisnotdeterminablebytheemployerwithinoneyearwithoutpaymentofcompensation(otherthanstatutorycompensation).
FeesandEmoluments
FulldetailsofDirectors’feesandemolumentsaresetoutinnote10totheaccounts.
Directors’feespaidtotheIndependentNon-ExecutiveDirectorsduringtheyeartotalledHK$2,950,000.TheyreceivednootheremolumentsfromtheGroup.
Directors’InterestsAsat31stDecember2011,therequirementunderSection352oftheSecuritiesandFuturesOrdinance(“SFO”)tomaintainaregisterofdirectors’andchiefexecutives’interestsandshortpositionswasnotapplicabletotheCompanybecausetheCompanywasnotyetalistedcorporation(withinthemeaningofPartXVoftheSFO).
On18thJanuary2012,theCompanybecamealistedcorporation.Asat18thJanuary2012,theregistermaintainedunderSection352oftheSFOshowedthatDirectorsheldthefollowinginterestsinthesharesoftheCompanyanditsassociatedcorporations(withinthemeaningofPartXVoftheSFO),JohnSwire&SonsLimited,SwirePacificLimitedandHongKongAircraftEngineeringCompanyLimited:
Capacity
BeneficialInterest
Personal FamilyTrust
InterestTotalNo.ofShares
PercentageofIssued
Capital(%) Note
Swire Properties Limited
S.E.Bradley 700 – – 700 0.00001
P.K.Etchells – 8,400 – 8,400 0.00014
D.C.Y.Ho 14,000 – – 14,000 0.00024
P.A.Kilgour 3,500 – – 3,500 0.00006
C.D.Pratt 49,700 – – 49,700 0.00085
M.B.Swire 354,961 – 551,397 906,358 0.01549 (1)
CorporateGovernance&Sustainability|Directors’Report
78 SwirePropertiesAnnualReport|2011
Capacity
BeneficialInterest
Personal FamilyTrust
InterestTotalNo.ofShares
PercentageofIssued
Capital(%) Note
John Swire & Sons Limited
Ordinary Shares of £1
M.B.Swire 3,140,523 – 19,222,920 22,363,443 22.36 (1)
8% Cum. Preference Shares of £1
M.B.Swire 846,476 – 5,655,441 6,501,917 21.67 (1)
Capacity
BeneficialInterest
Personal FamilyTrust
InterestTotalNo.ofShares
PercentageofIssued
Capital(%) Note
Swire Pacific Limited
‘A’ shares
S.E.Bradley 1,000 – – 1,000 0.0001
P.K.Etchells – 12,000 – 12,000 0.0013
P.A.Kilgour 5,000 – – 5,000 0.0006
C.D.Pratt 51,000 – – 51,000 0.0056
M.B.Swire 58,791 – – 58,791 0.0065
‘B’ shares
D.C.Y.Ho 100,000 – – 100,000 0.0033
C.D.Pratt 100,000 – – 100,000 0.0033
M.B.Swire 2,241,483 – 3,938,554 6,180,037 0.2063 (1)
Capacity
BeneficialInterest
Personal FamilyTrust
InterestTotalNo.ofShares
PercentageofIssued
Capital(%) Note
Hong Kong Aircraft Engineering Company Limited
D.C.Y.Ho 6,400 – – 6,400 0.0038
Note:(1)M.B.Swireisatrusteeoftrustswhichheld425,295sharesintheCompany,10,766,080ordinarysharesand3,121,716preferencesharesin
JohnSwire&SonsLimitedand3,037,822‘B’sharesinSwirePacificLimitedincludedunder“Trustinterest”anddoesnothaveanybeneficialinterestinthoseshares.
SwirePropertiesAnnualReport|2011 79
Otherthanasstatedabove,noDirectororChiefExecutiveoftheCompanyhadanyinterestorshortposition,whetherbeneficialornon-beneficial,inthesharesorunderlyingsharesanddebenturesoftheCompanyoranyofitsassociatedcorporations(withinthemeaningofPartXVoftheSFO)on18thJanuary2012.
Neitherduringnorpriortotheyearunderreviewhasanyrightbeengrantedto,orexercisedby,anyDirectoroftheCompany,ortoorbythespouseorminorchildofanyDirector,tosubscribeforshares,warrantsordebenturesoftheCompany.
AtnotimeduringtheyeardidanyDirector,otherthanasstatedinthisreport,haveabeneficialinterest,whetherdirectlyorindirectly,inacontracttowhichtheCompanyoranyofitsassociatedcorporationswasaparty,beingacontractwhichwasofsignificanceandinwhichtheDirector’sinterestwasmaterial.
AtnotimeduringtheyearwastheCompany,oranyofitsassociatedcorporations,apartytoanyarrangementstoenabletheDirectorsoftheCompanytoacquirebenefitsbymeansoftheacquisitionofsharesinordebenturesoftheCompanyoranyotherbodycorporate.
Directors’Interestsin CompetingBusinessesNoneoftheDirectorsortheirrespectiveassociateshasanycompetinginterestswhichneedtobedisclosedpursuanttoRule8.10oftheListingRules.
SubstantialShareholders’andOtherInterestsAsat31stDecember2011,therequirementunderSection336oftheSFOtomaintainaregisterofinterestsinsharesandshortpositionswasnotapplicabletotheCompanybecausetheCompanywasnotyetalistedcorporation(withinthemeaningofPartXVoftheSFO).
TheregisterofinterestsinsharesandshortpositionsmaintainedunderSection336oftheSFOshowsthatasat18thJanuary2012theCompanyhadbeennotifiedofthefollowinginterestsinthesharesoftheCompanyheldbysubstantialshareholdersandotherpersons:
NumberofShares PercentageofIssuedCapital(%) TypeofInterest(notes)
1.SwirePacificLimited 4,796,765,835 82.00 Beneficialowner(1)
2.JohnSwire&SonsLimited 5,247,704,623 89.70 Beneficialownerandattributableinterest(2)
Notes:Asat18thJanuary2012:(1)SwirePacificLimitedwasinterestedin4,796,765,835sharesoftheCompanyasbeneficialowner;(2)JohnSwire&SonsLimitedisdeemedtobeinterestedinatotalof5,247,704,623sharesoftheCompany,comprising:
(a)1,626,412shareshelddirectly;(b)14,106,194sharesheldbyitswholly-ownedsubsidiaryTaikooLimited;(c)435,206,182sharesheldbyitswholly-ownedsubsidiaryJohnSwire&Sons(H.K.)Limited;and(d)4,796,765,835sharesinwhichSwirePacificLimitedwasinterested,byvirtueoftheJohnSwire&SonsLimitedgroup’sinterestinsharesof
SwirePacificLimitedrepresentingapproximately43.13%oftheissuedsharecapitalandapproximately58.58%ofthevotingrights.
CorporateGovernance&Sustainability|Directors’Report
80 SwirePropertiesAnnualReport|2011
PublicFloatListingRule8.08(1)oftheListingRulesrequiresthatatleast25%ofanissuer’stotalissuedsharecapitalmustatalltimesbeheldbythepublic.TheCompanyhasbeengrantedbytheStockExchangeawaiverfromstrictcompliancewithListingRule8.08(1)soastoallowalowerpublicfloatpercentageof10%(orsuchhigherpercentageasmaybeheldbythepublicuponcompletionoftheSpin-off).ImmediatelyuponcompletionoftheSpin-offon18thJanuary2012,thepublicfloatpercentagewasapproximately10.28%.
ContinuingConnectedTransactionsDuringtheyearended31stDecember2011,theGrouphadthefollowingcontinuingconnectedtransactions,detailsofwhicharesetoutbelow:
(a)JSSHKServicesAgreementThereisanagreementforservices(“ServicesAgreement”),inrespectofwhichJohnSwire&Sons(H.K.)Limited(“JSSHK”),awholly-ownedsubsidiaryofJohnSwire&SonsLimited(“Swire”),providedtotheCompanyanditssubsidiaryadviceandexpertiseofthedirectorsandseniorofficersoftheSwiregroup,full-orpart-timeservicesofmembersofthestaffoftheSwiregroup,otheradministrativeandsimilarservicesandsuchotherservicesasmayhavebeenagreedfromtimetotime,andprocuredfortheCompanyanditssubsidiary,jointlycontrolledandassociatedcompaniestheuseofrelevanttrademarksownedbySwire.Nofeeispayableinconsiderationofsuchprocurationobligationorsuchuse.TheprocurationobligationwouldfallawayiftheServicesAgreementwereterminatedornotrenewed.
Inreturnfortheseservices,JSSHKreceivesannualservicefeescalculatedas2.5%oftheCompany’sconsolidatedprofitbeforetaxationandnon-controllinginterestsaftercertainadjustments.Thefeesforeachyeararepayableincashinarrearintwoinstalments,aninterimpaymentbytheendofOctoberandafinalpaymentbytheendofAprilofthefollowingyear,adjustedtotakeaccountoftheinterimpayment.TheCompanyalsoreimbursestheSwiregroupatcostforalltheexpensesincurredintheprovisionoftheservices.
TheServicesAgreement,whichwasenteredintobetweenJSSHKandtheCompanyon1stDecember2004,tookeffectfrom1stJanuary2005,wasrenewedon
1stOctober2007,wasamendedandrestatedwitheffectfrom1stJanuary2010,andwasrenewedagainon1stOctober2010.ThecurrenttermoftheServicesAgreementisfrom1stJanuary2011to31stDecember2013anditisrenewableforsuccessiveperiodsofthreeyearsthereafterunlesseitherpartytoitgivestotheothernoticeofterminationofnotlessthanthreemonthsexpiringonany31stDecember.
Particularsofthefeespaidandtheexpensesreimbursedfortheyearended31stDecember2011aregiveninnote42totheaccounts.
(b)JSSHKTenancyFrameworkAgreementTheCompanyandJSSHKenteredintoatenancyframeworkagreement(the“JSSHKTenancyFrameworkAgreement”)on18thOctober2011togovernexistingandfuturetenancyagreementsbetweenmembersoftheGroupandmembersoftheJSSHKgroup(excludingtheSwirePacificgroup)foratermofsixyearsfrom1stJanuary2010to31stDecember2015.PursuanttotheJSSHKTenancyFrameworkAgreement,membersoftheGroupwillenterintotenancyagreementswithmembersoftheJSSHKgroup(excludingtheSwirePacificgroup)fromtimetotimeonnormalcommercialtermsbasedonprevailingmarketrentals.TheJSSHKTenancyFrameworkAgreementisrenewableforsuccessiveperiodsofsixyearsthereafterunlesseitherpartytoitgivestotheothernoticeofterminationofnotlessthanthreemonthsexpiringonany31stDecember.
Fortheyearended31stDecember2011,theaggregaterentalspayabletotheGroupunderthetenanciespursuanttotheJSSHKTenancyFrameworkAgreementtotalledHK$76million.
(c)SwirePacificTenancyFrameworkAgreementTheCompanyandSwirePacificenteredintoatenancyframeworkagreement(the“SwirePacificTenancyFrameworkAgreement”)on18thOctober2011togovernexistingandfuturetenancyagreementsbetweenmembersoftheGroupandmembersoftheSwirePacificgroup(excludingtheGroup)foratermofsixyearsfrom1stJanuary2010to31stDecember2015.PursuanttotheSwirePacificTenancyFrameworkAgreement,membersoftheGroupwillenterintotenancyagreementswithmembersoftheSwirePacificgroup(excludingthe
SwirePropertiesAnnualReport|2011 81
Group)fromtimetotimeonnormalcommercialtermsbasedonprevailingmarketrentals.TheSwirePacificTenancyFrameworkAgreementisrenewableforsuccessiveperiodsofsixyearsthereafterunlesseitherpartytoitgivestotheothernoticeofterminationofnotlessthanthreemonthsexpiringonany31stDecember.
Fortheyearended31stDecember2011,theaggregaterentalspayabletotheGroupunderthetenanciespursuanttotheSwirePacificTenancyFrameworkAgreementtotalledHK$60million.
Asat31stDecember2011,theSwiregroupownedapproximately42.79%oftheissuedcapitalofSwirePacificandapproximately58.45%ofvotingrightsattachedtosuchissuedsharecapitalandtheCompanywasawhollyownedsubsidiaryofSwirePacific.Asat18thJanuary2012,SwirePacificownedapproximately82.00%oftheissuedsharecapitaloftheCompany.JSSHK,asawholly-ownedsubsidiaryofSwire,andSwirePacificarethereforeconnectedpersonsoftheCompanyundertheListingRules.ThetransactionsundertheServicesAgreement,JSSHKTenancyFrameworkAgreementandSwirePacificTenancyFrameworkAgreementarecontinuingconnectedtransactions,theparticularsofwhicharesetoutinthelistingdocumentoftheCompanydated21stDecember2011.
Asdirectorsand/oremployeesoftheSwiregroup,G.M.C.Bradley,M.Cubbon,J.W.J.Hughes-Hallett,P.A.Kilgour,M.M.S.Low,C.D.Pratt,andM.B.SwireareinterestedintheServicesAgreementandtheJSSHKTenancyFrameworkAgreement.J.C.G.BremridgewasinterestedasadirectorandemployeeoftheSwiregroupuntilhisresignationwitheffectfrom12thSeptember2011.M.B.SwireisalsointerestedasashareholderofSwire.
AsdirectorsofSwirePacific,M.Cubbon,J.W.J.Hughes-Hallett,P.A.Kilgour,C.D.PrattandM.B.SwireareinterestedintheSwirePacificTenancyFrameworkAgreement.
TheIndependentNon-ExecutiveDirectorsoftheCompany,whoarenotinterestedinanyconnectedtransactionswiththeGroup,havereviewedandconfirmedthatthecontinuingconnectedtransactionsassetoutabovehavebeenenteredintobytheGroupintheordinaryandusualcourseofbusiness,onnormalcommercialterms,andinaccordancewiththerelevantagreementsgoverningthemontermsthatarefairandreasonableandintheinterestsoftheshareholdersoftheCompanyasawhole.
TheauditorsoftheCompanyhavealsoreviewedthesetransactionsandconfirmedtotheBoardthatthesetransactionshavebeenapprovedbytheBoardoftheCompanyandhavebeenenteredintoinaccordancewiththerelevantagreementsgoverningthetransactions;thattheyareinaccordancewiththepricingpoliciesoftheGroup(ifthetransactionsinvolveprovisionofgoodsorservicesbytheGroup);andthattheyhavenotexceededtherelevantannualcapsdisclosedinthelistingdocumentoftheCompanydated21stDecember2011.
OnbehalfoftheBoard
ChristopherPratt|Chairman
Hong Kong, 15th March 2012
82 SwirePropertiesAnnualReport|2011
Webelievethatlong-termvaluecreationdependsonthesustainabledevelopmentofourbusinessandthecommunitiesinwhichweoperate.
Ourcommitmenttosustainabledevelopmentmeansthatweincorporatesocial,economicandenvironmentalrisksandbenefitsintoourbusinessdecision-making.Wetaketheseconsiderationsthroughallphasesofadevelopmentproject:frominception,design,procurement,constructionandoccupationtodemolitionorconversion.
OurapproachisreflectedinourSustainableDevelopmentPolicyandsupportedbyourEnvironment,Health&SafetypoliciesandSupplierCodeofConduct,allofwhichareavailable,togetherwithadditionalinformation,onourwebsitehttp://www.swireproperties.com/en/sustainability/commitments/pages/index.aspx.
Wewillpublishaseparate2011SustainableDevelopmentReportlaterthisyear.
SustainableDevelopment SteeringCommitteeOurSustainableDevelopmentSteeringCommitteeisresponsibleforbalancingsocial,economicandenvironmentalrisksandbenefitsinourbusinessdecision-makingprocessandformonitoringperformance.TheCommitteeisconvenedbytheGeneralManagerofTechnicalServicesandSustainabilityandincludesrepresentativesfromtheFinance&HumanResources,Marketing,Communications&e-Services,Development&Valuations,ProjectsandPortfolioManagementdepartments
andfromSwireHotels.TheHeadoftheSustainableDevelopmentOfficeofJohnSwire&Sons(H.K.)Ltd.isalsoamemberoftheCommittee,toaidthesharingofbestpracticesfromandwiththeremainderoftheSwiregroup.
EnvironmentAsaleadingpropertydeveloper,werecognisetheneedtobearolemodelfortheindustry,andtotaketheleadinreducingourenvironmentalimpactandinincorporatingsustainablepracticesinourdevelopments.
Weworktoreduceourimpactontheenvironmentbyminimisingouruseofnaturalresources,reducingorpreventingpollution,managingwasteeffectivelyandensuringenvironmentalconsiderationsareanintegralpartofourdecision-makingprocess.
Actionstakenonclimatechangeandenvironmentalprotectionin2011includethefollowing:
1. TheTaiKooHuipropertyinGuangzhou(ourmostrecentlyopeneddevelopmentinMainlandChina)incorporatedsustainabilityelementsinitsdesignandconstruction.WeaimedtoachieveLEED’s(LeadershipinEnergyandEnvironmentalDesign)Goldcertificationforthedevelopment,soweincludedfromthestartenvironmentalconsiderationsinrelationtothesitedevelopment,materials,wastemanagement,energyuse,indoorairqualityandwaterconservation.
SustainableDevelopment
Establishmentofa
JointResearchCentreforBuildingEnergyEfficiencyandSustainability
September,Beijing
SwirePropertiesAnnualReport|2011 83
approachisguidedbyourHealth&SafetyPolicyanddirectedbyourHealth&SafetyTeam.WeestablishedaSafetyManagementSystem(SMS)inHongKongin2003.ThereisaSMSSteeringCommittee,whichincludesrepresentativesfromoperatingdepartments,supportdepartmentsandourHealth&Safetyteam.TheSteeringCommitteemonitorsourhealth&safetyperformance,identifiesworkplacehazardsandunsafepracticesandaddressessafetyconcernsraisedbyouremployeesandtenantsandbythegeneralpublic.
WithourexpansioninMainlandChinaandinlightoftheincreasingdemandforcontractorsafety,wehaveimplementedasafetymonitoringschemeatourpropertiesinMainlandChina,withaviewtoraisingourcontractors’health&safetystandards.
Weverymuchregretthat,despiteourbestefforts,anemployeeofacontractorwaskilledatoneofourconstructionsitesinHongKongin2011.
CommunitiesWebelievethat,whenthecommunitiesinwhichweoperateprosper,sodowe.Weconcentrateonprojectswherewecanmakeadifference.Wesupportcommunityprojectswithmoney,ourproductsandservicesandthetimeandenergyofourstaff.
ArtsandCulture
Webelievethatculturaldevelopmentisaneffectivewaytoenrichasociety.Wearealong-standingandcommittedpatronofthearts.InHongKong,ahighlightofouractivitiesin2011was“AfterHourClassics”atArtisTree,acollaborationinMarchwiththeHongKongPhilharmonicOrchestra.FromSeptembertoOctober,wepresented“OutsidetheBox|FrankGehry”atArtisTree,bringingto
a. WeusedBuildingInformationModelling(BIM)(three-dimensional,real-timemodellingsoftware)inthedesignofTaiKooHui.Thissoftwareenablesustodetectdesignclashesinadvanceofconstruction,whichreducestheamountofbuildingwasteproduced.
b. Wetriedtosourcematerialsfromsupplierswithinaradiusof500milesduringtheconstructionofTaiKooHui,toreducetheenergyrequiredtotransportthem.
c. Weaimtosaveover140millionlitresofwaterperyear.Weuserainwaterforthecoolingtowerwatersupply.Treatedwastewaterfromtheofficesandthehotelwillbeusedfortheflushingsystemintheshoppingmallandtowashtheloadingbayfloor.
2. TogetherwiththeBuildingEnergyResearchCentreofTsinghuaUniversity,weestablishedaJointResearchCentreforBuildingEnergyEfficiencyandSustainability,providingUS$1millionperannuminfundingforaninitialthreeyearsfromSeptember2011.ThecentrewillextenditsresearchtoourprojectsinMainlandChina.A“MicroclimateAnalysis”anda“Three-StarGreenBuildingEvaluation”willbeconductedfortheDaciTempleprojectinChengdu,withaviewtoreducingcarbonemissionsandmakingtheprojectenergyefficient.Thejointresearchcentrewillundertakefurtherresearchintobuildingenergyefficiencyandwillpromotesustainabledevelopmentinthepropertyindustry.
3. Wehaveacceleratedthetimeperiodduringwhichweaimtoreduceenergyconsumptionatourinvestmentpropertyportfolioby50MkWh:thetargetdateforachievingthisgoalhasbeenbroughtforwardfrom2020to2016.Weachieved12.8MkWhenergyreductionfrom2008baselinein2011.
Health&SafetyThesafetyofouremployees,tenants,contractorsandthosewhouseourfacilitiesisahighpriorityforourbusiness.Our
“ExperiencingRhythmsAnew”atthe
BeijingMusicFestivalOctober,Beijing
FirstFrankGehryExhibitioninHongKong
September,HongKong
CorporateGovernance&Sustainability|SustainableDevelopment
84 SwirePropertiesAnnualReport|2011
HongKongthefirstexhibitionoftheworkofPritzkerPrize-winningarchitect,FrankGehry.Theexhibitiondrewlargenumbersofpeople,includingstudentsandmembersofprofessionalgroups.
InMainlandChina,wepresented“ExperiencingRhythmsAnew”,theinauguralconcertofthe“UrbanSeries”fortheBeijingMusicFestival(BMF).HeldinOctoberatTheOrangeatSanlitunVillage,theconcertfeaturedtheacclaimedJUPercussionGroupfromTaiwanandmarkedthebeginningofalong-termcollaborationbetweenSwirePropertiesandBMFintendedtopromoteartsandcultureappreciationinBeijing.
VolunteerService
SocialresponsibilityisoneofSwireProperties’corevalues.SinceweestablishedtheCommunityAmbassadorProgrammein2001,theprogrammehasgrownfrom40tomorethan1,000Ambassadors,whoworkwithanexpandingnetworkoffamilymembersandstakeholders,includingtenants,NGOsandotherbusinesspartners.
TheCommunityAmbassadorProgrammeisledbyouremployees,whodesignandorganisealloftheprogramme’sactivitiesandcontributetheirskills,professionalexpertiseandresourcestosupportthoseinneed.TheCompanysupportstheirinitiativeswithflexibleworkarrangements,specialawardschemesandaspecialday-offarrangementforstaff
whohaveaccumulatedacertainnumberofhoursofvolunteerservice.
Since2001,ourAmbassadorshavecontributedover45,000servicehoursthroughmorethan400volunteeringactivitiestobenefitmorethan50,000peopleinthecommunity.OureffortshavebeenrecognisedwiththeFourthHongKongVolunteerAward(CorporateAward),presentedbytheAgencyforVolunteerService.Thisawardacknowledgescorporations’outstandingcontributionsandaccomplishmentsinpromotingvolunteeringinHongKong.
In2011,theCommunityAmbassadorProgrammecelebrateditstenthanniversaryofcommunityservicewiththeLove’sTeamCharityBazaar,whichwasheldinIslandEastinDecember.TheeventraisedatotalofHK$1,055,007,includingadonationfromtheSwireGroupCharitableTrust.ThemoneywasdonatedtothefiveNGOswhoco-organisedtheeventwithus.
EnvironmentalandEducationalProgrammes
Ourenvironmentalandeducationalprogrammesaredesignedtopromoteeco-friendlypractices.Weactivelyencourageourtenantsandstakeholderstocollaboratewithusontheseprogrammes.In2011,weconcentratedoncollectingandrecyclingreadingmaterialsfortheneedy.
SwirePropertiesAnnualReport|2011 85
InMay,weranathree-monthbookdrive,“BooksforLove”,tocollectbookstosellattheLove’sTeamCharityBazaar.WeinvitedourstakeholdersinHongKong(includingresidentsof11residentialdevelopments,tenantsfrom19commercialpropertiesandemployeesofallSwiregroupcompaniesandtheirsubsidiaries)todonateneworsecond-handbooks.Morethan30,000bookswerecollected.
InShanghai,wedonatedmorethan900newEnglishandHongKongbookstoJing’anDistrictLibraryinJuly,offeringresidentsarichnewvarietyofreadingmaterials.AlsoinShanghai,welaunchedtheYouthforEnvironmentalSustainability(YES)programmeataprimaryschoolaffiliatedtoShanghaiNormalUniversityinSeptember.Theprogrammeusedcreativeactivitiestohelpstudentsunderstandmoreaboutenvironmentalprotection.
ValueChainOurapproachtosustainabledevelopmentencompassesoursuppliersandcustomers.Thisapproachrequiresustoaddresssuchissuesasethicalconduct,labourstandards,humanrights,productresponsibilityandenvironmentalimpacts.
WehaveaSupplyChainSustainabilityCommittee,chairedbytheGeneralManagerofTechnicalServicesandSustainabilityandincludingrepresentativesfromdepartmentsinHongKongandMainlandChina.Theserepresentativesheadanumberof
subcommittees,whichareresponsibleforvarioussupplierrelationships.
ThroughourSupplyChainSustainabilityProgramme,weseekcommitmentstosustainabledevelopmentfromoursuppliers.Weaddresssustainabilityissuesandmanageriskinoursupplychainthroughasupplierself-assessment,supportedbyourSupplierCodeofConduct.WeincludetheSupplierCodeofConductinourcontractswithourmostsignificantsuppliersinHongKongandMainlandChina.Incaseofnon-compliance,thesuppliermustsubmitacorrectiveactionplanandimplementitwithinanagreedperiod,orriskterminationofthecontract.
EmployeesSwirePropertiesemploysover4,000peopleinHongKong,MainlandChina,theU.S.andtheU.K.Asanequalopportunityemployer,wearecommittedtoprovidingequalopportunitiesinrelationtoallhumanresourcesmattersandstrivetoofferaworkplacefreefromdiscriminationandharassment.
TheCompanyprovidestraininganddevelopmentforitsemployees,includingtraineeprogrammesforfreshgraduates,externaleducationalcourses,on-the-jobtraining,internaljobrotations,mentoringandoverseassecondments.WealsoofferanEmployeeAssistanceProgrammetoassiststaffinresolvingworkandpersonalproblems.
Launchof
YESprogamme
September-December,Shanghai
CommunityAmbassadorProgramme’s10thAnniversary–
Love’sTeamCharityBazaarDecember,HongKong
FinancialContentsAUDITOR’SREPORTANDACCOUNTS
88 IndependentAuditor’sReport
89 ConsolidatedIncomeStatement
90 ConsolidatedStatementofComprehensiveIncome
91 ConsolidatedStatementofFinancialPosition
92 CompanyStatementofFinancialPosition
93 ConsolidatedStatementofCashFlows
94 ConsolidatedStatementofChangesinEquity
95 NotestotheAccounts
136 PrincipalAccountingPolicies
145 PrincipalSubsidiary,JointlyControlledandAssociatedCompanies
SUPPLEMENTARYINFORMATION
148 ScheduleofPrincipalGroupProperties
159 Glossary
160 FinancialCalendarandInformationforInvestors
88 SwirePropertiesAnnualReport|2011
IndependentAuditor’sReport
TotheshareholdersofSwirePropertiesLimited(incorporatedinHongKongwithlimitedliability)
WehaveauditedtheaccountsofSwirePropertiesLimited(the“Company”)anditssubsidiaries(together,the“Group”)setoutonpages89to147,whichcomprisetheconsolidatedandcompanystatementoffinancialpositionasat31stDecember2011,andtheconsolidatedincomestatement,theconsolidatedstatementofcomprehensiveincome,theconsolidatedstatementofchangesinequityandtheconsolidatedstatementofcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.
Directors’ResponsibilityfortheAccountsThedirectorsoftheCompanyareresponsibleforthepreparationofaccountsthatgiveatrueandfairviewinaccordancewithHongKongFinancialReportingStandardsissuedbytheHongKongInstituteofCertifiedPublicAccountants,andtheHongKongCompaniesOrdinance,andforsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationofaccountsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
Auditor’sResponsibilityOurresponsibilityistoexpressanopinionontheseaccountsbasedonourauditandtoreportouropinionsolelytoyou,asabody,inaccordancewithsection141oftheHongKongCompaniesOrdinanceandfornootherpurpose.Wedonotassumeresponsibilitytowardsoracceptliabilitytoanyotherpersonforthecontentsofthisreport.
WeconductedourauditinaccordancewithHongKongStandardsonAuditingissuedbytheHongKongInstituteofCertifiedPublicAccountants.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceastowhethertheaccountsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheaccounts.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementoftheaccounts,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationofaccountsthatgiveatrueandfairviewinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationoftheaccounts.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
OpinionInouropinion,theaccountsgiveatrueandfairviewofthestateofaffairsoftheCompanyandoftheGroupasat31stDecember2011,andoftheGroup’sprofitandcashflowsfortheyearthenendedinaccordancewithHongKongFinancialReportingStandardsandhavebeenproperlypreparedinaccordancewiththeHongKongCompaniesOrdinance.
PricewaterhouseCoopersCertifiedPublicAccountants
Hong Kong, 15th March 2012
SwirePropertiesAnnualReport|2011 89
ConsolidatedIncomeStatementFortheyearended31stDecember2011
Note2011
HK$M2010
HK$M
Turnover 4 9,581 8,871
Costofsales 5 (2,334) (2,261)
Grossprofit 7,247 6,610
Administrativeexpenses (1,029) (911)
Otheroperatingexpenses (130) (135)
ProfitonsaleofinterestinFestivalWalk 6 595 –
Othernet(losses)/gains 7 (83) 925
Changeinfairvalueofinvestmentproperties 20,345 20,480
Operatingprofit 26,945 26,969
Financecharges (1,504) (1,264)
Financeincome 27 27
Netfinancecharges 11 (1,477) (1,237)
Shareofprofitslesslossesofjointlycontrolledcompanies 851 1,461
Shareofprofitslesslossesofassociatedcompanies 156 225
Profitbeforetaxation 26,475 27,418
Taxation 12 (1,296) (1,324)
Profitfortheyear 25,179 26,094
Profitfortheyearattributableto:
TheCompany’sshareholder 37 25,126 26,045
Non-controllinginterests 38 53 49
25,179 26,094
Dividends
Specialinterim–paid 10,014 –
Interim–paid – 1
Firstinterim–declaredon15thMarch2012 1,053 –
Final–paid – 2,425
14 11,067 2,426
HK$ HK$
EarningspershareforprofitattributabletotheCompany’sshareholder (basicanddiluted) 15 4.40 4.58
Thenotesonpages95to135andtheprincipalaccountingpoliciesonpages136to144formpartoftheseaccounts.
90 SwirePropertiesAnnualReport|2011
ConsolidatedStatementofComprehensiveIncomeFortheyearended31stDecember2011
2011HK$M
2010HK$M
Profit for the year 25,179 26,094
Other comprehensive income
RevaluationofpropertiespreviouslyoccupiedbytheGroup
–gainrecognisedduringtheyear 186 1,448
Shareofothercomprehensiveincomeofjointlycontrolledandassociatedcompanies 276 132
Nettranslationdifferencesonforeignoperations 517 441
Other comprehensive income for the year, net of tax 979 2,021
Total comprehensive income for the year 26,158 28,115
Totalcomprehensiveincomeattributableto:
TheCompany’sshareholder 26,105 28,063
Non-controllinginterests 53 52
26,158 28,115
Note:Itemsshownwithinothercomprehensiveincomehavenotaxeffect.
Thenotesonpages95to135andtheprincipalaccountingpoliciesonpages136to144formpartoftheseaccounts.
SwirePropertiesAnnualReport|2011 91
ConsolidatedStatementofFinancialPositionAt31stDecember2011
Note2011
HK$M2010
HK$M
ASSETS AND LIABILITIESNon-current assets Property,plantandequipment 16 6,615 6,333 Investmentproperties 17 187,488 178,985 Leaseholdlandandlanduserights 18 3 6 Intangibleassets 19 7 187 Propertiesheldfordevelopment 20 124 443 Jointlycontrolledcompanies 22 13,000 10,940 Associatedcompanies 23 639 705 Available-for-saleassets 25 9 7 Deferredtaxassets 34 57 94 Retirementbenefitassets 35 108 83
208,050 197,783Current assets Propertiesunderdevelopmentandforsale 26 6,848 5,554 Stocksandworkinprogress 27 69 59 Tradeandotherreceivables 28 1,945 1,168 Amountduefromimmediateholdingcompany–SwirePacificLimited 29 142 106 Cashandcashequivalents 30 1,180 1,042
10,184 7,929Current liabilities Tradeandotherpayables 31 8,088 5,199 Taxationpayable 445 379 Bankoverdraftsandshort-termbankloans 32 1,023 991 Long-termloansduewithinoneyear 32 664 3,103 Loansduetoafellowsubsidiarycompany–SwireFinanceLimited 33 6,943 5,228
17,163 14,900
Net current liabilities (6,979) (6,971)
Total assets less current liabilities 201,071 190,812
Non-current liabilities Long-termbankloans 32 5,819 1,582 Deferredtaxliabilities 34 4,246 3,900 Loansduetoafellowsubsidiarycompany–SwireFinanceLimited 33 14,431 26,974
24,496 32,456
NET ASSETS 176,575 158,356
EQUITYSharecapital 36 5,850 5,690Reserves 37 170,193 152,187Equity attributable to the Company’s shareholder 176,043 157,877Non-controlling interests 38 532 479
TOTAL EQUITY 176,575 158,356
Christopher D. PrattPaul K. EtchellsDirectorsHong Kong, 15th March 2012
Thenotesonpages95to135andtheprincipalaccountingpoliciesonpages136to144formpartoftheseaccounts.
92 SwirePropertiesAnnualReport|2011
CompanyStatementofFinancialPositionAt31stDecember2011
Note2011
HK$M2010
HK$M
ASSETS AND LIABILITIES
Non-current assets
Property,plantandequipment 16 74 88
Intangibleassets 19 7 5
Subsidiarycompanies 21 45,005 36,430
Jointlycontrolledcompanies 22 492 515
Associatedcompanies 23 179 179
Retirementbenefitassets 35 99 79
45,856 37,296
Current assets
Tradeandotherreceivables 28 92 58
Taxrecoverable 3 –
Cashandcashequivalents 30 267 285
362 343
Current liabilities
Tradeandotherpayables 31 2,992 2,691
Taxationpayable – 1
2,992 2,692
Net current liabilities (2,630) (2,349)
Total assets less current liabilities 43,226 34,947
Non-current liabilities
Deferredtaxliabilities 34 19 4
NET ASSETS 43,207 34,943
EQUITY
Equity attributable to the Company’s shareholder
Sharecapital 36 5,850 5,690
Reserves 37 37,357 29,253
TOTAL EQUITY 43,207 34,943
Christopher D. PrattPaul K. EtchellsDirectorsHong Kong, 15th March 2012
Thenotesonpages95to135andtheprincipalaccountingpoliciesonpages136to144formpartoftheseaccounts.
SwirePropertiesAnnualReport|2011 93
ConsolidatedStatementofCashFlowsFortheyearended31stDecember2011
Note2011
HK$M2010
HK$M
Operating activities Cashgeneratedfromoperations 43(a) 7,396 4,753 Interestpaid (1,664) (1,469) Interestreceived 38 15 Profitstaxpaid (485) (435)
5,285 2,864 Dividendsreceivedfromjointlycontrolledandassociatedcompaniesand available-for-saleassets 415 48
Net cash from operating activities 5,700 2,912
Investing activities Purchaseofproperty,plantandequipment 43(b) (548) (507) Additionstoinvestmentproperties (4,717) (4,234) Purchaseofintangibleassets (5) (3) Proceedsfromdisposalsofproperty,plantandequipment 1 – Proceedsfromdisposalsofinvestmentproperties – 1,213 ProceedsfromdisposalofFestivalWalk 43(c) 18,305 – Purchaseofsharesinsubsidiarycompanies – (189) Purchaseofsharesinjointlycontrolledcompanies – (284) Loanstojointlycontrolledcompanies (2,294) (1,032) PurchaseofsharesinPCCWTower – (1,824) Repaymentofloansbyjointlycontrolledcompanies 1,169 351 ProceedsfromdisposalofsharesinPCCWTower – 1,353 Initialleasingcostsincurred (193) (117)
Net cash generated from/(used in) investing activities 11,718 (5,273)
Net cash inflow/(outflow) before financing 17,418 (2,361)
Financing activities Bankloansdrawnandrefinancing 2,206 1,822 Repaymentofbankloans (628) (349)
1,578 1,473 Proceedsfromissuanceofordinaryshares 4,500 – Capitalcontributionfromnon-controllinginterests 38 12 11 (Decrease)/increaseinloansduetoafellowsubsidiarycompany (10,875) 882 Decreaseinamountduetoimmediateholdingcompany – (11) DividendspaidtotheCompany’sshareholder 37 (12,439) (1) Dividendspaidtonon-controllinginterests 43(d) (12) (8)
Net cash (used in)/generated from financing activities (17,236) 2,346
Increase/(decrease) in cash and cash equivalents 182 (15) Cashandcashequivalentsat1stJanuary 1,023 1,066 Currencyadjustment (26) (28)Cash and cash equivalents at 31st December 1,179 1,023
Represented by:Bankbalancesandshort-termdepositsmaturingwithinthreemonths 30 1,180 1,042Bankoverdrafts (1) (19)
1,179 1,023
Thenotesonpages95to135andtheprincipalaccountingpoliciesonpages136to144formpartoftheseaccounts.
94 SwirePropertiesAnnualReport|2011
ConsolidatedStatementofChangesinEquityFortheyearended31stDecember2011
Attributable to the Company’s shareholder
Note
Share capital HK$M
RevenuereserveHK$M
Otherreserves
HK$MTotal
HK$M
Non-controlling
interestsHK$M
TotalequityHK$M
At 1st January 2011 5,690 150,317 1,870 157,877 479 158,356
Profitfortheyear – 25,126 – 25,126 53 25,179
Othercomprehensiveincome – – 979 979 – 979
Total comprehensive income for the year 37, 38 – 25,126 979 26,105 53 26,158
Dividendpaid – (12,439) – (12,439) (12) (12,451)
Capitalcontribution 160 – 4,340 4,500 12 4,512
At 31st December 2011 5,850 163,004 7,189 176,043 532 176,575
AttributabletotheCompany’sshareholder
Note
SharecapitalHK$M
RevenuereserveHK$M
Otherreserves
HK$MTotal
HK$M
Non-controlling
interestsHK$M
TotalequityHK$M
At 1st January 2010 5,690 124,273 (148) 129,815 424 130,239
Profitfortheyear – 26,045 – 26,045 49 26,094
Othercomprehensiveincome – – 2,018 2,018 3 2,021
Total comprehensive income for the year 37, 38 – 26,045 2,018 28,063 52 28,115
Dividendpaid – (1) – (1) (8) (9)
Capitalcontribution – – – – 11 11
At 31st December 2010 5,690 150,317 1,870 157,877 479 158,356
Thenotesonpages95to135andtheprincipalaccountingpoliciesonpages136to144formpartoftheseaccounts.
SwirePropertiesAnnualReport|2011 95
NotestotheAccounts
1. ChangesinAccountingStandards(a) TheGrouphasadoptedthefollowingrelevantrevisedHongKongFinancialReportingStandards(“HKFRS”),amendmentsand
interpretationseffectivefrom1stJanuary2011:
HKFRSs(Amendments) ImprovementstoHKFRSs2010HK(IFRIC)-Int14(Amendments) PrepaymentsofaMinimumFundingRequirementHKAS24(Revised) RelatedPartyDisclosuresHKAS12(Amendment) Incometaxes*
* TheGrouphasearlyadoptedtheamendmenttoHKAS12in2010.Thenewaccountingpolicyhasbeenretrospectivelyappliedforannual periodsbeginningbefore1stJanuary2010.
TheimprovementstoHKFRSs2010consistofamendmentstoexistingstandards.IthashadnofinancialimpactontheGroup’sannualaccounts.
TheamendmenttoHK(IFRIC)-Int14permitscompanieswhichmakeanearlypaymentofcontributionstocoverminimumfundingrequirementstotreatthatpaymentasanasset.IthashadnosignificanteffectontheGroup’sresultsornetassets.
HKAS24(Revised)haschangedthedefinitionofRelatedParties.IthashadnofinancialimpactontheGroup’sannualaccounts.
(b) ThefollowingamendedHKFRSandinterpretationsareeffectivebutnotrelevanttotheGroup’soperations:
HK(IFRIC)-Int19 ExtinguishingFinancialLiabilitieswithEquityInstrumentsHKAS32(Amendments) ClassificationofRightsIssues
(c) TheGrouphasnotearlyadoptedthefollowingrelevantnewandrevisedstandardsandamendmentsthathavebeenissuedbutarenotyeteffective:
HKFRS7(Amendment) Disclosures–TransfersofFinancialAssets1
HKFRS9 FinancialInstruments3
HKFRS10 ConsolidatedFinancialStatements2
HKFRS11 JointArrangements2
HKFRS12 DisclosureofInterestsinOtherEntities2
HKFRS13 FairValueMeasurement2
HKAS1(Amendment) PresentationofFinancialStatement2
HKAS19(revised2011) EmployeeBenefits2
HKAS28(revised2011) InvestmentsinAssociatesandJointVentures2
1 TobeappliedbytheGroupfrom1stJanuary2012.2 TobeappliedbytheGroupfrom1stJanuary2013.3 TobeappliedbytheGroupfrom1stJanuary2015.
HKFRS7(Amendment)introducesnewdisclosurerequirementsontransfersoffinancialassets.Disclosureisrequiredbyclassofassetofthenature,carryingamountandadescriptionoftherisksandrewardsoffinancialassetsthathavebeentransferredtoanotherpartyyetremainontheentity’sbalancesheet.Thegainorlossonthetransferredassetsandanyretainedinterestinthoseassetsmustbegiven.Inaddition,otherdisclosuresmustenableuserstounderstandtheamountofanyassociatedliabilities,andtherelationshipbetweenthefinancialassetsandassociatedliabilities.Thedisclosuresmustbepresentedbytypeofongoinginvolvement.Forexample,theretainedexposurecouldbepresentedbytypeoffinancialinstrument(suchasguarantees,callorputoptions),orbytypeoftransfer(suchasfactoringofreceivables,securitisationsorsecuritieslending).Itisnotexpectedthatthisamendmentwillhaveasignificanteffectontheaccounts.
NotestotheAccounts
96 SwirePropertiesAnnualReport|2011
1.ChangesinAccountingStandards(continued)
HKFRS9‘FinancialInstruments’addressestheclassification,measurementandrecognitionoffinancialassetsandfinancialliabilities.HKFRS9wasissuedinNovember2009andOctober2010.ItreplacesthepartsofHKAS39thatrelatetotheclassificationandmeasurementoffinancialinstruments.HKFRS9requiresfinancialassetstobeclassifiedintotwomeasurementcategories:thosemeasuredasatfairvalueandthosemeasuredatamortisedcost.Thedeterminationismadeatinitialrecognition.Theclassificationdependsontheentity’sbusinessmodelformanagingitsfinancialinstrumentsandthecontractualcashflowcharacteristicsoftheinstrument.Forfinancialliabilities,thestandardretainsmostoftheHKAS39requirements.Themainchangeisthat,incaseswherethefairvalueoptionistakenforfinancialliabilities,thepartofafairvaluechangeduetoanentity’sowncreditriskisrecordedinothercomprehensiveincomeratherthantheincomestatement,unlessthiscreatesanaccountingmismatch.ItisnotexpectedthatthenewstandardwillhaveasignificanteffectontheGroup’sresultsandnetassets.
HKFRS10‘ConsolidatedFinancialStatements’buildsonexistingprinciplesbyidentifyingtheconceptofcontrolasthedeterminingfactorinwhetheranentityshouldbeincludedwithintheconsolidatedfinancialstatementsoftheparentcompany.Thestandardprovidesadditionalguidancetoassistinthedeterminationofcontrolwherethisisdifficulttoassess.ItisnotexpectedthatthenewstandardwillhaveasignificanteffectontheGroup’sresultsandnetassets.
HKFRS11‘JointArrangements’,whichsupersedesHKAS31InterestsinJointVentures,classifiesjointarrangementsaseitherjointoperations(combingtheexistingconceptsofjointlycontrolledassetsandjointlycontrolledoperations)orjointventures(equivalenttotheexistingconceptofajointlycontrolledentity).Thedeterminationofastowhetheritisajointoperationorajointventureisbasedontherightsandobligationsunderthearrangementratherthanitslegalform.Jointoperationsarisewhereajointoperatorhasrightstotheassetsandobligationsrelatingtothearrangementwhereasjointventuresarisewherethejointoperatorhasrightstothenetassetsofthearrangement.Thenewstandardrequirestheuseoftheequitymethodofaccountingforinterestsinjointventuresandhaseliminatedtheoptionofusingproportionateconsolidationmethod.ItisnotexpectedthatthenewstandardwillhaveasignificanteffectontheGroup’sresultsornetassets.
HKFRS12‘DisclosuresofInterestsinOtherEntities’includesthedisclosurerequirementsforallformsofinterestsinotherentities,includingjointarrangements,associates,specialpurposevehiclesandotheroffbalancesheetvehicles.ItisnotexpectedthatthenewstandardwillhaveasignificanteffectontheGroup’sresultsandnetassets.
HKFRS13‘FairValueMeasurement’aimstoimproveconsistencyandreducecomplexitybyprovidingaprecisedefinitionoffairvalueandasinglesourceoffairvaluemeasurementanddisclosurerequirementsforuseacrossHKFRSs.TherequirementsdonotextendtheuseoffairvalueaccountingbutprovideguidanceonhowitshouldbeappliedwhereitsuseisalreadyrequiredorpermittedbyotherstandardswithinHKFRSs.ItisnotexpectedthatthenewstandardwillhaveasignificanteffectontheGroup’sresultsandnetassets.
TheamendmenttoHKAS1focusesonimprovingpresentationofcomponentsofothercomprehensiveitems.TheGroupwillberequiredtogroupitemspresentedinothercomprehensiveincomeonthebasisofwhethertheyarepotentiallyreclassifiabletoprofitorlosssubsequently.
TheamendmenttoHKAS19requirestherecognitionofchangesinthedefinedbenefitobligationandinplanassetswhenthosechangesoccur.Italsoeliminatesthecorridorapproachandcalculatesthefinancecostsonanetfundingbasis.TheGroupisyettoassessthefullimpactoftheamendments.
HKAS28(revised2011)includestherequirementsforjointventures,aswellasassociates,tobeequityaccountedfollowingtheissueofHKFRS11.ItisnotexpectedthattheamendmentwillhaveasignificanteffectontheGroup’sresultsornetassets.
(d) ThefollowingrevisedstandardsandamendmentshavebeenissuedwhicharenotyeteffectiveandnotrelevanttotheGroup’soperations:
HKFRS1(Amendment) SevereHyperinflationandRemovalofFixedDatesforFirst-TimeAdoptersHKAS27(revised) SeparateFinancialStatements
SwirePropertiesAnnualReport|2011 97
2. FinancialRiskManagementFinancial risk factors
TheGroupisexposedtofinancialrisksattributabletocashflowinterestrate,creditandliquidity.Managementmanagesandmonitorstheseexposurestoensureappropriatemeasuresareimplementedonatimelyandeffectivemanner.TheGroup’soverallriskmanagementprogrammefocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsontheGroup’sfinancialperformance.
RiskmanagementiscarriedoutunderpoliciesapprovedbytheBoardofDirectorsoftheGroupinconjunctionwithpoliciesapprovedbytheBoardofDirectorsofitsimmediateholdingcompany.TheBoardofDirectorsidentifyandevaluatefinancialrisksandmaintainanddeveloptheGroup’sfinancialriskmanagementpoliciesandprocedureswhichareimplementedbytheGroup.
(i) Interestrateexposure
TheGroup’sinterestrateriskarisesmainlyfromborrowingsfrombanksandafellowsubsidiary.BorrowingsatvariableratesexposetheGrouptocashflowinterestraterisk.BorrowingsatfixedratesexposetotheGrouptofairvalueinterestraterisk.TheGroupearnsinterestincomeoncashdepositsandloansduefromjointlycontrolledcompanies.
TheGroupdidnotenterintointerestrateswapcontracts.TheGroupmanagesitsinterestrateriskbycloselymonitoringthemovementofinterestratesandtheparentcompanyoftheCompanyusesinterestrateswapstomanagethelong-terminterestrateexposureonbehalfoftheCompany.Theeffectsoftheseinterestrateswapsarereflectedintheintercompanyinterestcharged.
TheimpactontheGroup’sincomestatementandequityofa100basis-pointsincreaseordecreaseinmarketinterestratesfromtheratesapplicableat31stDecember,withallothervariablesheldconstant,wouldhavebeen:
100 basis-pointsincrease in
interest ratesHK$M
100 basis-pointsdecrease in
interest ratesHK$M
At31stDecember2011
Impactonincomestatement:(loss)/gain (86) 86
At31stDecember2010
Impactonincomestatement:(loss)/gain (131) 131
Thisanalysisisbasedonahypotheticalsituation,asinpracticemarketinterestratesrarelychangeinisolation,andshouldnotbeconsideredaprojectionoflikelyfutureprofitsorlosses.Theanalysisassumesthefollowing:
–Changesinmarketinterestratesaffecttheinterestincomeorexpenseoffloatingratefinancialinstruments–Changesinmarketinterestratesonlyaffectinterestincomeorexpenseinrelationtofixedratefinancialinstrumentsifthese arerecognisedatfairvalue–Allotherfinancialassetsandliabilitiesareheldconstant
(ii) Currencyexposure
TheGroupoperatesinternationallyandisexposedtoforeignexchangeriskarisingfromvariouscurrencyexposures,primarilywithrespecttoUSdollarsandRenminbi.Foreignexchangeriskarisesfromtheforeigncurrencydenominationofcommercialtransactions,assetsandliabilities,andnetinvestmentsinforeignoperations.TheGrouphasnosignificantdirectexposuretoforeigncurrenciesasthesearemanagedbyafellowsubsidiary.Indirectlythroughtheborrowingsfromitsfellowsubsidiary,theGroup
NotestotheAccounts
98 SwirePropertiesAnnualReport|2011
2. FinancialRiskManagement(continued)
hedgeshighlyprobabletransactionsineachmajorcurrencywheretheirvalueortimetoexecutiongivesrisetoasignificantcurrencyexposure,providedthatthecostoftheforeignexchangeforwardorderivativecontractisnotprohibitivelyexpensivehavingregardtotheunderlyingexposure.
Asat31stDecember2011,theGrouphad(throughborrowingsfromitsfellowsubsidiary)hedgeditssignificantforeigncurrencyfundingexposures.ExposurearisingfromtheGroup’sinvestmentsinoperatingsubsidiarieswithnetassetsdenominatedinforeigncurrenciesisreduced,wherepractical,byprovidingfundinginthesamecurrency.
Foreigncurrencyfundinganddepositexposurearemonitoredonacontinuousbasis.Onaquarterlybasis,sensitivitytestingisperformedbyvaryingforecastforeignexchangerates.TheinterestchargedontheGroup’sborrowingsfromitsfellowsubsidiaryreflects,amongotherthings,theGroup’sproportionateshareoftherelevantcurrencyhedgingcostsorsavings.Otherwise,currentlytheGroupdoesnotengageinhedgingactivitiesdesignedorintendedtomanagecurrencyrisk.
(iii) Creditexposure
TheGroup’screditriskismainlyattributabletotradedebtors,depositswithfinancialinstitutions,receivablesfromjointlycontrolledcompaniesandassociatedcompanies.Theexposuretothesecreditrisksiscloselymonitoredonanongoingbasisbyestablishedcreditpolicies.Forfinancialinstitutions,onlyindependentlyratedpartieswithgoodcreditratingsareaccepted.Tenantsareassessedandratedbasedontheircreditquality,takingintoaccounttheirfinancialposition,pastexperienceandotherfactors.TheGroupdoesnotgrantcredittermstoitscustomersexcepttocorporatecustomersinthehotelbusinesswherecommercialtradecredittermsaregiven.TheGroupalsoholdsrentaldepositsassecurityagainsttradedebtors.Inaddition,theGroupandtheCompanymonitortheexposuretocreditriskinrespectofthefinancialassistanceprovidedtosubsidiaries,jointlycontrolledcompaniesandassociatedcompaniesthroughexercisingcontrolorsignificantinfluenceovertheirfinancialandoperatingpolicydecisionsandreviewingtheirfinancialpositionsonaregularbasis.
(iv) Liquidityexposure
TheGrouptakesliquidityriskintoconsiderationwhendecidingitssourcesoffundsandtheirrespectivetenors.ThetablesbelowanalysethecontractualundiscountedcashflowsoftheGroup’sandtheCompany’sfinancialliabilitiesbyrelevantmaturitygroupingsbasedontheremainingperiodfromtheyear-enddatetotheearliestdatetheGroupandtheCompanycanberequiredtopay:
GroupAt 31st December 2011
Note
Carrying amount HK$M
Total contractual
undiscounted cash flow
HK$M
Within 1 year or on
demand HK$M
More than 1 year but
less than2 yearsHK$M
More than2 years but
less than5 yearsHK$M
More than5 yearsHK$M
Tradecreditors 31 1,788 1,788 1,788 – – –
Amountduetointermediateholdingcompany 31 79 79 79 – – –
Amountduetoafellowsubsidiarycompany 31 102 102 102 – – –
Amountduetoajointlycontrolledcompany 2 2 2 – – –
Interest-bearingadvancesfrom ajointlycontrolledcompany 31 225 225 225 – – –
Advancesfromnon-controllinginterests 31 234 234 234 – – –
Rentaldepositsfromtenants 31 1,780 1,908 379 380 809 340
Accruedcapitalexpenditure 1,215 1,215 1,215 – – –
Otherpayables 31 1,726 1,726 1,726 – – –
Non-controllinginterestputoption 31 937 937 937 – – –
Borrowingsfrombanks (includinginterestobligations) 32 7,506 8,437 2,084 464 5,889 –
Loansduetoafellowsubsidiarycompany (includinginterestobligations) 33 21,374 25,144 7,737 3,000 6,491 7,916
36,968 41,797 16,508 3,844 13,189 8,256
SwirePropertiesAnnualReport|2011 99
GroupAt31stDecember2010
Note
CarryingamountHK$M
Totalcontractual
undiscountedcashflow
HK$M
Within1yearoron
demandHK$M
Morethan1yearbut
lessthan2yearsHK$M
Morethan2yearsbut
lessthan5yearsHK$M
Morethan5yearsHK$M
Tradecreditors 31 544 544 544 – – –
Amountduetointermediateholdingcompany 31 99 99 99 – – –
Interest-bearingadvancefrom anassociatedcompany 31 149 149 149 – – –
Advancesfromnon-controllinginterests 31 214 214 214 – – –
Rentaldepositsfromtenants 31 1,810 1,912 441 349 842 280
Accruedcapitalexpenditure 1,192 1,192 1,192 – – –
Otherpayables 31 513 513 513 – – –
Non-controllinginterestputoption 31 678 678 678 – – –
Borrowingsfrombanks (includinginterestobligations) 32 5,676 6,026 4,310 169 1,547 –
Loansduetoafellowsubsidiarycompany (includinginterestobligations) 33 32,202 38,364 6,215 8,085 6,417 17,647
43,077 49,691 14,355 8,603 8,806 17,927
CompanyAt 31st December 2011
Note
Carrying amount HK$M
Total contractual
undiscounted cash flow
HK$M
Within 1 year or on
demand HK$M
More than 1 year but
less than2 yearsHK$M
More than2 years but
less than5 yearsHK$M
More than5 yearsHK$M
Amountduetointermediateholdingcompany 31 79 79 79 – – –
Amountsduetosubsidiarycompanies 31 2,586 2,586 2,586 – – –
Otherpayables 31 327 327 327 – – –
2,992 2,992 2,992 – – –
At31stDecember2010
Note
CarryingamountHK$M
Totalcontractual
undiscountedcashflow
HK$M
Within1yearoron
demandHK$M
Morethan1yearbut
lessthan2yearsHK$M
Morethan2yearsbut
lessthan5yearsHK$M
Morethan5yearsHK$M
Tradecreditors 31 15 15 15 – – –
Amountduetointermediateholdingcompany 31 99 99 99 – – –
Amountsduetosubsidiarycompanies 31 2,386 2,386 2,386 – – –
Interest-bearingadvancesfrom anassociatedcompany 31 149 149 149 – – –
Otherpayables 31 42 42 42 – – –
2,691 2,691 2,691 – – –
2. FinancialRiskManagement(continued)
NotestotheAccounts
100 SwirePropertiesAnnualReport|2011
3. CriticalAccountingEstimatesandJudgementsEstimatesandjudgementsusedinpreparingtheaccountsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.TheGroupmakesestimatesandassumptionsconcerningthefuture.Theresultingaccountingestimateswill,inevitably,seldombeequaltotherelatedactualresults.Theestimatesandassumptionsthathaveasignificanteffectonthecarryingamountsofassetsandliabilitiesarediscussedbelow:
(a) Estimates of fair value of investment properties
DTZDebenhamTieLeung(“DTZ”),anindependentpropertyvaluer,wasengagedtocarryoutanindependentvaluationofthemajorportionoftheGroup’sinvestmentpropertyportfolioasat31stDecember2011.ThisvaluationwascarriedoutinaccordancewiththeValuationStandardsonPropertiesissuedbytheHongKongInstituteofSurveyors,whichdefinemarketvalueas“theestimatedamountforwhichapropertyshouldexchangeonthedateofvaluationbetweenawillingbuyerandawillingsellerinanarm’slengthtransactionafterpropermarketingwhereinthepartieseachactedknowledgeably,prudentlyandwithoutcompulsion”.
DTZhasderivedthevaluationoftheGroup’scompletedinvestmentpropertyportfoliobycapitalisingtherentalincomederivedfromexistingtenancieswithdueprovisionforreversionaryincomepotentialandbymakingreferencetorecentcomparablesalestransactionsasavailableintherelevantpropertymarket.Theymakeassumptionsprincipallyinrespectofopenmarketrentsandyields.
DTZhasderivedthevaluationoftheGroup'sinvestmentpropertiesunderconstructionbymakingreferencetorecentcomparablesalestransactionsasavailableintherelevantpropertymarket(ontheassumptionithadalreadybeencompletedatthevaluationdate),andhasalsotakenintoaccounttheconstructioncostalreadyincurredaswellastheestimatedcosttobeincurredtocompletetheproject.Wherethevaluationispreparedbasedontheassumptionthattheproperty’stitlecertificatehasbeenreceivedbutthisisnotthecase,theGrouphasmadeanestimateofthefuturelandcostanddeductedfromthevaluation.
ManagementhasreviewedtheDTZvaluationandcompareditwithitsownassumptions,withreferencetocomparablesalestransactiondatawheresuchinformationisavailable,andhasconcludedthattheDTZvaluationoftheGroup’sinvestmentpropertyportfolioisreasonable.
(b) Impairment of assets
TheGrouptestsatleastannuallywhethergoodwillandotherassetsthathaveindefiniteusefulliveshavesufferedanyimpairment.Assets,includinglandandpropertiesnotheldatfairvalue,arereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountoftheassetexceedsitsrecoverableamount.Therecoverableamountisdeterminedusingfairvaluelesscoststosellorvalue-in-usecalculationsasappropriate.
(c) Income taxes
TheGroupissubjecttoincometaxesinnumerousjurisdictions.Significantjudgementisrequiredindeterminingtheworldwideprovisionforincometaxes.TherearetransactionsandcalculationsrelatingtotheGroup'sordinarybusinessactivitiesforwhichtheultimatetaxdeterminationisuncertain.TheGrouprecognisesliabilitiesforpotentialtaxexposuresbasedonestimatesofwhetheradditionaltaxeswillbedue.Wherethefinaltaxoutcomeofthesemattersaredifferentfromtheamountsthatwereinitiallyrecorded,suchdifferenceswillaffecttheincometaxanddeferredtaxprovisionsintheyearinwhichtheoutcomesbecomeknown.
SwirePropertiesAnnualReport|2011 101
4. TurnoverTheCompanyisalimitedliabilitycompanyincorporatedinHongKongandlistedonTheStockExchangeofHongKongLimited.TheprincipalactivityoftheCompanyisthatofaholdingcompany.Theprincipalactivitiesofitsmajorsubsidiary,jointlycontrolledandassociatedcompaniesareshownonpages145to147.
TurnoverrepresentssalesbytheCompanyanditssubsidiarycompaniestoexternalcustomersandcomprisesrevenuefrom:
Group
2011HK$M
2010HK$M
Grossrentalincomefrominvestmentproperties 8,557 7,875
Propertytrading 213 400
Hotels 717 518
Renderingofservices 94 78
9,581 8,871
5. CostofSalesThefollowingtableillustratesthecostofsalesfortheyear:
Group
2011HK$M
2010HK$M
Directrentaloutgoingsinrespectofinvestmentpropertiesthat
–generatedrentalincome (1,471) (1,330)
–didnotgeneraterentalincome (46) (92)
(1,517) (1,422)
Propertytrading (199) (267)
Hotels (584) (543)
Renderingofservices (34) (29)
(2,334) (2,261)
6. ProfitonSaleofInterestinFestivalWalkInJuly2011,anagreementwasenteredintowithanIndependentThirdPartyforthedisposaloftheGroup’sentireinterestinFestivalWalkforacashconsiderationofHK$18,800million,subjecttoanadjustmentbyreferencetonetcurrentassetsandliabilitiesatcompletion.TheadjustmentresultedinanadditionalreceiptofapproximatelyHK$116million.Completiontookplaceon18thAugust2011.
Theprofitonthesale,whichexcludesgainsonrevaluationofthepropertypreviouslycreditedtotheconsolidatedincomestatementupto30thJune2011(ofwhichHK$1,098millionaroseinthesixmonthsendedonthatdate),isHK$595million.
NotestotheAccounts
102 SwirePropertiesAnnualReport|2011
7. OtherNet(Losses)/Gains
Group
2011HK$M
2010HK$M
Profitonsaleofinvestmentproperties – 544Remeasurementgainsandprofitondisposalrelatingtothechangeofshareholding inPCCWTower – 342Impairment(losses)/reversalsonhotelandtradingproperties (100) 1Netforeignexchangelosses (6) (2)Provisionwrittenback 19 18Reversalofincomepreviouslyrecognisedasforfeiteddepositontradingproperties (16) –Others 20 22
(83) 925
8. ExpensesbyTypeExpensesincludedincostofsales,administrativeandotheroperatingexpensesareanalysedasfollows:
Group
2011HK$M
2010HK$M
Depreciationofproperty,plantandequipment(note16) 224 214Amortisationof –intangibleassets(note19) 3 4
–initialleasingcostsoninvestmentproperties 65 34Staffcosts 1,137 1,087Operatingleaserentals –properties 55 8Auditors’remuneration –auditservices 8 5 –taxservices 1 6 –otherservices 15 19
SwirePropertiesAnnualReport|2011 103
9. SegmentInformation(a) Informationaboutreportablesegments
Analysis of Consolidated Income Statement
External turnover
HK$M
Inter-segment turnover
HK$M
Operating profit/(loss)
after depreciation
and amortisation
HK$M
Finance chargesHK$M
Finance incomeHK$M
Share of profits less
losses of jointly
controlled companies
HK$M
Share of profits less
losses of associated companies
HK$M
Profit/(loss) before
taxationHK$M
Tax chargeHK$M
Profit/(loss) for the year
HK$M
Profit/(loss) attributable
to the Company’s
shareholderHK$M
Depreciation and
amortisation charged to operating
profitHK$M
Year ended 31st December 2011
Propertyinvestment 8,651 8 6,743 (1,464) 24 123 – 5,426 (760) 4,666 4,656 (163)
Propertytrading 213 – (50) (5) 3 59 – 7 (3) 4 7 (9)
Hotels 717 2 (93) (35) – (7) 155 20 (53) (33) (33) (120)
Changeinfairvalueof investmentproperties – – 20,345 – – 676 1 21,022 (480) 20,542 20,496 –
Inter-segmentelimination – (10) – – – – – – – – – –
9,581 – 26,945 (1,504) 27 851 156 26,475 (1,296) 25,179 25,126 (292)
Yearended 31stDecember2010
Propertyinvestment 7,953 4 6,561 (1,233) 24 19 18 5,389 (793) 4,596 4,589 (132)
Propertytrading 400 – 72 (6) 3 30 – 99 (12) 87 87 –
Hotels 518 – (144) (25) – (23) 132 (60) (49) (109) (109) (120)
Changeinfairvalueof investmentproperties – – 20,480 – – 1,435 75 21,990 (470) 21,520 21,478 –
Inter-segmentelimination – (4) – – – – – – – – – –
8,871 – 26,969 (1,264) 27 1,461 225 27,418 (1,324) 26,094 26,045 (252)
Analysis of total assets of the Group
Segment assets
HK$M
Jointly controlled companies
HK$M
Associated companies
HK$M
Bank deposits HK$M
Total assets
HK$M
Additions to non-current assets (note)
HK$M
At 31st December 2011
Propertyinvestment 190,771 11,303 55 1,003 203,132 5,117
Propertytradinganddevelopment 7,479 842 – 76 8,397 2
Hotels 5,165 855 584 101 6,705 586
203,415 13,000 639 1,180 218,234 5,705
At31stDecember2010
Propertyinvestment 182,116 9,965 53 960 193,094 4,623
Propertytradinganddevelopment 6,150 348 – 42 6,540 2
Hotels 4,759 627 652 40 6,078 236
193,025 10,940 705 1,042 205,712 4,861
Note:Inthisanalysis,additionstonon-currentassetsduringtheyearexcludefinancialinstruments(whichincludejointlycontrolledandassociatedcompaniesandavailable-for-saleassets),deferredtaxassetsandretirementbenefitassets.
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104 SwirePropertiesAnnualReport|2011
9. SegmentInformation(continued)(a) Informationaboutreportablesegments(continued)
Analysis of total liabilities and non-controlling interests of the Group
Segment liabilities
HK$M
Current and deferred tax
liabilities HK$M
Gross borrowings
HK$M
Total liabilities
HK$M
Non- controlling
interests HK$M
At 31st December 2011
Propertyinvestment 6,184 4,672 22,852 33,708 532
Propertytradinganddevelopment 1,721 19 5,409 7,149 –
Hotels 183 – 619 802 –
8,088 4,691 28,880 41,659 532
At31stDecember2010
Propertyinvestment 4,764 4,278 32,755 41,797 479
Propertytradinganddevelopment 194 1 4,554 4,749 –
Hotels 241 – 569 810 –
5,199 4,279 37,878 47,356 479
TheSwirePropertiesGroupisorganisedonadivisionalbasis:Propertyinvestment,Propertytradinganddevelopment,andHotels.
Thereportablesegmentswithineachofthethreedivisionsareclassifiedaccordingtothenatureofthebusiness.
(b) Informationaboutgeographicalareas
TheactivitiesoftheGroupareprincipallybasedinHongKong,MainlandChina,theUnitedStatesofAmericaandtheUnitedKingdom.
Ananalysisofturnoverandnon-currentassetsoftheGroupbyprincipalmarketsisoutlinedbelow:
Turnover Non-current assets*
2011HK$M
2010HK$M
2011HK$M
2010HK$M
HongKong 8,392 8,301 169,779 166,268MainlandChina 932 446 23,378 18,693UnitedStatesofAmerica 146 50 569 446UnitedKingdom 111 74 511 547
9,581 8,871 194,237 185,954
* Inthisanalysis,thetotalofnon-currentassetsexcludesfinancialinstruments(whichincludejointlycontrolledandassociatedcompaniesandavailable-for-saleassets),deferredtaxassetsandretirementbenefitassets.
SwirePropertiesAnnualReport|2011 105
10.Directors’andExecutiveOfficers’Emoluments(a) DetailsoftheemolumentspaidandpayabletothedirectorsoftheGroupfortheyearended31stDecember2011areasfollows:
Cash Non cash
Salary/fee HK$’000
Discretionary bonus
(note (vi)) HK$’000
Allowances and benefits
HK$’000
Retirement schemes
contributions HK$’000
Discretionary bonus paid
to retirement schemes
HK$’000
Housing and other
benefits HK$’000
Total 2011
HK$’000
Total2010
HK$’000
For the year ended 31st December 2011
Executive Directors
C.D.Pratt – – – – – – – –
M.Cubbon 4,320 3,213 401 1,243 1,102 3,428 13,707 10,028
M.M.S.Low 1,860 483 580 99 – 54 3,076 777
G.M.C.Bradley 1,728 1,140 1,610 499 681 2,262 7,920 5,829
D.C.Y.Ho 3,744 646 – 12 – 111 4,513 2,665
G.J.Ongley 3,838 2,133 162 560 – 2,748 9,441 10,384
J.C.G.Bremridge(note(i)) 1,231 948 158 367 757 1,820 5,281 5,831
J.C.Culbertson(note(ii)) – 474 – – – – 474 3,132
S.G.Spurr(note(iii)) – 500 – – – – 500 2,854
K.G.Kerr(note(iv)) – – – – – – – 2,187
Non-Executive Directors
J.W.J.Hughes-Hallett – – – – – – – –
P.A.Kilgour – – – – – – – 439
M.B.Swire – – – – – – – –
P.N.L.Chen(note(v)) – – – – – – – –
Independent Non-Executive Directors
S.E.Bradley 550 – – – – – 550 395
J.C.C.Chan 650 – – – – – 650 467
H.C.Cheng 500 – – – – – 500 –
P.K.Etchells 700 – – – – – 700 502
S.C.Liu 550 – – – – – 550 395
Total 2011 19,671 9,537 2,911 2,780 2,540 10,423 47,862
Total2010 17,148 10,176 4,143 3,674 1,084 9,660 45,885
Notes:(i) J.C.G.Bremridgeresignedasanexecutivedirectoron11thSeptember2011.(ii) J.C.Culbertsonresignedasanexecutivedirectoron31stMarch2010withfinalbonuspaymentmadein2011.(iii) S.G.Spurrresignedasanexecutivedirectoron31stMarch2010withfinalbonuspaymentmadein2011.(iv) K.G.Kerrresignedasanexecutivedirectoron31stMay2009withfinalbonuspaymentmadein2010.(v) P.N.L.Chenresignedasanon-executivedirectoron13thApril2010.(vi) Thebonusesdisclosedabovearerelatedtoservicesasexecutiveandnon-executivedirectorsforthepreviousyear.
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106 SwirePropertiesAnnualReport|2011
10.Directors’andExecutiveOfficers’Emoluments(continued)(b) Fivehighestpaidindividuals
ThefiveindividualswhoseemolumentswerethehighestintheGroupfortheyearsended31stDecember2011and2010areasfollows:
Year ended 31st December
2011 2010
Numberofindividuals
Executivedirectors(note(i)) 3 3
Executiveofficers(note(ii)) 2 2
5 5
Notes:(i) Detailsoftheemolumentspaidtothesedirectorswereincludedinthedisclosureassetoutinnote10(a)above.(ii) Detailsofemolumentspaidtotheaboveexecutiveofficersareasfollows:
Year ended 31st December
2011HK$’000
2010HK$’000
Salary 3,902 5,225
Discretionarybonus* 3,150 3,696
Allowanceandbenefits 5,192 3,894
Retirementschemecontributions 406 502
12,650 13,317
* Thebonusesdisclosedabovearerelatedtoservicesforthepreviousyear.
Thenumberoftheaboveexecutiveofficersfellwithinthefollowingbandsofemoluments:
Year ended 31st December
2011 2010
HK$5,000,001–HK$5,500,000 1 –
HK$5,500,001–HK$6,000,000 – –
HK$6,000,001–HK$6,500,000 – 1
HK$7,000,001–HK$7,500,000 1 1
2 2
11.NetFinanceChargesRefertopage58fordetailsoftheGroup'snetfinancecharges.
SwirePropertiesAnnualReport|2011 107
12.Taxation
Group
2011 2010
HK$M HK$M HK$M HK$M
Currenttaxation:
HongKongprofitstax (628) (651)
Overseastaxation (12) (7)
Over/(under)-provisionsinprioryears 20 (6)
(620) (664)
Deferredtaxation:(note34)
Changesinfairvalueofinvestmentproperties (386) (384)
Originationandreversaloftemporarydifferences (290) (276)
(676) (660)
(1,296) (1,324)
HongKongprofitstaxiscalculatedat16.5%(2010:16.5%)ontheestimatedassessableprofitsfortheyear.OverseastaxiscalculatedattaxratesapplicableinjurisdictionsinwhichtheGroupisassessablefortax.
ThetaxchargeontheGroup’sprofitbeforetaxationdiffersfromthetheoreticalamountthatwouldariseusingtheHongKongprofitstaxrateoftheCompanyasfollows:
2011HK$M
2010HK$M
Profitbeforetaxation 26,475 27,418
Calculatedatataxrateof16.5%(2010:16.5%) (4,368) (4,524)Shareofprofitslesslossesofjointlycontrolledandassociatedcompanies 166 278Effectofdifferenttaxratesinothercountries (77) (106)Incomenotsubjecttotax 3,199 3,158Expensesnotdeductiblefortaxpurposes (141) (31)Unusedtaxlossesnotrecognised (84) (31)Utilisationofpreviouslyunrecognisedtaxlosses 24 34Recognitionofpreviouslyunrecognisedtaxlosses 45 1Deferredtaxassetswrittenoff (62) (96)Over/(under)-provisionsinprioryears 20 (6)
Deferredtaxonretirementbenefits (15) –Others (3) (1)
Taxcharge (1,296) (1,324)
TheGroup’sshareofjointlycontrolledandassociatedcompanies'taxchargesofHK$76million(2010:HK$436million)andHK$31million(2010:HK$34million)respectivelyisincludedintheshareofprofitslesslossesofjointlycontrolledandassociatedcompaniesshownintheconsolidatedincomestatement.
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108 SwirePropertiesAnnualReport|2011
13.ProfitAttributabletotheCompany’sShareholderOftheprofitattributabletotheCompany’sshareholder,HK$16,203million(2010:HK$2,491million)isdealtwithintheaccountsoftheCompany.
14.Dividends
Group
2011HK$M
2010HK$M
Firstspecialinterimdividendpaidon30thSeptember2011 4,514 –
Secondspecialinterimdividendpaidon8thNovember2011 5,500 –
Interimdividendpaidpriortothemerger* – 1
Firstinterimdividend(inlieuoffinaldividend)declaredon15thMarch2012ofHK¢18pershare) 1,053 –
Proposedfinaldividend – 2,425
11,067 2,426
Company
2011HK$M
2010HK$M
Firstspecialinterimdividendpaidon30thSeptember2011 4,514 –
Secondspecialinterimdividendpaidon8thNovember2011 5,500 –
Firstinterimdividend(inlieuoffinaldividend)declaredon15thMarch2012ofHK¢18pershare) 1,053 –
Proposedfinaldividend – 2,425
11,067 2,425
Thefirstinterimdividendisnotaccountedforin2011becauseithadnotbeendeclaredattheyearenddate.Theactualamountwillbeaccountedforasanappropriationoftherevenuereserveintheyearending31stDecember2012.
* ThisrelatestothedividendpaidbytheUSsubsidiarycompanypriortothemergerwiththeCompany,whichtookplaceon25thJanuary2010.Refertopage144ofthePrincipalAccountingPoliciesforfurtherdetails.
15.EarningsPerShare(BasicandDiluted)EarningspersharearecalculatedbydividingtheprofitattributabletotheCompany’sshareholderofHK$25,126million(2010:HK$26,045million,bytheweightedaveragenumberof5,704,027,397ordinarysharesinissueduring2011(2010:5,690,000,000ordinaryshares).
SwirePropertiesAnnualReport|2011 109
16.Property,PlantandEquipment
Group Company
Leasehold land held for own use
under finance lease HK$M
Land and property
HK$M
Plant and equipment
HK$MTotal
HK$M
Plant and equipment
HK$M
Cost:
At1stJanuary2011 2,378 4,011 951 7,340 225
Translationdifferences – 52 9 61 –
ChangeincompositionofGroup (20) (32) (27) (79) –
Additions – 595 90 685 15
Disposals – – (3) (3) (1)
Transferfromdeferredexpenditure – – 17 17 –
Costwritten-off – (25) (3) (28) (3)
Transferfrompropertiesheldfordevelopment – 50 – 50 –
Othernettransferstoinvestmentproperties (310) (1) – (311) –
Transferbetweencategories – 8 (8) – –
Revaluationsurplus 186 – – 186 –
At31stDecember2011 2,234 4,658 1,026 7,918 236
Accumulateddepreciationandimpairment:
At1stJanuary2011 49 413 545 1,007 137
Translationdifferences – 12 5 17 –
ChangeincompositionofGroup (6) (9) (26) (41) –
Chargefortheyear(note8) 20 76 128 224 26
Provisionforimpairmentlosses(note43(a)) – 99 6 105 –
Disposals – – (2) (2) (1)
Nettransferstoinvestmentproperties (5) (3) – (8) –
Depreciationwrittenback – (1) – (1) –
Transferfromdeferredexpenditure – – 2 2 –
At31stDecember2011 58 587 658 1,303 162
Netbookvalue:
At31stDecember2011 2,176 4,071 368 6,615 74
At31stDecember2011and2010,noneoftheGroup’sproperty,plantandequipmentwaspledgedassecurityfortheGroup’slong-termloans.
PropertiesoccupiedbytheGroup(togetherwiththeassociatedleaseholdland)weretransferredtoinvestmentpropertiesfollowingtheendofoccupationbytheGroup.Thevaluationincreasefromcarryingamounttofairvaluefortheyearsended31stDecember2011wasHK$186million(2010:HK$1,448million),hasbeenrecognisedinothercomprehensiveincomeandthepropertiesrevaluationreserve.
Property,plantandequipmentisreviewedforimpairmentwherevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.In2011theDirectorsconsideredanumberofhotelsintheUnitedKingdomtobeimpairedasaresultoftheconditionofthehotelpropertymarketintheselocations.ThecarryingamountofthesehotelshavebeenwrittendownbyHK$105milliontotheirrecoverableamount,whichisthefairvaluelesscoststosell,calculatedusingtheincomecapitalisationapproach.
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110 SwirePropertiesAnnualReport|2011
16.Property,PlantandEquipment(continued)
Group Company
Leaseholdlandheldforownuse
underfinanceleaseHK$M
Landandproperty
HK$M
Plantandequipment
HK$MTotal
HK$M
Plantandequipment
HK$M
Cost:
At1stJanuary2010 1,791 3,871 772 6,434 256
Translationdifferences – 24 4 28 –
Costwritten-off – (57) – (57) –
Additions – 269 146 415 83
Disposals – – (115) (115) (114)
Nettransferstoinvestmentproperties (861) 48 – (813) –
Transferbetweencategories – (144) 144 – –
Revaluationsurplus 1,448 – – 1,448 –
At31stDecember2010 2,378 4,011 951 7,340 225
Accumulateddepreciationandimpairment:
At1stJanuary2010 40 378 523 941 219
Translationdifferences – 5 2 7 –
Chargefortheyear(note8) 17 72 125 214 22
Disposals – – (105) (105) (104)
Transferstoinvestmentproperties (8) (42) – (50) –
At31stDecember2010 49 413 545 1,007 137
Netbookvalue:
At31stDecember2010 2,329 3,598 406 6,333 88
17.InvestmentPropertiesRefertopage35fordetailsoftheGroup’sinvestmentproperties.
SwirePropertiesAnnualReport|2011 111
18.LeaseholdLandandLandUseRightsTheGroup’sinterestsinleaseholdlandandlanduserightsrepresentprepaidoperatingleasepayments,thenetbookvalueofwhichisanalysedasfollows:
Group
2011HK$M
2010HK$M
At1stJanuary 6 6
Translationdifferences (1) –
Impairmentloss(note43(a)) (2) –
At31stDecember 3 6
HeldoutsideHongKong:
Onmedium-termleases(10to50years) 3 6
3 6
19.IntangibleAssets
Group Company
Goodwill HK$M
Computer Software
HK$MTotal
HK$M
Computer Software
HK$M
Cost:
At1stJanuary2011 182 43 225 43
Additions – 5 5 5
Disposals/written-off (182) – (182) –
At31stDecember2011 – 48 48 48
Accumulatedamortisationandimpairment:
At1stJanuary2011 – 38 38 38
Amortisationfortheyear(note8) – 3 3 3
At31stDecember2011 – 41 41 41
Netbookvalue:
At31stDecember2011 – 7 7 7
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112 SwirePropertiesAnnualReport|2011
19.IntangibleAssets(continued)
Group Company
GoodwillHK$M
ComputerSoftware
HK$MTotal
HK$M
ComputerSoftware
HK$M
Cost:
At1stJanuary2010 183 40 223 40
Translationdifferences (1) – (1) –
Additions – 3 3 3
At31stDecember2010 182 43 225 43
Accumulatedamortisationandimpairment:
At1stJanuary2010 – 34 34 34
Amortisationfortheyear(note8) – 4 4 4
At31stDecember2010 – 38 38 38
Netbookvalue:
At31stDecember2010 182 5 187 5
AmortisationofHK$3million(2010:HK$4million)isincludedinadministrativeexpensesintheconsolidatedincomestatement.
Impairmenttestofgoodwill
GoodwillattributabletoinvestmentpropertiesinHongKongarosewherethefairvalueofnetassetsacquiredwasbelowthefairvalueofconsiderationpaidduetotherecognition,requiredforaccountingpurposes,ofdeferredtaxliabilitiesinrespectofacceleratedtaxdepreciationontheinvestmentpropertiespurchased.Consequentlytherelatedgoodwillwillonlybeimpairedshouldthefairvalueoftheinvestmentpropertyinfuturefallbelowitsfairvalueatacquisition.Therecoverableamountofgoodwillattributabletothiscash-generatingunitisthereforeassessedonapost-taxbasisusingfairvaluelesscoststosell.
20.PropertiesHeldforDevelopmentRefertopage37fordetailsoftheGroup’spropertiesheldfordevelopment.
21.SubsidiaryCompaniesCompany
2011HK$M
2010HK$M
Unlistedsharesatcostlessprovisions 504 3,234
Loansandotheramountsduefromsubsidiarycompanies
–Interest-free 44,501 33,041
–Interest-bearing(2010:HIBORplus0.24%) – 155
45,005 36,430
Theloansandamountsduefromsubsidiarycompaniesareunsecuredandhavenofixedtermsofrepayment.
TheprincipalsubsidiarycompaniesofSwirePropertiesLimitedwhichhavemateriallyaffectedtheresultsorassetsoftheGroupareshownonpages145to147.
SwirePropertiesAnnualReport|2011 113
22.JointlyControlledCompanies
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Unlistedsharesatcost – –Shareofnetassets,unlisted 3,240 2,198 –Loansduefromjointlycontrolledcompanieslessprovisions –Interest-free 9,174 8,388 492 515 –Interest-bearingat1.71%to6.56%(2010:1.71%) 586 354 – –
13,000 10,940 492 515
Theloansduefromjointlycontrolledcompaniesareunsecuredandhavenofixedtermsofrepayment.
TheGroup’sshareofassetsandliabilitiesandresultsofjointlycontrolledcompaniesissummarisedbelow:
Group
2011HK$M
2010HK$M
Non-currentassets 14,558 13,052
Currentassets 3,231 2,031
Currentliabilities (4,227) (4,176)
Non-currentliabilities (10,322) (8,709)
Net assets 3,240 2,198
Revenue 608 426
Changeinfairvalueofinvestmentproperties 719 1,819
Expenses (400) (348)
Profitbeforetaxation 927 1,897
Taxation (76) (436)
Profit for the year 851 1,461
TheprincipaljointlycontrolledcompaniesofSwirePropertiesLimitedwhichhavemateriallyaffectedtheresultsorassetsoftheGroupareshownonpages145to147.
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114 SwirePropertiesAnnualReport|2011
23.AssociatedCompanies
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Unlistedsharesatcost – 3 3Shareofnetassets –Unlisted 463 529 –Loansduefromassociatedcompanies –Interest-free 176 176 176 176
639 705 179 179
Theloansduefromassociatedcompaniesareunsecuredandhavenofixedtermsofrepayment.
TheGroup’sshareoftheassetsandliabilitiesandresultsofassociatedcompaniesissummarisedbelow:
Group
2011HK$M
2010HK$M
Non-currentassets 689 694
Currentassets 221 349
Currentliabilities (150) (122)
Non-currentliabilities (297) (392)
Net assets 463 529
Revenue 572 539
Profitfortheyear 156 225
TheprincipalassociatedcompaniesofSwirePropertiesLimitedwhichhavemateriallyaffectedtheresultsorassetsoftheGroupareshownonpages145to147.
SwirePropertiesAnnualReport|2011 115
24.FinancialInstrumentsbyCategory
Group
At fair value through
profit or loss
HK$M
Available- for-sale HK$M
Loans and receivables
HK$M
Amortised cost
HK$M
Total carrying amount HK$M
Fair value
HK$M
Assets as per consolidated statement of financial position
At31stDecember2011
Available-for-saleassets(note25) – 9 – – 9 9
Amountduefromimmediateholdingcompany – – 142 – 142 142
Tradeandotherreceivables(note28) – – 1,823 – 1,823 1,823
Bankbalancesandshort-termdeposits(note30) – – 1,180 – 1,180 1,180
Total – 9 3,145 – 3,154 3,154
At31stDecember2010
Available-for-saleassets(note25) – 7 – – 7 7
Amountduefromimmediateholdingcompany – – 106 – 106 106
Tradeandotherreceivables(note28) – – 1,141 – 1,141 1,141
Bankbalancesandshort-termdeposits(note30) – – 1,042 – 1,042 1,042
Total – 7 2,289 – 2,296 2,296
Liabilities as per consolidated statement of financial position
At31stDecember2011
Tradeandotherpayables(note31) 937 – – 7,131 8,068 8,068
Bankoverdraftsandshort-termbankloans – – – 1,023 1,023 1,023
Long-termbankloans – – – 6,483 6,483 6,483
Total 937 – – 14,637 15,574 15,574
At31stDecember2010
Tradeandotherpayables(note31) 678 – – 4,495 5,173 5,173
Bankoverdraftsandshort-termbankloans – – – 991 991 991
Long-termbankloans – – – 4,685 4,685 4,685
Total 678 – – 10,171 10,849 10,849
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116 SwirePropertiesAnnualReport|2011
24.FinancialInstrumentsbyCategory(continued)
Company
Loans and receivables
HK$M
Amortised cost
HK$M
Total carrying amount HK$M
Fair value
HK$M
Assets as per statement of financial position
At31stDecember2011
Tradeandotherreceivables(note28) 87 – 87 87
Short-termdepositsandbankbalances(note30) 267 – 267 267
Total 354 – 354 354
At31stDecember2010
Tradeandotherreceivables(note28) 55 – 55 55
Short-termdepositsandbankbalances(note30) 285 – 285 285
Total 340 – 340 340
Liabilities as per statement of financial position
At31stDecember2011
Tradeandotherpayables(note31) – 2,992 2,992 2,992
Total – 2,992 2,992 2,992
At31stDecember2010
Tradeandotherpayables(note31) – 2,691 2,691 2,691
Total – 2,691 2,691 2,691
Theaccountingpoliciesappliedtofinancialinstrumentsareshownbelow:
Thefairvaluesoffinancialinstrumentstradedinactivemarketsarebasedonquotedmarketpricesattheyear-enddate.ThequotedmarketpricesusedforfinancialassetsheldbytheGrouparethecurrentbidprices.
Thefairvaluesoffinancialinstrumentsthatarenottradedinactivemarketsaredeterminedbyusingvaluationtechniquessuchasestimateddiscountedcashflowswhichuseassumptionsthatarebasedonmarketconditionsexistingateachyear-enddate.
Thebookvaluesoftradeandotherreceivables,tradeandotherpayablesandprovisionsapproximatetheirfairvalues.
Thefairvaluesofshort-termandnon-currentborrowingsaredeterminedbyusingvaluationtechniquessuchasestimateddiscountedcashflowswhichuseassumptionssourcedfromtherelevantfinancialinstitutions.
SwirePropertiesAnnualReport|2011 117
24.FinancialInstrumentsbyCategory(continued)Financialinstrumentsthataremeasuredatfairvalueareincludedinthefollowingfairvaluehierarchy:
GroupLevel 2HK$M
Assets as per consolidated statement of financial position
At31stDecember2011
Available-for-saleassets(note25) 9
Total 9
At31stDecember2010
Available-for-saleassets(note25) 7
Total 7
Liabilities as per consolidated statement of financial position
At31stDecember2011
Putoptionovernon-controllinginterestinSanlitunVillage(note31) 937
Total 937
At31stDecember2010
Putoptionovernon-controllinginterestinSanlitunVillage(note31) 678
Total 678
Note:Level2–Financialinstrumentsmeasuredatfairvalueusinginputsotherthanquotedpricesbutwherethoseinputsarebasedonobservablemarketdata.
25.Available-for-saleAssets
Group
2011HK$M
2010HK$M
Unlistedinvestments 9 7
9 7
26.PropertiesunderDevelopmentandforSaleRefertopage37fordetailsoftheGroup’spropertiesunderdevelopmentandforsale.
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118 SwirePropertiesAnnualReport|2011
27.StocksandWorkinProgress
Group
2011HK$M
2010HK$M
Tradinggoods 17 13
Storeandspareparts 44 35
Workinprogress 8 11
69 59
28.TradeandOtherReceivables
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Tradedebtors 284 204 – 13
Prepaymentsandaccruedincome 125 27 5 3Otherreceivables 1,536 937 87 42
1,945 1,168 92 58
Theanalysisoftheageoftradedebtorsatyear-end(basedontheinvoicedate)isasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Underthreemonths 272 195 – 13Betweenthreeandsixmonths 5 3 – –Oversixmonths 7 6 – –
284 204 – 13
Thereisnoconcentrationofcreditriskwithrespecttotradereceivables,astheGrouphasalargenumberofcustomers.
TheGroupdoesnotgrantanycredittermtoitscustomers,excepttocorporatecustomersinthehotelbusinesswherecommercialtradecredittermsaregiven.At31stDecember2011,tradedebtorsofHK$284million(2010:HK$204million)werepastduebutnotimpaired.Theserelatetoanumberofindependentcustomersforwhomthereisnorecenthistoryofdefault.Theotherclasseswithintradeandreceivablesdonotcontainimpairedassets.
Themaximumexposuretocreditriskat31stDecember2011and31stDecember2010isthecarryingvalueoftradedebtorsdisclosedabove.Thevalueofrentaldepositsfromtenantsheldassecurityagainsttradedebtorsat31stDecember2011wasHK$1,780million(2010:HK$1,810million).
29.AmountDuefromImmediateHoldingCompany–SwirePacificLimitedTheamountduefromimmediateholdingcompanyisunsecured,interestfreeandrepayablewithinoneyear.
SwirePropertiesAnnualReport|2011 119
30.CashandCashEquivalentsGroup Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Short-termdepositsmaturingwithinthreemonths 260 795 200 240Bankbalances 920 247 67 45
1,180 1,042 267 285
Theeffectiveinterestratesonshort-termdepositsoftheGrouprangedfrom0.01%to1.31%(2010:0.005%to1.17%);thesedepositshaveamaturityfrom3to8days(2010:3to90days).
Themaximumexposuretocreditriskinrespectofbankbalancesandshort-termdepositsat31stDecember2011and31stDecember2010isthecarryingvalueofthebankbalancesandshort-termdepositsdisclosedabove.
31.TradeandOtherPayablesGroup Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Tradecreditors 1,788 544 – 15
Amountsduetointermediateholdingcompany 79 99 79 99
Amountsduetoafellowsubsidiarycompany 102 – – –
Amountsduetosubsidiarycompanies – – 2,586 2,386
Amountsduetoajointlycontrolledcompany 2 – – –
Interest-bearingadvancesfromajointlycontrolled companyat1.55% 225 – – –
Interest-bearingadvancesfromanassociated company(2010:0.54%) – 149 – 149
Advancesfromnon-controllinginterests 234 214 – –
Rentaldepositsfromtenants 1,780 1,810 – –
Putoptionovernon-controllinginterestinSanlitunVillage 937 678 – –
Accruedcapitalexpenditure 1,215 1,192 – –Otherpayables 1,726 513 327 42
8,088 5,199 2,992 2,691
Apartfromcertainamountsduetojointlycontrolledandassociatedcompanies,whichareinterest-bearingasspecifiedabove,thebalancesareinterestfree,unsecuredandhavenofixedtermofrepayment.
Theanalysisoftheageoftradecreditorsatyear-endisasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Underthreemonths 1,529 543 – 15
Betweenthreeandsixmonths 259 1 – –
1,788 544 – 15
NotestotheAccounts
120 SwirePropertiesAnnualReport|2011
32.Borrowingsfrombanks
Group
2011HK$M
2010HK$M
Bankoverdraftsandshort-termbankloans–unsecured 1,023 991
Long-termbankloans–unsecured:
Repayablewithinoneyear 664 3,103
Repayablebetweenoneandtwoyears 93 –
Repayablebetweentwoandfiveyears 5,726 1,582
6,483 4,685
Amountduewithinoneyearincludedundercurrentliabilities (664) (3,103)
5,819 1,582
(a) Theeffectiveinterestratesperannumattheyear-enddatewereasfollows:
2011 2010
RMB %
US$ %
Others %
RMB%
US$%
Others%
Bankoverdrafts/short-termbankloans 3.14-7.93 – – 4.37-4.59 – –
Long-termbankloans 5.6-7.87 1.11 2.05 4.86-5.94 1.11 1.89
Bankloansarerepayableonvariousdatesupto2014(2010:upto2014).
(b) Thecarryingamountsoftheselong-termbankloansapproximatetotheirfairvalueandaredenominatedinthefollowingcurrencies:
2011HK$M
2010HK$M
Renminbi 6,017 4,476
Poundssterling 60 60
UnitedStatesdollar 406 149
6,483 4,685
SwirePropertiesAnnualReport|2011 121
33.LoansDuetoaFellowSubsidiaryCompany–SwireFinanceLimitedTheloansduetoafellowsubsidiarycompanyareunsecured,repayableonvariousdatesupto2018andbearinterestatacombinationoffixedandfloatingratewhicheffectivelywas4.46%perannumat31stDecember2011(2010:3.75%perannum).
Group
2011HK$M
2010HK$M
Repayablewithinoneyear 6,943 5,228
Repayablebetweenoneandtwoyears 2,296 7,128
Repayablebetweentwoandfiveyears 4,638 3,800
Repayableafterfiveyears 7,497 16,046
21,374 32,202
Loansduewithinoneyearincludedundercurrentliabilities (6,943) (5,228)
14,431 26,974
34.DeferredTaxationThemovementonthenetdeferredtaxliabilitiesaccountisasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 3,806 3,151 4 –
Translationdifferences 111 (5) – –
ChangeincompositionofGroup (404) – – –Chargedtoincomestatement(note12) 676 660 15 4
At31stDecember 4,189 3,806 19 4
Deferredtaxassetsarerecognisedinrespectoftaxlossescarriedforwardtotheextentthatrealisationoftherelatedtaxbenefitsthroughfuturetaxableprofitsisprobable.TheGrouphasunrecognisedtaxlossesofHK$1,735million(2010:HK$1,452million)tocarryforwardagainstfuturetaxableincome.Theseamountsareanalysedasfollows:-
Group
Unrecognised tax losses
2011 HK$M
2010HK$M
Noexpirydate 794 665Expiringin2012 13 12Expiringin2013 64 188Expiringin2014 244 291Expiringin2015 293 296Expiringin2016 327 –
1,735 1,452
NotestotheAccounts
122 SwirePropertiesAnnualReport|2011
34.DeferredTaxation(continued)Themovementindeferredtaxassetsandliabilities(priortooffsettingbalanceswithinthesametaxationjurisdiction)duringtheyearisasfollows:
Deferredtaxliabilities
Group
Accelerated tax depreciation
Valuation of investment properties Others Total
2011HK$M
2010HK$M
2011HK$M
2010HK$M
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 2,312 2,130 1,514 1,130 181 193 4,007 3,453
Translationdifferences – – 116 – (1) – 115 –
ChangeincompositionofGroup (401) – – – (3) – (404) –
Charged/(credited)toincomestatement 170 182 386 384 67 (12) 623 554
At31stDecember 2,081 2,312 2,016 1,514 244 181 4,341 4,007
Company
Accelerated tax depreciation Others Total
2011HK$M
2010HK$M
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 4 – – – 4 –
Charged/(credited)toincomestatement (1) 4 16 – 15 4
At31stDecember 3 4 16 – 19 4
Deferredtaxassets
Group
Tax losses Others Total
2011HK$M
2010HK$M
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 43 92 158 210 201 302
Translationdifferences – 5 4 – 4 5
Chargedtoincomestatement (30) (54) (23) (52) (53) (106)
At31stDecember 13 43 139 158 152 201
SwirePropertiesAnnualReport|2011 123
34.DeferredTaxation(continued)
Deferredtaxassetsandliabilitiesarenettedoffwhenthetaxesrelatetothesametaxationauthorityandwhereoffsettingislegallyenforceable.Thefollowingamounts,determinedafterappropriateoffsetting,areshownseparatelyonthestatementoffinancialposition:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Deferredtaxassets:
–Toberecoveredaftermorethan12months (57) (94) – –
–Toberecoveredwithin12months – – – –
(57) (94) – –
Deferredtaxliabilities:
–Tobesettledaftermorethan12months 4,246 3,900 – 4
–Tobesettledwithin12months – – 19 –
4,246 3,900 19 4
4,189 3,806 19 4
35.RetirementBenefitsTheGroupoperatesvariousretirementbenefitplansprovidingresignationandretirementbenefitstostaffonbothacontributoryandnon-contributorybasis.TheassetsoftheplansareadministeredbytrusteesandaremaintainedindependentlyoftheGroup’sfinances.Themajorityoftheplansareofthedefinedbenefittypeandcontributionstosuchplansaremadeinaccordancewiththefundingratesrecommendedbyindependentqualifiedactuariestoensurethattheplanswillbeabletomeettheirliabilitiesastheybecomedue.Thefundingratesaresubjecttoannualreviewandaredeterminedbytakingintoconsiderationthedifferencebetweenthemarketvaluesoftheplans’assetsandthepresentvalueofaccruedpastserviceliabilities,onanon-goingbasis,ascomputedbyreferencetoactuarialvaluations.TheplansinHongKongarevaluedannuallybyqualifiedactuaries,TowersWatson(formerlyknownasWatsonWyattHongKongLimited),forfundingpurposesundertheprovisionofHongKong’sOccupationalRetirementSchemesOrdinance.Fortheyearended31stDecember2011,thefundinglevelwas110%(2010:107%)oftheaccruedactuarialliabilitiesonanongoingbasis.
Allnewemployeesareofferedthechoiceofjoiningtheretirementbenefitplansorthemandatoryprovidentfund(“MPF”)scheme.WherestaffelecttojointheMPFscheme,boththeCompanyandstaffarerequiredtocontribute5%oftheemployees’relevantmonthlyincome(cappedatHK$20,000).Staffmayelecttocontributemorethantheminimumasavoluntarycontribution.EmployeesengagedoutsideHongKongarecoveredbyappropriatelocalarrangements.
Totalretirementbenefitcostsrecognisedintheconsolidatedincomestatementfortheyearended31stDecember2011amountedtoHK$30million(2010:HK$31million),includingHK$5million(2010:HK$4million)inrespectofdefinedcontributionplans.
ThedefinedbenefitplanisvaluedusingtheprojectedunitcreditmethodinaccordancewithHKAS19.Fortheyearended31stDecember2011and2010,theHKAS19disclosuresarebasedonvaluationspreparedbyTowersWatsonat31stDecember2009,whichwereupdatedat31stDecember2011and2010byCannonTrusteesLimited,themainadministrationmanageroftheGroup’sdefinedbenefitplans.
NotestotheAccounts
124 SwirePropertiesAnnualReport|2011
35.RetirementBenefits(continued)
(a) Theamountsrecognisedinthestatementoffinancialpositionareasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Presentvalueoffundedobligations 599 547 496 451
Fairvalueofplanassets (519) (594) (431) (492)
80 (47) 65 (41)
Netunrecognisedactuariallosses (188) (36) (164) (38)
Netretirementbenefitassets (108) (83) (99) (79)
Representedby:
Retirementbenefitassets (108) (83) (99) (79)
Retirementbenefitliabilities – – – –
(108) (83) (99) (79)
(b) Changesinthepresentvalueofthedefinedbenefitobligationsareasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 547 516 451 428
Servicecost 50 47 42 38
Interestcost 23 24 18 20
Actuariallosses 70 15 59 13
Benefitspaid (91) (55) (74) (48)
At31stDecember 599 547 496 451
Changesinthefairvalueofplanassetsareasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 594 532 492 442
Expectedreturn 47 44 39 37
Actuarial(losses)/gains (82) 22 (67) 19
Contributionsbyemployers 51 51 41 42
Benefitspaid (91) (55) (74) (48)
At31stDecember 519 594 431 492
SwirePropertiesAnnualReport|2011 125
35.RetirementBenefits(continued)
(c) Netexpensesrecognisedintheconsolidatedincomestatementareasfollows:
Group
2011HK$M
2010HK$M
Currentservicecost 50 47
Interestcost 23 24
Expectedreturnonplanassets–gain (47) (44)
26 27
Theabovenetexpensesweremainlyincludedincostofsalesandadministrativeexpensesintheconsolidatedincomestatement.
TheactualreturnondefinedbenefitplanassetswasalossofHK$35million(2010:gainofHK$66million).
(d) Planassetscomprisethefollowing:
Group
2011 2010
HK$M % HK$M %
Equities 322 62 389 65
Governmentbonds 102 20 92 16
Corporatebonds 79 15 115 19
Cash/(bankoverdraft) 16 3 (2) –
519 100 594 100
(e) Amountsforthecurrentandpreviousfourperiodsareasfollows:
Group
2011 HK$M
2010HK$M
2009HK$M
2008HK$M
2007HK$M
Definedbenefitplans
–Definedbenefitobligations 599 547 516 429 487
–Planassets (519) (594) (532) (397) (579)
–Deficit/(surplus) 80 (47) (16) 32 (92)
–Experienceadjustmentsonplanliabilities 23 14 31 6 16
–Experienceadjustmentsonplanassets 82 (22) (90) 233 (64)
NotestotheAccounts
126 SwirePropertiesAnnualReport|2011
35.RetirementBenefits(continued)
(f) Theprincipalactuarialassumptionsusedareasfollows:
Group
2011 2010
Discountrate 3.96% 4.40%
Expectedrateofreturnonplanassets 8.00% 8.00%
Expectedrateoffuturesalaryincreases 3.28%-3.61% 3.57%
Theexpectedreturnonplanassetsreflectstheportfoliomixofassets,whichitselfisdeterminedbytheGroup’scurrentinvestmentpolicy.Expectedreturnsonequitiesandbondsreflectlong-termrealratesofreturnexperiencedintherespectivemarkets.
36.ShareCapital
Company
2011HK$M
2010HK$M
Authorised:
At31stDecember2011and2010
30,000,000,000ordinarysharesofHK$1each 30,000 30,000
Issuedandfullypaid:
5,850,000,000ordinarysharesofHK$1eachat31stDecember2011 (31stDecember2010:5,690,000,000ordinarysharesofHK$1each) 5,850 5,690
On30thNovember2011,theCompanyissued160,000,000sharestoSwirePacificLimitedforatotalcashconsiderationofHK$4,500million(beingHK$28.125pershare).Followingthisshareissue,theCompanyhasatotalof5,850,000,000fullypaidsharesinissue.
Saveasdisclosedabove,therewasnopurchase,saleorredemptionbytheCompanyofitssharesduringtheyearended31stDecember2011.
SwirePropertiesAnnualReport|2011 127
37.Reserves
Revenue reserve HK$M
Share premium account
HK$M
Merger account reserve HK$M
Property revaluation
reserve HK$M
Cash flow hedge
reserveHK$M
Translation reserveHK$M
TotalHK$M
Group
At1stJanuary2010 124,273 259 (1,108) – (1) 702 124,125
Profit for the year 26,045 – – – – – 26,045
Other comprehensive income
Revaluationofpropertiespreviouslyoccupied bytheGroup
–gainrecognisedduringtheyear – – – 1,448 – – 1,448
Shareofothercomprehensiveincomeof jointlycontrolledandassociatedcompanies – – – – 1 131 132
Nettranslationdifferenceson foreignoperations – – – – – 438 438
Total comprehensive income for the year 26,045 – – 1,448 1 569 28,063
2010interimdividendpaidpriortothe merger(note14) (1) – – – – – (1)
At31stDecember2010 150,317 259 (1,108) 1,448 – 1,271 152,187
At1stJanuary2011 150,317 259 (1,108) 1,448 – 1,271 152,187
Profit for the year 25,126 – – – – – 25,126
Other comprehensive income
Revaluationofpropertiespreviouslyoccupied bytheGroup
–gainrecognisedduringtheyear – – – 186 – – 186
Shareofothercomprehensiveincomeof jointlycontrolledandassociatedcompanies – – – – – 276 276
Nettranslationdifferenceson foreignoperations – – – – – 517 517
Total comprehensive income for the year 25,126 – – 186 – 793 26,105
Issuanceofnewordinaryshares – 4,340 – – – – 4,340
2010finaldividend(note14) (2,425) – – – – – (2,425)
2011specialinterimdividends(note14) (10,014) – – – – – (10,014)
At31stDecember2011 163,004 4,599 (1,108) 1,634 – 2,064 170,193
NotestotheAccounts
128 SwirePropertiesAnnualReport|2011
37.Reserves(continued)
Revenue reserveHK$M
Share premium account
HK$MTotal
HK$M
Company
At1stJanuary2010 26,503 259 26,762
Profit for the year(note13) 2,491 – 2,491
At31stDecember2010 28,994 259 29,253
At1stJanuary2011 28,994 259 29,253
Profit for the year(note13) 16,203 – 16,203
Issuanceofnewordinaryshares – 4,340 4,340
2010finaldividend(note14) (2,425) – (2,425)
2011specialinterimdividends(note14) (10,014) – (10,014)
At31stDecember2011 32,758 4,599 37,357
(a) TheGrouprevenuereserveincludesretainedrevenuereservesfromjointlycontrolledcompaniesamountingtoHK$51million(2010:accumulatedlossesofHK$607million)andretainedrevenuereservesfromassociatedcompaniesamountingtoHK$369million(2010:HK$477million).
(b) TheGroupandCompanyrevenuereserveshavenotyetdeductedthefirstinterimdividendfortheyearofHK$1,053milliondeclaredafteryearenddate(2010:proposedfinaldividendofHK$2,425million)(note14).
38.Non-controllingInterests
Group
2011HK$M
2010HK$M
At1stJanuary 479 424
Shareofprofitslesslossesfortheyear 53 49
Shareoftranslationdifferencesonforeignoperations – 3
Shareoftotalcomprehensiveincome 53 52
Dividendspaidandpayable (12) (8)
Capitalcontributionfromnon-controllinginterests 12 11
At31stDecember 532 479
SwirePropertiesAnnualReport|2011 129
39.CapitalCommitments
Group
2011HK$M
2010HK$M
Outstandingcapitalcommitmentsattheyear-endinrespectof:
(a)Property,plantandequipment
Contractedfor 88 103
AuthorisedbyDirectorsbutnotcontractedfor 1,003 902
(b)Investmentproperties Contractedfor 1,428 2,017
AuthorisedbyDirectorsbutnotcontractedfor 8,060 1,513
TheGroup’sshareofcapitalcommitmentsofjointlycontrolledcompaniesattheyear-end*
Contractedfor 734 1,755
AuthorisedbyDirectorsbutnotcontractedfor 6,367 5,202
7,101 6,957
* ofwhichtheGroupiscommittedtofundingHK$1,828million(2010:HK$2,459million)
TheCompanyhadnocommitmentsinrespectoftheaboveitemsat31stDecember2011(2010:same).
At31stDecember2011,theGrouphadunprovidedcontractualobligationsforfuturerepairsandmaintenanceoninvestmentpropertiesofHK$162million(2010:HK$146million).
NotestotheAccounts
130 SwirePropertiesAnnualReport|2011
40.Contingencies
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
(a) Guarantees provided in respect of bank loans and other liabilities of:
Subsidiarycompanies – – 28,914 37,820
Bankguaranteesgiveninlieuofutilitydeposits 89 101 89 101
89 101 29,003 37,921
Thedirectorshaveassessedthefairvalueoftheaboveguaranteesanddonotconsiderthemtobematerial.TheyhavethereforenotbeenrecognisedintheGroup’sstatementoffinancialposition.
(b) Contingent tax liability
Certainwholly-ownedsubsidiarycompaniesoftheCompanyhavebeenunabletofinalisetheirliabilitytoprofitstaxinrespectoftheyears1997/98to2004/05inclusiveasaconsequenceofqueriesraisedbytheHongKongInlandRevenueDepartment(“IRD”).Thesequeriesrelatetothedeductibility,intheassessmentofprofitstax,ofinterestonborrowingsofthosesubsidiarycompaniesduringtheperiodsunderreview.
AnumberofdiscussionshavetakenplacebetweenthosesubsidiarycompaniesandtheIRDtounderstandtheprecisenatureoftheIRDqueries.However,atthisstagethereisinsufficientinformationavailabletodeterminereliablytheultimateoutcomeoftheIRD’sreviewwithanacceptabledegreeofcertainty.Consequentlynoprovisionhasbeenrecognisedintheseaccountsforanyamountsthatmayfalldueinregardtothesequeries.
TheIRDhasissuedNoticesofAssessmenttotallingHK$492millioninrespectoftheirqueriesfortheyearsunderreview.Thesubsidiarycompaniesinvolvedhaveobjectedtotheseassessments.TheIRDhasagreedtoholdoverconditionallypartofthetaxindisputeinthesumofHK$16millionandoneofthesubsidiariesinvolvedhaspurchasedaTaxReserveCertificateofthesameamount.TheIRDhasagreedtoholdoverunconditionallythebalanceofthetaxindisputeinthesumofHK$476million.Inaddition,theestimatedinterestwhichwouldbepayableinrespectoftheNoticesofAssessmenttotalledHK$244millionasat31stDecember2011.Itisnotpossible,giventhelackofinformationavailable,todeterminetheultimateoutcomeoftheIRD'sreviewofthismatterandconsequentlytomakeajudgementastoitsmateriality.SwirePacifichasundertakentotheCompanythat,ifanysubsidiaryoftheCompanyreferredtointhisparagraphisrequiredtopaytotheIRDanyamountoftaxinresponseorbyreferencetoanynoticeofassessmentreferredtointhisparagraph(ortoanycorrespondingnoticeofassessmentissuedinrespectofanyyearofassessmentfromtheyearsofassessment2005/06to2010/11inclusive),SwirePacificwillpaytotheCompanyanamountequaltotheamountofsuchpayment.ThisundertakingwillexpireonthethirdanniversaryoftheListingDateoftheCompanyon18thJanuary2012exceptwhereaprovisionforarelevantpaymenthas,withtheagreementofSwirePacific,previouslybeenmadeintheaccountsofanysuchsubsidiary.
SwirePropertiesAnnualReport|2011 131
41.OperatingLeaseArrangementsTheGroupactsasbothlessorandlesseeunderoperatingleases.DetailsoftheGroup’scommitmentsundernon-cancellableoperatingleasesaresetoutasfollows:
(a) LessorTheGroupleasesoutlandandbuildingsunderoperatingleases.Theleasesforlandandbuildingstypicallyrunforperiodsofthreetosixyears.Theturnover-relatedrentalincomereceivedduringtheyearamountedtoHK$504million(2010:HK$295million).
At31stDecember,thefutureaggregateminimumleasereceiptsundernon-cancellableoperatingleasesreceivablebytheGroupandtheCompanywereasfollows:
Group
2011HK$M
2010HK$M
Landandbuildings:
Notlaterthanoneyear 6,247 6,084
Laterthanoneyearbutnotlaterthanfiveyears 13,815 12,769
Laterthanfiveyears 2,105 2,332
22,167 21,185
Assetsheldfordeploymentonoperatingleasesat31stDecemberwereasfollows:
Group
2011HK$M
2010HK$M
Investmentpropertiesatfairvalue 174,951 161,508
(b) LesseeTheGroupleaseslandandbuildingsunderoperatingleases.Theseleasestypicallyrunforaninitialperiodofonetofifteenyearswithsomeleaseshavinganoptiontorenewtheleaseafterthatdate,atwhichtimealltermsarerenegotiated.
At31stDecember,thefutureaggregateminimumleasepaymentsundernon-cancellableoperatingleasespayablebytheGroupandtheCompanywereasfollows:
Group Company
2011HK$M
2010HK$M
2011HK$M
2010HK$M
Landandbuildings:
Notlaterthanoneyear 45 10 63 44
Laterthanoneyearbutnotlaterthanfiveyears 95 27 199 130
Laterthanfiveyears 401 70 97 84
541 107 359 258
NotestotheAccounts
132 SwirePropertiesAnnualReport|2011
42.RelatedPartyTransactionsThereisanagreementforservices(“ServicesAgreement”),inrespectofwhichJohnSwire&Sons(H.K.)Limited(“JSSHK”),anintermediateholdingcompany,providesservicestotheCompanyanditssubsidiarycompaniesandunderwhichcostsarereimbursedandfeespayable.Inreturnfortheseservices,JSSHKreceivesannualfeescalculatedas2.5%oftheGroup’srelevantconsolidatedprofitsbeforetaxationandnon-controllinginterestsaftercertainadjustments.ThecurrentServicesAgreement,whichcommencedon1stJanuary2011foraperiodofthreeyears,willexpireon31stDecember2013.TheprecedingServicesAgreement,withthesametermsandconditions,wasfrom1stJanuary2008to31stDecember2010.Fortheyearended31stDecember2011,servicefeespayableamountedtoHK$130million(2010:HK$115million).ExpensesofHK$36million(2010:HK$29million)werereimbursedatcost;inaddition,HK$44million(2010:HK$30million)inrespectofsharedadministrativeserviceswasreimbursed.
Underatenancyframeworkagreement(“JSSHKTenancyFrameworkAgreement”)betweentheCompanyandJSSHKdated18thOctober2011,membersoftheGroupwillenterintotenancyagreementswithmembersoftheJSSHKgroupfromtimetotimeonnormalcommercialtermsbasedonprevailingmarketrentals.TheJSSHKTenancyFrameworkAgreementisforatermofsixyearsfrom1stJanuary2010to31stDecember2015.Fortheyearended31stDecember2011,theaggregaterentalspayabletotheGroupunderthetenanciespursuanttotheJSSHKTenancyFrameworkAgreementamountedtoHK$76million(2010:HK$59million).
Underanothertenancyframeworkagreement(“SwirePacificTenancyFrameworkAgreement”)betweentheCompanyandSwirePacificLimiteddated18thOctober2011,membersoftheGroupwillenterintotenancyagreementswithmembersoftheSwirePacificgroupfromtimetotimeonnormalcommercialtermsbasedonprevailingmarketrentals.TheSwirePacificTenancyFrameworkAgreementisforatermofsixyearsfrom1stJanuary2010to31stDecember2015.Fortheyearended31stDecember2011,theaggregaterentalspayabletotheGroupunderthetenanciespursuanttotheSwirePacificTenancyFrameworkAgreementamountedtoHK$60million(2010:HK$58million).
Inaddition,thefollowingisasummaryofsignificanttransactionsbetweentheGroupandrelatedparties(includingtransactionsundertheJSSHKTenancyFrameworkAgreementandSwirePacificTenancyFrameworkAgreement),whichwerecarriedoutinthenormalcourseoftheGroup’sbusiness,inadditiontothosetransactionsdisclosedelsewhereintheaccounts.TransactionsundertheServicesAgreement,theJSSHKTenancyFrameworkAgreementandSwirePacificTenancyFrameworkAgreementarecontinuingconnectedtransactions,inrespectofwhichtheCompanyhascompliedwiththedisclosurerequirementsinaccordancewithChapter14AoftheListingRules.
Jointly controlled companies
Fellow subsidiary companies
Immediate holding company
Intermediate holding company Other related parties
Notes2011
HK$M2010
HK$M2011
HK$M2010
HK$M2011
HK$M2010
HK$M2011
HK$M2010
HK$M2011
HK$M2010
HK$M
Purchasesofservices (a) – – 9 10 – – – – – –
Rentalrevenue (b) 3 – 69 64 7 7 61 46 7 15
Revenuefromhotels – – 1 – – – 1 – 3 –
Interestincome (c) 9 3 2 – – – – – – –
Interestcharges (c) 2 – 1,096 1,202 – – – – – –
Notes:(a) Purchasesofgoodsandrenderingofservicestoandfromrelatedpartieswereconductedinthenormalcourseofbusinessatpricesandontermsnoless
favourabletotheGroupthanthosechargedto/byandcontractedwithothercustomers/suppliersoftheGroup.(b) TheGrouphas,inthenormalcourseofitsbusiness,enteredintoleaseagreementswithrelatedpartiestoleasepremisesforvaryingperiodsuptosix
years.Theleaseswereenteredintoonnormalcommercialterms.(c) Loansadvancedtojointlycontrolledandassociatedcompaniesat31stDecember2011aredisclosedinnotes22and23respectively.Advancesfrom
jointlycontrolledandassociatedcompaniesaredisclosedinnote31.ThereareanumberofloanagreementsbetweentheGroupandtheSwirePacificgroup.Refertopage53to61fordetails.TheloansduetoSwireFinanceLimited,afellowsubsidiarycompany,aredisclosedinnote33.
Amountsduefromtheimmediateholdingcompanyat31stDecember2011aredisclosedinnote29.Thesebalancesariseinthenormalcourseofbusiness,arenon-interest-bearingandrepayablewithinoneyear.
Remunerationofkeymanagementisdisclosedinnote10.
SwirePropertiesAnnualReport|2011 133
43.NotestotheConsolidatedStatementofCashFlows(a) Reconciliation of operating profit to cash generated from operations
Group
2011HK$M
2010HK$M
Operatingprofit 26,945 26,969
Profitonsaleofinvestmentproperties – (544)
Remeasurementgainsandprofitondisposalrelatingtothechangeofshareholding inPCCWTower – (342)
Changeinfairvalueofinvestmentproperties (20,345) (20,480)
Depreciation 224 214
Amortisationofinitialleasingcostsoninvestmentproperties 65 34
Amortisationofintangibleassets 3 4
Impairmentlossesonhoteloperations 107 –
ProfitonsaleofinterestinFestivalWalk (595) –
Otheritems 62 (1)
Operating profit before working capital changes 6,466 5,854
(Increase)/decreaseinamountduefromimmediateholdingcompany (36) 71
Increaseinpropertiesunderdevelopmentandforsale (1,227) (1,245)
Increaseinstocksandworkinprogress (6) (2)
(Increase)/decreaseintradeandotherreceivables (828) 91
Increaseintradeandotherpayables 3,052 7
Increaseinretirementbenefitassets (25) (23)
Cash generated from operations 7,396 4,753
(b) Purchase of property, plant and equipment
Group
2011HK$M
2010HK$M
Properties 461 361
Plantandequipment 87 146
Total 548 507
Theabovefiguresdonotincludeinterestcapitalisedonproperty,plantandequipment.
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43.NotestotheConsolidatedStatementofCashFlows(continued)
(c) Sale of interest in Festival Walk
Group
2011HK$M
Netassetsdisposed:
Investmentproperties 18,263
Property,plantandequipment 38
Stocks 4
Debtors 33
Cashatbankandinhand 495
Creditorsandprovisions (330)
Taxpayable (68)
Deferredtax (404)
Goodwillonacquisition 174
18,205
ProfitondisposalofFestivalWalk 595
18,800
Satisfiedby:
Cashreceived(netoftransactioncosts) 18,800
AnalysisofnetinflowofcashandcashequivalentsinrespectofthesaleofinterestinFestivalWalk
Netcashproceeds 18,800
Cashatbankandinhand (495)
Net inflow of cash and cash equivalents per consolidated statement of cash flows 18,305
(d) Analysis of changes in financing during the year
Group
Bank loans Non-controlling interests
2011HK$M
2010HK$M
2011HK$M
2010HK$M
At1stJanuary 5,657 4,229 479 424
Netcashinflowfromfinancing 1,578 1,473 12 11
Non-controllinginterests’shareoftotalcomprehensiveincome – – 53 49
Dividendspaidtonon-controllinginterests – – (12) (8)
Othernon-cashmovements 270 (45) – 3
At31stDecember 7,505 5,657 532 479
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44.EventsaftertheReportingPeriodInJanuary2012,theGroupenteredintoanagreementwithSino-OceanLandLimitedtofundthewholeoftheremaininglandpremium(andassociatedtaxes)payableinrespectoftheDaciTempleprojectandcertainworkingcapitalrequirementsinanaggregateamountofUS$230million.Followingthistransaction,theGroup’sinterestintheprojectwasincreasedto81%,reflectingitscontributiontotheoverallfundingoftheproject.Sino-OceanLandLimitedhasacalloption,exercisableforoneyearcommencingfromtheabovedateofcompletionoftheagreement,topurchasetheGroup’sadditionalinterestintheprojectforanamountequaltoonehalfoftheaboveadditionalfundingplusinterestattherateof10%perannum.TheGrouphastheright,exercisableforoneyearcommencingoneweekbeforetheendofthecalloptionperiod,torequireSino-OceanLandLimitedtopurchasetheGroup’sadditionalinterestintheprojectforanamountequaltoonehalfoftheaboveadditionalfundingplusinterestattherateof10%perannum.Untiltherightsdescribedaboveareexercisedorlapse,theGroup’sadditionalinterestintheprojectwillbeaccountedforasasecuredloanandtheGroup’sexistinginterestwillcontinuetobeaccountedforasa50%interestinajointlycontrolledentity.
45.ImmediateandUltimateHoldingCompanyTheimmediateholdingcompanyisSwirePacificLimited,acompanyincorporatedandlistedinHongKong.
TheultimateholdingcompanyisJohnSwire&SonsLimited,acompanyincorporatedinEnglandandWales.
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1. BasisofPreparationTheaccountshavebeenpreparedinaccordancewithHongKongFinancialReportingStandards(“HKFRS”).Theaccountshavebeenpreparedunderthehistoricalcostconventionasmodifiedbytherevaluationofcertaininvestmentproperties,thenon-controllinginterestputoptionandavailable-for-saleassets,whicharecarriedatfairvalue.
2. BasisofConsolidationTheconsolidatedaccountsincorporatetheaccountsofSwirePropertiesLimited,itssubsidiarycompanies(togetherreferredtoasthe“Group”)andtheGroup'sinterestsinjointlycontrolledandassociatedcompanies.
3. SubsidiaryCompaniesSubsidiarycompaniesareallentitles(includingspecialpurposeentities)overwhichtheGrouphasthepowertogovernthefinancialandoperatingpoliciesgenerallyaccompanyingashareholdingofmorethanonehalfofthevotingrights.TheexistenceandeffectofpotentialvotingrightsthatarecurrentlyexercisableorconvertibleareconsideredwhenassessingwhethertheGroupcontrolsanotherentity.SubsidiarycompaniesarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheGroup.Theyaredeconsolidatedfromthedatethatcontrolceases.
TheGroupusestheacquisitionmethodofaccountingtoaccountforbusinesscombinations.Theconsiderationtransferredfortheacquisitionofasubsidiarycompanyisthefairvaluesoftheassetstransferred,theliabilitiesincurredandtheequityinterestsissuedbytheGroup.Theconsiderationtransferredincludesthefairvalueofanyassetorliabilityresultingfromacontingentconsiderationarrangement.Acquisition-relatedcostsareexpensedasincurred.Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate.Onanacquisition-by-acquisitionbasis,theGrouprecognisesanynon-controllinginterestintheacquireeeitheratfairvalueoratthenon-controllinginterest’sproportionateshareoftheacquiree’snetassets.
Investmentsinsubsidiarycompaniesareaccountedforatcostlessimpairment.Costisadjustedtoreflectchangesinconsiderationarisingfromcontingentconsiderationamendments.Costalsoincludesdirectattributablecostsofinvestment.
Theexcessoftheconsiderationtransferred,theamountofanynon-controllinginterestintheacquireeandtheacquisition-datefairvalueofanypreviousequityinterestintheacquireeoverthefairvalueoftheGroup’sshareoftheidentifiablenetassetsacquiredisrecordedasgoodwill.Ifthisislessthanthefairvalueofthenetassetsofthesubsidiarycompanyacquiredinthecaseofabargainpurchase,thedifferenceisrecogniseddirectlyinthestatementofcomprehensiveincome.
Intercompanytransactions,balancesandunrealisedgainsontransactionsbetweenGroupcompaniesareeliminatedonconsolidation.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.AccountingpoliciesofsubsidiarycompanieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.
TheGrouptreatstransactionswithnon-controllinginterestsastransactionswithequityownersoftheGroup.Forpurchasesfromnon-controllinginterests,thedifferencebetweenanyconsiderationpaidandtherelevantshareacquiredofthecarryingvalueofnetassetsofthesubsidiarycompanyisrecordedinequity.Gainsorlossesondisposalstonon-controllinginterestswherecontrolisnotlostarealsorecordedinequity.
WhentheGroupceasestohavecontrolorsignificantinfluence,anyretainedinterestintheentityisremeasuredtoitsfairvalue,withthechangeincarryingamountrecognisedinprofitorloss.Thefairvalueistheinitialcarryingamountforthepurposesofsubsequentlyaccountingfortheretainedinterestasanassociatedcompany,jointlycontrolledcompanyorfinancialasset.Inaddition,anyamountspreviouslyrecognisedinothercomprehensiveincomeinrespectofthatentityareaccountedforasiftheGrouphaddirectlydisposedoftherelatedassetsorliabilities.Thismaymeanthatamountspreviouslyrecognisedinothercomprehensiveincomearereclassifiedtoprofitorloss.
WheretheGroupentersintoacontractthatcontainsanobligation(forexampleawrittenputoptionexercisablebythecontractcounterparty)toacquiresharesinapartly-ownedsubsidiarycompanyfromthenon-controllinginterest,whichisnotpartofabusinesscombination,theGrouprecordsafinancialliabilityforthepresentvalueoftheredemptionamountandeliminatesthevalueofthenon-controllinginterest.Changestothevalueofthefinancialliabilityarerecognisedintheincomestatementwithinfinanceincomeorfinancecosts.
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3. SubsidiaryCompanies (continued)
IntheCompany’sstatementoffinancialposition,itsinvestmentsinsubsidiarycompaniesarestatedatcostlessprovisionforanyimpairmentlosses.IncomefromsubsidiarycompaniesisaccountedforbytheCompanyonthebasisofdividendsreceivedandreceivable.
Long-termloanstosubsidiarycompaniesareconsideredtobequasi-equityinnature,wheretherearenodefinedrepaymenttermsandnohistoricalrepaymentofthebalances.
4. JointlyControlledandAssociatedCompaniesJointlycontrolledcompaniesarethosecompaniesheldforthelongterm,overwhichtheGroupisinapositiontoexercisejointcontrolwithotherventurersinaccordancewithcontractualarrangements,andwherenoneoftheparticipatingpartieshasunilateralcontrolovertheeconomicactivityofthejointventure.
AssociatedcompaniesarethosecompaniesoverwhichtheGrouphassignificantinfluencebutnotcontrolorjointcontrol,overtheirmanagementincludingparticipationinthefinancialandoperatingpolicydecisions,generallyaccompanyingashareholdingofbetween20%and50%ofthevotingrights.
Investmentsinjointlycontrolledandassociatedcompaniesareaccountedforusingtheequitymethodofaccountingandareinitiallyrecognisedatcost.TheexcessofthecostofinvestmentinjointlycontrolledandassociatedcompaniesoverthefairvalueoftheGroup’sshareoftheidentifiablenetassetsacquiredrepresentsgoodwill.TheGroup’sinvestmentsinjointlycontrolledandassociatedcompaniesincludegoodwillidentifiedonacquisitions,netofanyaccumulatedimpairmentloss.
TheGroup’sshareofitsjointlycontrolledandassociatedcompanies’post-acquisitionprofitsorlossesisrecognisedintheconsolidatedincomestatement,anditsshareofpost-acquisitionmovementsinothercomprehensiveincomeisrecognisedintheconsolidatedstatementofcomprehensiveincome.Thecumulativepost-acquisitionmovementsareadjustedagainstthecarryingamountoftheinvestment.WhentheGroup’sshareoflossesequalsorexceedsitsinterestinthejointlycontrolledorassociatedcompany,includinganyotherunsecuredreceivables,theGroupdoesnotrecognisefurtherlosses,unlessithasincurredobligationsormadepaymentsonbehalfofthejointlycontrolledorassociatedcompany.
TheGrouprecognisesthedisposalofaninterestinajointlycontrolledcompanywhenitceasestohavejointcontrolandtherisksandrewardsofownershiphavepassedtotheacquirer.
Iftheownershipinterestinanassociatedcompanyisreducedbutsignificantinfluenceisretained,onlyaproportionateshareoftheamountspreviouslyrecognisedinothercomprehensiveincomearereclassifiedtoprofitorlosswhereappropriate.
UnrealisedgainsontransactionsbetweentheGroupanditsjointlycontrolledandassociatedcompaniesareeliminatedtotheextentoftheGroup’sinterestinthesecompanies.UnrealisedlossesonassetstransferredbetweentheGroupanditsjointlycontrolledandassociatedcompaniesarealsoeliminatedunlessthetransactionsprovideevidenceofimpairmentoftheassetstransferred.AccountingpoliciesofjointlycontrolledandassociatedcompanieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.
Dilutiongainsandlossesarisingininvestmentsinassociatedcompaniesarerecognizedintheconsolidatedincomestatement.
IntheCompany’sstatementoffinancialposition,itsinvestmentsinjointlycontrolledandassociatedcompaniesarestatedatcostlessprovisionforanyimpairmentlosses.IncomefromjointlycontrolledandassociatedcompaniesisrecognisedbytheCompanyonthebasisofdividendsreceivedandreceivable.
Long-termloanstojointlycontrolledandassociatedcompaniesareconsideredtobequasi-equityinnature,wheretherearenodefinedrepaymenttermsandnohistoricalrepaymentofthebalances.
5. ForeignCurrencyTranslation
(a) Functional and presentation currency
ItemsincludedintheaccountsofeachoftheGroup’sentitiesaremeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(the“functionalcurrency”).TheconsolidatedaccountsarepresentedinHongKongdollars,whichistheCompany’sfunctionalandpresentationcurrency.
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5. ForeignCurrencyTranslation (continued)
(b) Transactions and balances
Foreigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangeratesprevailingatthedatesofthetransactions.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatyear-endexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedintheincomestatement,exceptwhendeferredinothercomprehensiveincomeasqualifyingcashflowhedgesorqualifyingnetinvestmenthedges.
Whenagainorlossonanon-monetaryitemisrecogniseddirectlyinothercomprehensiveincome,anyassociatedtranslationdifferenceisalsorecogniseddirectlyinothercomprehensiveincome.Whenagainorlossonanon-monetaryitemisrecognisedintheincomestatement,anyassociatedtranslationdifferenceisalsorecognisedintheincomestatement.
(c) Group companies
TheresultsandfinancialpositionofalltheGroupentities(noneofwhichhasthecurrencyofahyperinflationaryeconomy)thathaveafunctionalcurrencydifferentfromthepresentationcurrencyaretranslatedintothepresentationcurrencyasfollows:
(i) Assetsandliabilitiesforeachstatementoffinancialpositionpresentedaretranslatedattheclosingrateatthedateofthatstatementoffinancialposition;
(ii)Incomeandexpensesforeachincomestatementaretranslatedataverageexchangerates(unlessthisaverageisnotareasonableapproximationofthecumulativeeffectoftheratesprevailingonthetransactiondates,inwhichcaseincomeandexpensesaretranslatedatthedatesofthetransactions);and
(iii)Allresultingexchangedifferencesarerecognisedasaseparatecomponentofothercomprehensiveincome.
Onconsolidation,exchangedifferencesarisingfromthetranslationofthenetinvestmentinforeignoperations,andofborrowingsandothercurrencyinstrumentsdesignatedashedgesofsuchinvestments,aretakentoothercomprehensiveincome.Whenaforeignoperationispartiallydisposedoforsold,exchangedifferencesthatwererecordedinequityarerecognisedintheconsolidatedincomestatementaspartofthegainorlossonsale.
Goodwillandfairvalueadjustmentsarisingontheacquisitionofaforeignentityaretreatedasassetsandliabilitiesoftheforeignentityandtranslatedattheclosingrate.
6. InvestmentPropertiesPropertythatisheldforlong-termrentalyieldsorforcapitalappreciationorboth,andthatisnotoccupiedbytheGroup,isclassifiedasinvestmentproperty.Investmentpropertycomprisesleaseholdlandandbuildingsheldunderfinanceleases.Landheldunderoperatingorfinanceleasesisclassifiedandaccountedforasinvestmentpropertywhentherestofthedefinitionofinvestmentpropertyismet.
Investmentproperties(includingthoseunderconstruction)arecarriedatfairvalueandarevaluedatleastannually.Themajorityofinvestmentpropertiesarevaluedbyindependentvaluers.ThevaluationsareperformedinaccordancewiththeValuationStandardsonPropertiesissuedbytheHongKongInstituteofSurveyorsandareonanopenmarketbasis,relatedtoindividualproperties,andseparatevaluesarenotattributedtolandandbuildings.Landandbuildingsthatarebeingdevelopedforfutureuseasinvestmentpropertiesandinvestmentpropertiesthatarebeingredevelopedforcontinuinguseasinvestmentpropertiesaremeasuredatfairvalueandincludedasunderconstruction.Changesinfairvaluesarerecognisedintheincomestatement.
Subsequentexpenditureischargedtotheasset’scarryingamountonlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancecostsareexpensedintheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Ifaninvestmentpropertybecomesowner-occupied,itisreclassifiedasproperty,plantandequipment,anditsfairvalueatthedateofreclassificationbecomesitscostforaccountingpurposes.
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7. Property,PlantandEquipmentProperty,plantandequipmentarecarriedatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.Costincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.Costmayalsoincludetransfersfromequityofanygains/lossesonqualifyingcashflowhedgesofforeigncurrencypurchasesofproperty,plantandequipment.Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenanceareexpensedintheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Leaseholdlandcanbeclassifiedasheldunderfinanceleaseandrecordedasproperty,plantandequipmentiftheleaseeisexposedtosubstantiallyalltherisksandrewardsofownershipofthatpriceofland.Leaseholdlandisdepreciatedovertheleaseterm.
Onthetransferofowneroccupiedpropertytoinvestmentproperty,increasesinthecarryingamountarisingonrevaluationoflandandbuildingsarecreditedtoothercomprehensiveincomeandshownaspropertyrevaluationreserveinshareholders’equity.Decreasesthatoffsetpreviousincreasesofthesameassetarechargedinothercomprehensiveincomeanddebitedagainstpropertyrevaluationreservedirectlyinequity;allotherdecreasesarechargedtotheincomestatement.Eachyearthedifferencebetweendepreciationbasedontherevaluedcarryingamountoftheassetchargedtotheincomestatement,anddepreciationbasedontheasset’soriginalcostistransferredfrom‘propertyrevaluationreserve’to‘revenuereserve’.
Withtheexceptionoffreeholdland,allotherproperty,plantandequipmentaredepreciatedatratessufficienttowriteofftheiroriginalcoststoestimatedresidualvaluesusingthestraight-linemethodovertheiranticipatedusefullivesinthefollowingmanner:
Leaseholdland OvertheleasetermProperties 2%to5%perannumPlantandequipment 20%to331/3%perannum
Theassets’expectedusefullivesandresidualvaluesareregularlyreviewedandadjusted,ifappropriate,ateachperiod-enddatetotakeintoaccountoperationalexperienceandchangingcircumstances.
Ateachperiod-enddate,bothinternalandexternalsourcesofinformationareconsideredtoassesswhetherthereisanyindicationthattheassetsareimpaired.Ifanysuchindicationexists,therecoverableamountoftheassetisestimatedandwhererelevant,animpairmentlossisrecognisedtoreducetheassettoitsrecoverableamount.Suchimpairmentlossesarerecognisedintheincomestatement.
Gainsandlossesondisposalsaredeterminedbycomparingtheproceedswiththecarryingamountandarerecognisedwithin‘Othernetgains/(losses)’intheincomestatement.Whenrevaluedassetsaresold,theamountsincludedinthepropertyrevaluationreservearetransferredtorevenuereserve.
8. IntangibleAssets
(a) Goodwill
GoodwillrepresentstheexcessofthecostofacquisitionoverthefairvalueoftheGroup’sshareofthenetidentifiableassetsoftheacquiredsubsidiary,jointlycontrolledandassociatedcompaniesatthedateofacquisition.Goodwillistreatedasanassetoftheentityacquiredandwhereattributabletoaforeignentitywillbetranslatedattheclosingrate.
Goodwillonacquisitionofasubsidiarycompanyisincludedinintangibleassets.Goodwillonacquisitionsofassociatedandjointlycontrolledcompaniesisincludedininvestmentsinassociatedandjointlycontrolledcompaniesrespectively.
Goodwillisstatedatcostlessaccumulatedimpairmentlosses.Goodwillisallocatedtocash-generatingunitsforthepurposeofimpairmenttesting,whichisperformedannually.Impairmentlossesrecognisedongoodwillarenotreversed.
Gainsandlossesonthedisposalofanentityincludethecarryingamountofgoodwillrelatingtotheentitysold.
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8. IntangibleAssets (continued)
(b) Computer software
Acquiredcomputersoftwarelicencesarecapitalisedonthebasisofthecostsincurredtoacquireandbringtousethespecificsoftware.Thesecostsareamortisedovertheirestimatedusefullives(threetofiveyears).
Costsassociatedwithmaintainingcomputersoftwareprogrammesarerecognisedasanexpenseasincurred.CoststhataredirectlyassociatedwiththedevelopmentofidentifiableanduniquesoftwareproductscontrolledbytheGroup,andthatwillprobablygenerateeconomicbenefitsexceedingcostsbeyondoneyear,arerecognisedasintangibleassets.Directcostsincludethesoftwaredevelopmentemployeecostsandanappropriateportionofrelevantoverheads.
Computersoftwarecostsrecognisedasassetsareamortisedovertheirestimatedusefullives.
9. ImpairmentofAssetsAssetsthathaveanindefiniteusefullifearenotsubjecttoamortisation.Theseassetsaretestedatleastannuallyforimpairmentandarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Assetsthataresubjecttoamortisationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset'scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset'sfairvaluelesscoststosellandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashflows(cash-generatingunits).
10.FinancialAssetsTheGroupclassifiesitsfinancialassetsinthefollowingcategories:loansandreceivables,andavailable-for-saleassets.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatinitialrecognitionandre-evaluatesthisdesignationateveryreportingdate.
(a) Loans and receivables
Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.TheyarisewhentheGroupprovidesmoney,goodsorservicesdirectlytoadebtorwithnointentionoftradingthereceivable.Theyareincludedincurrentassets,exceptformaturitiesgreaterthan12monthsaftertheperiod-enddatewheretheseareclassifiedasnon-currentassets.Seealsopolicyfortradeandotherreceivables(accountingpolicynote14).
(b) Available-for-sale assets
Available-for-saleassetsarenon-derivativeinvestmentsandotherassetsthatareeitherdesignatedinthiscategoryornotclassifiedinanyoftheothercategories.Available-for-saleinvestmentsareincludedinnon-currentassetsunlessmanagementintendstodisposeoftheinvestmentwithin12monthsoftheperiod-enddate.
Purchasesandsalesoffinancialassetsarerecognisedontheirtrade-date–thedateonwhichtheGroupcommitstopurchaseorselltheasset.Financialassetsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.FinancialassetsarederecognisedwhentherightstoreceivecashflowsfromtheinvestmentshaveexpiredorhavebeentransferredandtheGrouphastransferredsubstantiallyallrisksandrewardsofownership.Available-for-saleassetsaresubsequentlycarriedatfairvalue.Loansandreceivablesarecarriedatamortisedcostusingtheeffectiveinterestmethod.Unrealisedgainsandlossesarisingfromchangesinthefairvalueofavailable-for-saleassetsarerecognisedinothercomprehensiveincome.Whenavailable-for-saleassetsaresoldorimpaired,theaccumulatedfairvalueadjustmentsareincludedintheincomestatementasgainsandlossesfrominvestments.
Thefairvalueoffinancialinstrumentstradedinactivemarkets(suchasavailable-for-saleinvestments)isbasedonquotedmarketpricesattheperiod-enddate.ThequotedmarketpriceusedforfinancialassetsheldbytheGroupisthecurrentbidprice.
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10.FinancialAssets (continued)
Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarket(forexample,over-the-counterderivatives)isdeterminedbyusingvaluationtechniques.Othertechniques,suchasestimateddiscountedcashflows,areusedtodeterminefairvaluefortheremainingfinancialinstruments.Thenominalvaluelessestimatedcreditadjustmentsoftradereceivablesisassumedtoapproximatetheirfairvalue.
TheGroupassessesateachperiod-enddatewhetherthereisobjectiveevidencethatafinancialassetoragroupoffinancialassetsisimpaired.Inthecaseofequityinvestmentsclassifiedasavailable-for-sale,asignificantorprolongeddeclineinthefairvalueoftheinvestmentbelowitscostisconsideredindeterminingwhethertheinvestmentsareimpaired.Ifanysuchevidenceexistsforavailable-for-saleinvestments,thecumulativeloss–measuredasthedifferencebetweentheacquisitioncostandthecurrentfairvalue,lessanyimpairmentlossonthatinvestmentpreviouslyrecognisedinprofitorloss–isremovedfromequityandrecognisedintheincomestatement.Impairmentlossesrecognisedintheincomestatementonequityinstrumentsarenotreversedthroughtheincomestatement.
11.InitialLeasingCostsExpenditureincurredinleasingtheGroup’spropertyduringconstructionisdeferredandamortisedonastraight-linebasistotheincomestatementuponoccupationofthepropertyoveraperiodnotexceedingthetermsofthelease.
12.StocksandWorkinProgressStocksandworkinprogressarestatedatthelowerofcostandnetrealisablevalue.Costrepresentsaverageunitcostandnetrealisablevalueisdeterminedonthebasisofanticipatedsalesproceedslessestimatedsellingexpenses.Thecostsoffinishedgoodsandworkinprogresscomprisedirectmaterialandlabourcostsandanappropriateproportionofproductionoverheadexpenseslessprovisionsforforeseeablelosses.
13.PropertiesUnder/HeldforDevelopmentandPropertiesforSalePropertiesunder/heldfordevelopmentandpropertiesforsalecomprisefreeholdandleaseholdland,constructioncostsandinterestcostscapitalised,lessprovisionsforpossiblelosses.PropertiesheldfordevelopmentarenotexpectedtobesoldwithintheGroup’snormaloperatingcycleandareclassifiedasnon-currentassets.PropertiesunderdevelopmentareexpectedtobesoldwithintheGroup’snormaloperatingcycleandareclassifiedascurrentassets.Propertiesforsaleareavailableforimmediatesaleandareclassifiedascurrentassets.
14.TradeandOtherReceivablesTradeandotherreceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.AprovisionforimpairmentoftradeandotherreceivablesisestablishedwhenthereisobjectiveevidencethattheGroupwillnotbeabletocollectallamountsdueaccordingtotheoriginaltermsofreceivables.Tradeandotherreceivablesinthestatementoffinancialpositionarestatednetofsuchprovisions.
15.CashandCashEquivalentsIntheconsolidatedstatementofcashflows,cashandcashequivalentscomprisecashinhand,amountsrepayableondemandfrombanksandfinancialinstitutionsandshort-termhighlyliquidinvestmentswhichwerewithinthreemonthsofmaturitywhenacquired,lessbankoverdrafts.Intheconsolidatedstatementoffinancialposition,bankoverdraftsareshownwithinborrowingsincurrentliabilities.
16.TradePayablesTradepayablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.
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17.BorrowingsBorrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurredforthosenotheldatfairvaluethroughprofitorloss.Transactioncostsareincrementalcoststhataredirectlyattributabletotheinitiationoftheborrowings,includingfeesandcommissionpaidtoagents,advisers,brokersanddealers,leviesbyregulatoryagenciesandsecuritiesexchanges,andtransfertaxesandduties.Borrowingsaresubsequentlystatedeitheratamortisedcost,withanydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvaluerecognisedintheincomestatementovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.
BorrowingsareclassifiedascurrentliabilitiesunlesstheGrouphasanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsaftertheperiod-enddate.
Fordisclosurepurposes,thefairvalueofborrowingsstatedatamortisedcostisestimatedbydiscountingthefuturecontractualcashflowsatthecurrentmarketinterestratethatisavailabletotheGroupforsimilarfinancialinstruments.
18.BorrowingCostsInterestcostsincurredarechargedtotheincomestatementexceptforthoseinterestchargesattributabletotheacquisition,constructionorproductionofqualifyingassets(i.e.assetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale)whicharecapitalisedaspartofthecostofthoseassets.Capitalisationofsuchborrowingcostsceaseswhentheassetsaresubstantiallyreadyfortheirintendeduseorsale.
19.LeasesLeasesinwhichasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Receiptsorpaymentsmadeunderoperatingleases(netofanyincentivespaidtolesseesorreceivedfromthelessors)arerecognisedasincomeorexpenseintheincomestatementonastraight-linebasisovertheperiodofthelease.
20.DeferredTaxationDeferredtaxationisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsintheaccounts.However,ifthedeferredtaxarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthat,atthetimeoftherecognitionhasnoimpactontaxablenoraccountingprofitorloss,itisnotrecognised.Taxratesenactedorsubstantiallyenactedbytheperiod-enddateareusedtodeterminedeferredtaxation.
Deferredtaxassetsarerecognisedtotheextentthatitisprobablethatfuturetaxableprofitwillbeavailableagainstwhichthetemporarydifferencescanbeutilised.
Deferredtaxationisprovidedontemporarydifferencesarisingoninvestmentsinsubsidiary,jointlycontrolledandassociatedcompanies,exceptwherethetimingofthereversalofthetemporarydifferenceiscontrolledbytheGroupanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.
21.RevenueRecognitionProvidedthecollectibilityoftherelatedreceivableisreasonablyassured,revenueisrecognisedasfollows:
(a) Rentalincomeisrecognisedonastraight-linebasisovertheshorterof(i)theremainingleaseterm,(ii)theperiodtothenextrentreviewdateand(iii)theperiodfromthecommencementdateoftheleasetothefirstbreakoptiondate(ifany),exclusiveofanyturnoverrent(ifapplicable)andotherchargesandreimbursements(ifany).Wheretheleaseincludesarent-freeperiod,therentalincomeforegoneisallocatedevenlyovertheleaseterm.Turnoverrentisrecognisedwhenearned.
(b) Salesofpropertiesarerecognisedwheneffectivecontrolofownershipofthepropertiesistransferredtothebuyers.
(c) Salesofservices,includingservicesprovidedbyhoteloperations,arerecognisedwhentheservicesarerendered.
(d) Interestincomeisrecognisedonatime-proportionbasisusingtheeffectiveinterestmethod.
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22.RelatedPartiesRelatedpartiesareindividualsandcompanies,includingsubsidiary,fellowsubsidiary,jointlycontrolledandassociatedcompaniesandkeymanagement(includingclosemembersoftheirfamilies),wheretheindividual,companyorGrouphastheability,directlyorindirectly,tocontroltheotherpartyorexercisesignificantinfluenceovertheotherpartyinmakingfinancialandoperatingdecisions.
23.GovernmentGrantsGrantsfromthegovernmentarerecognisedwherethereisreasonableassurancethatthegrantwillbereceivedandtheGroupwillcomplywithallattachedconditions.
Governmentgrantsrelatedtoassetsaredeductedfromthecarryingamountoftheasset.
24.RetirementBenefitsTheGroupoperatesbothdefinedbenefitanddefinedcontributionretirementbenefitschemesforitsemployees,theassetsofwhicharegenerallyheldinseparatetrustee-administeredfunds.TheschemesaregenerallyfundedbypaymentsfromtherelevantGroupcompaniesand,insomecases,employeesthemselves,takingaccountoftherecommendationsofindependentqualifiedactuaries.
Adefinedbenefitplanisaretirementplanthatdefinesanamountofbenefitthatanemployeewillreceiveonretirement,usuallydependentononeormorefactorssuchasage,yearsofserviceandcompensation.AdefinedcontributionplanisaretirementplanunderwhichtheGrouppaysfixedcontributionsintoaseparateentity.TheGrouphasnolegalorconstructiveobligationstopayfurthercontributionsifthefunddoesnotholdsufficientassetstopayallemployeesthebenefitsrelatingtoemployeeserviceinthecurrentandpriorperiods.
TheGroup’scontributionstothedefinedcontributionschemesarechargedtotheincomestatementintheperiodtowhichthecontributionsrelate.
Fordefinedbenefitschemes,retirementbenefitcostsareassessedusingtheprojectedunitcreditmethod.Underthismethod,thecostofprovidingretirementbenefitsischargedtotheincomestatementsoastospreadtheregularcostovertheservicelivesofemployees.Theretirementbenefitobligationismeasuredasthepresentvalueoftheestimatedfuturecashoutflows.Planassetsaremeasuredatfairvalue.Cumulativeunrecognisednetactuarialgainsandlossesatthepreviousfinancialyear-end,totheextentthattheamountisinexcessof10%ofthegreaterofthepresentvalueofthedefinedbenefitobligationsandthefairvalueoftheplanassets,arerecognisedovertheexpectedaverageremainingworkinglivesoftheemployeesparticipatingintheplan.Asubsidiarycompanymayadoptanysystematicmethodthatresultsinfasterrecognitionofactuarialgainsandlosses,providedthesamebasisisappliedconsistentlyfromperiodtoperiod.Pastservicecostsarerecognisedasanexpenseonastraight-linebasisovertheaverageperioduntilthebenefitsbecomevested.
25.ProvisionsProvisionsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofpastevents;itismorelikelythannotthatanoutflowofresourceswillberequiredtosettletheobligation;andtheamounthasbeenreliablyestimated.Provisionsarenotrecognisedforfutureoperatinglosses.
Wherethereareanumberofsimilarobligations,thelikelihoodthatanoutflowwillberequiredinsettlementisdeterminedbyconsideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.
26.GuaranteesFinancialguaranteesareinitiallyrecognisedintheaccountsatfairvalueonthedatetheguaranteewasgiven.Subsequenttoinitialrecognition,theliabilitiesundersuchguaranteesaremeasuredatthehigheroftheinitialmeasurement,lessamortisationcalculatedtorecogniseintheincomestatementthefeeincomeearnedonastraight-linebasisoverthelifeoftheguarantee,andthebestestimateoftheexpenditurerequiredtosettleanyfinancialobligationarisingattheperiod-enddate.Anyincreaseintheliabilityrelatingtoguaranteesistakentotheincomestatement.
PrincipalAccountingPolicies
144 SwirePropertiesAnnualReport|2011
27.DividendDistributionDividenddistributiontotheCompany’sshareholdersisrecognisedasaliabilityintheGroup’saccountsintheperiodinwhichthedividendsareapprovedbytheCompany’sshareholdersordirectors,whereappropriate.
28.SegmentReportingOperatingsegmentsarereportedinamannerconsistentwiththeGroup'sinternalfinancialreportingprovidedtotheboardofdirectorsformakingstrategicdecisions.Fordisclosurepurposes,areportablesegmentcompriseseitheroneormoreoperatingsegmentswhichcanbeaggregatedtogetherbecausetheysharesimilareconomiccharacteristicsorsingleoperatingsegmentswhicharedisclosableseparatelybecausetheycannotbeaggregatedorbecausetheyexceedcertainquantitativethresholds.
29.MergerAccountingforCommonControlCombinationsOn25thJanuary2010,theGroupacquiredallthesharesofSwirePropertiesUSIncandSwirePropertiesOneLLC,whichwerewholly-ownedsubsidiariesoftheimmediateholdingcompanyoftheCompany,andalltheoutstandingrelatedloannotesofSwirePropertiesUSIncfromtheimmediateholdingcompanyforatotalconsiderationofHK$1,108,132,451,whichwassatisfiedbyanissueof1,108,132,451newsharesbytheCompanyatparonthesamedate.
TheGrouphasadoptedmergeraccountingtoaccountfortheabovetransactionsinaccordancewithAccountingGuidance5,MergerAccountingforCommonControlcombinations,asissuedbytheHKICPA.Thefinancialinformationincorporatesthefinancialpositionsandresultsoftheentitiesacquiredintheaboveasiftheentitieshadbeenconsolidatedfromthedatewhentheseentitlesfirstcameunderthecontroloftheimmediateholdingcompany.
Thenetassetsoftheentitiesacquiredfromtheimmediateholdingcompanywereconsolidatedusingtheexistingbookvaluesrecordedbytheimmediateholdingcompany.NoamountwasrecognisedforgoodwillortheexcessoftheCompany’sinterestinthenetfairvalueoftheacquirees’identifiableassets,liabilitiesandcontingentliabilitiesovercostatthetimeofthecommoncontrolcombinations,totheextentofthecontinuationoftheimmediateholdingcompany’sinterest.
30.2010ComparativeThe2010comparativehasbeenrestatedfromtheCompany’s2010statutoryaccountstoreflectcertainadjustmentsmadeinpreparingtheCompany’slistingdocumentthatwasissuedon21stDecember2011.
SwirePropertiesAnnualReport|2011 145
PrincipalSubsidiary,JointlyControlledandAssociatedCompaniesShowingproportionofcapitalownedat31stDecember2011
Attributable to the Group
%
Owned directly
%
Owned by
subsidiaries % Issued share capital Principal activities
Subsidiary companies
Incorporated in Hong Kong with limited liability and operate in Hong Kong:
53StubbsRoadDevelopmentCo.Limited 100 100 – 5,000,000sharesof HK$1each
Propertydevelopment
53StubbsRoad(Management)Limited 100 100 – 1shareofHK$10 Propertymanagement
CathayLimited 100 100 – 807sharesofHK$10each Propertyinvestment
CitiluckDevelopmentLimited 100 – 100 1,000sharesofHK$1each Propertyinvestment
CityplazaHoldingsLimited 100 100 – 100sharesofHK$10each Propertyinvestment
CoventryEstatesLimited 100 – 100 4sharesofHK$10each Propertyinvestment
GoldenTentLimited 100 – 100 1shareofHK$1 Hotelinvestment
IslandDelightLimited 87.5 – 100 1shareofHK$1 Propertytrading
KeenWellHoldingsLimited 80 – 100 1shareofHK$1 Propertytrading
OneIslandEastLimited 100 100 – 2sharesofHK$1each Propertyinvestment
OneQueen’sRoadEastLimited 100 100 – 2sharesofHK$1each Propertyinvestment
OrientalLandscapesLimited 100 100 – 50,000sharesof HK$10each
Landscapingservices
PacificPlaceHoldingsLimited 100 100 – 2sharesofHK$1each Propertyinvestment
RedhillPropertiesLimited 100 100 – 250,000sharesof HK$1each
Propertyinvestment
SuperGearInvestmentLimited 100 100 – 2sharesofHK$1each Propertyinvestment
SwireProperties(Finance)Limited 100 100 – 1,000,000sharesof HK$1each
Provisionoffinancial services
SwirePropertiesManagementLimited 100 100 – 2sharesofHK$10each Propertymanagement
SwirePropertiesProjectsLimited 100 100 – 2sharesofHK$1each Projectmanagement
SwirePropertiesRealEstateAgencyLimited 100 100 – 2sharesofHK$10each Realestateagency
TaiKooPlaceHoldingsLimited 100 100 – 2sharesofHK$1each Propertyinvestment
Incorporated in Mainland China with limited liability and operate in Mainland China:
(Domestic company) BeijingTianlianRealEstateCompanyLimited(2)(4) 100 – 100 Registeredcapitalof
RMB865,000,000Holdingcompany
(Sino-foreign joint venture) TaiKooHui(Guangzhou)Development CompanyLimited(2)
97 – 97 Registeredcapitalof RMB2,650,000,000
Propertyinvestment
(Wholly foreign owned enterprises) BeijingSanlitunHotelManagement CompanyLimited(2)
100 – 100 Registeredcapitalof RMB400,000,000
Hotelinvestment
BeijingSanlitunNorthPropertyManagement CompanyLimited(2)
80 – 100 Registeredcapitalof RMB1,392,000,000
Propertyinvestment
BeijingSanlitunSouthPropertyManagement CompanyLimited(2)
80 – 100 Registeredcapitalof RMB1,598,000,000
Propertyinvestment
SunshineMelody(Guangzhou)Properties ManagementLimited
100 – 100 Registeredcapitalof RMB195,000,000
Propertyinvestment
SwireProperties(China)Investment CompanyLimited(2)
100 – 100 Registeredcapitalof US$30,000,000
Holdingcompany
Notes:(1)Thistableliststheprincipalsubsidiary,jointlycontrolledandassociatedcompaniesoftheGroupincludingthosewhich,intheopinionoftheDirectors,
materiallycontributetothenetincomeoftheGrouporholdamaterialportionoftheassetsorliabilitiesoftheGroup.Togivefulldetailsofthesecompanieswould,intheopinionoftheDirectors,resultinparticularsofexcessivelength.
(2)Translatedname.(3)Groupinterestheldthroughjointlycontrolledandassociatedcompanies.(4)CompaniesnotauditedbyPricewaterhouseCoopers.Thesecompaniesaccountforapproximately2.1%ofattributablenetassetsat31stDecember2011.
PrincipalSubsidiary,JointlyControlledandAssociatedCompaniesShowingproportionofcapitalownedat31stDecember2011
146 SwirePropertiesAnnualReport|2011
Attributable to the Group
%
Owned directly
%
Owned by
subsidiaries % Issued share capital Principal activities
Subsidiary companies (continued)
Incorporated in the United States with limited liability and operate in the United States:
BrickellCitiCentreEastLLC 100 – 100 LimitedLiabilityCompany Propertyinvestment andhotel
BrickellCitiCentreNorthLLC 100 – 100 LimitedLiabilityCompany Propertytrading andinvestment
BrickellCitiCentrePlazaLLC 100 – 100 LimitedLiabilityCompany Propertyinvestment
BrickellCitiCentreWestLLC 100 – 100 LimitedLiabilityCompany Propertytrading andinvestment
FTL/ADLtd 75 – 75 FloridaPartnership Propertytrading
SwireDevelopmentSalesLLC 100 – 100 LimitedLiabilityCompany Realestateagency
SwirePacificHoldingsAsiaLLC 100 – 100 LimitedLiabilityCompany Propertytrading
SwirePropertiesInc 100 – 100 1,000sharesofUS$0.01 each
Holdingcompany
SwirePropertiesOneLLC 100 – 100 LimitedLiabilityCompany Propertytrading
SwirePropertiesUSInc 100 – 100 1,000sharesofUS$0.01 each
Holdingcompany
SwireRealtyLLC 100 – 100 LimitedLiabilityCompany Realestateagency
Incorporated in the British Virgin Islands with limited liability and operate in Hong Kong:
BaoWeiEnterprisesLimited 100 100 – 1shareofUS$1 Propertytrading
BoomViewHoldingsLimited 100 100 – 2sharesofUS$1each Propertyinvestment
CharmingGraceLimited 100 100 – 1shareofUS$1 Propertydevelopment
EndeavourTechnologyLimited 87.5 – 87.5 1,000sharesofUS$1each Holdingcompany
ExcelFreeLtd. 100 100 – 1shareofUS$1 Propertytrading
FineGraceInternationalLimited 100 100 – 1shareofUS$1 Propertytrading
NovelRayLimited 100 100 – 1shareofUS$1 Propertyinvestment
PeragoreLimited 80 – 80 1,000sharesofUS$1each Holdingcompany
SinoFlagshipInvestmentsLimited 100 100 – 1shareofUS$1 Propertyinvestment
SwireandIslandCommunication DevelopmentsLimited
60 60 – 100sharesofHK$10each and1non–voting dividendshareofHK$10
Propertyinvestment
SwirePropertiesChinaHoldingsLimited 100 100 – 1shareofUS$1 Holdingcompany
WonderCruiseGroupLimited 100 100 – 1shareofUS$1 Propertytrading
Incorporated in the United Kingdom with limited liability and operate in the United Kingdom:
NewLightHotelsLimited 100 – 100 17,000,100sharesof GBP1each
Hoteldeveloperandoperator
Jointly controlled companies
Incorporated in Hong Kong with limited liabilities and operate in Hong Kong:
HaretonLimited 50 50 – 100sharesofHK$10each Propertytrading
RichlyLeaderLimited 50 – 50 1,000,000,000sharesof HK$1each
Propertyinvestment
SkyTreasureLimited 50 – 50 2sharesofHK$1each Propertyinvestment
Incorporated in the United States with limited liability and operate in the United States:
SwireBrickellKeyHotel,Ltd. 75 – 75 FloridaPartnership Hotelinvestment
SwirePropertiesAnnualReport|2011 147
Attributable to the Group
%
Owned directly
%
Owned by
subsidiaries % Issued share capital Principal activities
Jointly controlled companies (continued)
Incorporated in the British Virgin Islands with limited liability:
DazhongliPropertiesLimited(operatesin MainlandChina)
50 – 50 1,000sharesofUS$1each Holdingcompany
GreatCityChinaHoldingsLimited (operatesinMainlandChina)
50 – 50 2sharesofUS$1each Holdingcompany
IslandLandDevelopmentLimited (operatesinHongKong)
50 50 – 100sharesofHK$10each Propertyinvestment
NewfoundworldInvestmentHoldingsLimited (operatesinHongKong)
20 – 20 5sharesofUS$1each Holdingcompany
Incorporated in Mainland China with limited liability and operate in Mainland China:
(Domestic company)
BeijingLinlianRealEstateCompanyLimited(2) 50 – 50 Registeredcapitalof RMB400,000,000
Propertyinvestment
(Sino–foreign joint venture)
ChengduQianhaoRealEstateCompanyLimited 49.5 – (3) Registeredcapitalof US$329,000,000
Propertyinvestment
(Wholly foreign owned enterprises)
GuanFeng(Shanghai)RealEstateDevelopment CompanyLimited(2)
50 – (3) Registeredcapitalof US$500,000,000
Propertyinvestment
PeiFeng(Shanghai)RealEstateDevelopment CompanyLimited(2)
50 – (3) Registeredcapitalof US$60,000,000
Propertyinvestment
YingFeng(Shanghai)RealEstateDevelopment CompanyLimited(2)
50 – (3) Registeredcapitalof US$336,500,000
Propertyinvestment
Associated companies
Incorporated in Hong Kong with limited liability and operate in Hong Kong:
GreenrollLimited(4) 20 20 – 45,441,000sharesof HK$10each
Hotelinvestment
QueenswayHotelLimited(4) 20 – (3) 100,000sharesofHK$10 each
Hotelinvestment
Shangri–LaInternationalHotels (PacificPlace)Limited
20 20 – 5,000sharesofHK$1each and10,000,000 non-votingdeferred sharesofHK$1each
Hotelinvestment
148 SwirePropertiesAnnualReport|2011
ScheduleofPrincipalGroupPropertiesAt31stDecember2011
Gross floor areas in square feet
Hong Kong Mainland China U.S.A. U.K. Totals
Held through subsidiaries
Held through other
companiesHeld through
subsidiaries
Held through other
companiesHeld through
subsidiaries
Held through other
companiesHeld through
subsidiariesHeld through
subsidiaries
Held through subsidiaries
and other companies
Completed properties for investment
Retail 2,324,862 99,698 2,871,898 – – – – 5,196,760 5,296,458
Office 7,954,113 492,711 1,723,424 297,732 – – – 9,677,537 10,467,980
Techno-centres 1,816,667 – – – – – – 1,816,667 1,816,667
Residential 483,711 – – – – – – 483,711 483,711
Hotels 358,371 384,775 169,463 – – 258,750 195,716 723,550 1,367,075
12,937,724 977,184 4,764,785 297,732 – 258,750 195,716 17,898,225 19,431,891
Property developments for investment
Retail 12,983 – – 1,588,338 520,000 – – 532,983 2,121,321
Office 145,390 – – 904,967 963,000 – – 1,108,390 2,013,357
Hotels – – 588,231 555,552 200,000 – – 788,231 1,343,783
Residential 62,099 – 52,797 37,335 108,000 – – 222,896 260,231
220,472 – 641,028 3,086,192 1,791,000 – – 2,652,500 5,738,692
Completed properties for sale
Retail – 3,820 – – – – – – 3,820
Residential 1,996 – – – 67,728 – – 69,724 69,724
MixedUse – – – – 12,586 – – 12,586 12,586
1,996 3,820 – – 80,314 – – 82,310 86,130
Property developments for sale
Office – – – 642,038 – – – – 642,038
Industrial – 191,250 – – – – – – 191,250
Residential 859,790 44,278 – – 1,521,800 – – 2,381,590 2,425,868
MixedUse – – – – 787,414 – – 787,414 787,414
859,790 235,528 – 642,038 2,309,214 – – 3,169,004 4,046,570
14,019,982 1,216,532 5,405,813 4,025,962 4,180,528 258,750 195,716 23,802,039 29,303,283
Notes:1. Allpropertiesheldthroughsubsidiarycompaniesarewholly-ownedexceptforIslandPlace(60%owned),TaiKooHui(97%owned),SanlitunVillage
(Retail:80%owned,Hotel:100%owned),AZURA(87.5%owned),SaiWanTerrace(80%owned),RiverCourtandFortLauderdale(100%owned;75%definedprofits).Theabovesummarytableincludesthefloorareasofthesesevenpropertiesin100%.
2. “Othercompanies”comprisejointlycontrolledorassociatedcompaniesandotherinvestments.Thefloorareasofpropertiesheldthroughsuchcompaniesareshownonanattributablebasis.
3. GrossfloorareasinHongKongandMainlandChinaexcludecarparkingspaces;thereareover9,000completedcarparkingspacesinHongKongandMainlandChina,whichareheldbysubsidiariesandothercompaniesforinvestment.
4. WhenaHongKongpropertyisheldunderarenewablelease,theexpirydateoftherenewalperiodisshown.5. AllpropertiesintheUnitedStatesarefreehold.6. GrossfloorareasinU.S.A.excludecarparkingspaces;thereareabout450completedcarparkingspacesheldbyothercompaniesforinvestment.7. GrossfloorareasinU.K.excludecarparkingspaces;thereareabout50completedcarparkingspacesheldbysubsidiariesforinvestment.8. TheGroup’slistingdocumentdated21stDecember2011includedvaluationsasat30thSeptember2011ofthepropertiesheldatcostlessdepreciation
andimpairmentintheaccountant’sreport,includingtheattributableshareofthoseheldbyjointlycontrolledandassociatedcompanies.Inaggregatethevaluationsofthesepropertiesat30thSeptember2011wereHK$25,080million,representingasurplusofHK$10,171millionabovetheiraccountingcarryingvaluesatcostlessdepreciationandimpairmentat31stDecember2011.Hadthesevaluationsbeenusedastheaccountingcarryingvaluesat1stJanuary2011,thiswouldhaveresultedinanadditionaldepreciationchargeofHK$58milliontotheincomestatementin2011.
SwirePropertiesAnnualReport|2011 149
Completed properties for investment in Hong Kong Lot number
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Retail and Office
1. PacificPlace,88Queensway,Central
OnePacificPlace IL8571(part) 2135 115,066(part)
863,266 – 1988 Officebuilding
TwoPacificPlace IL8582&Ext.(part) 2047 203,223(part)
695,510 – 1990 Officebuilding
TheMallatPacificPlace
IL8571(part)IL8582&Ext.(part)
2135/2047 318,289(part)
711,182 470 1988/90 Shoppingcentrewithrestaurantsandacinema.AccesstoAdmiraltyMTRstation.PacificPlacealsocomprisesservicedapartmentsandhotels,detailsofwhicharegivenintheResidentialandHotelcategoriesbelow.
2. ThreePacificPlace,OneQueen’sRoadEast
IL47AsARPIL47AsBRPIL47AsCRPIL47BsCRPIL47ARPIL47CsAss1RPIL47CsARPIL47BsARPIL47BsBRPIL47BRPIL47AsBss2IL47AsDIL47BsDIL47CRPIL47DRPIL47DsARPIL47sAss1IL47sARPIL47sBss1&RPIL47sCss1&ss2sA& ss2RP&ss3sA&ss3RP& ss4&ss5&ss6sA&ss6RP& ss7RP&RPIL47sPIL47RPIL47sCss5Ext.IL47sCss1Ext.
2050-2852 40,236 627,657 111 2004/07 OfficebuildinglinkedtoTheMallandAdmiraltyMTRstation.
3. Cityplaza,TaikooShing
QBML2&Ext.sKss5QBML2&Ext.sRRP(part)QBML2&Ext.sRss1sA(part)QBML2&Ext.sQRP(part)QBML2&Ext.sQss7sA(part)QBML2&Ext.sQss7RP(part)QBML2&Ext.sQss2sB(part)QBML2&Ext.sQss2sAss1(part)QBML2&Ext.sQss2sARP(part)QBML2&Ext.sJRP(part)
2899 334,475(part)
1,105,227 834 1983/87/97/2000
Shoppingcentrewithrestaurants,ice-skatingrink,cinemaandaccesstoTaiKooMTRstation.
4. CityplazaOne,TaikooShing
QBML2&Ext.sRRP(part)QBML2&Ext.sRss1sA(part)QBML2&Ext.sQRP(part)QBML2&Ext.sQss7sA(part)QBML2&Ext.sQss7RP(part)QBML2&Ext.sQss2sB(part)QBML2&Ext.sQss2sAss1(part)QBML2&Ext.sQss2sARP(part)QBML2&Ext.sJRP(part)
2899 146,184(part)
628,785 – 1997 OfficebuildingoverpartofCityplazashoppingcentre.
5. CityplazaThree,TaikooShing
QBML2&Ext.sKRP(part) 2899 33,730 447,714 10 1992 OfficebuildinglinkedbyafootbridgetoCityplaza.
6. CityplazaFour,TaikooShing
QBML2&Ext.sKRP(part) 2899 41,864 556,431 – 1991 OfficebuildinglinkedbyafootbridgetoCityplaza.
ScheduleofPrincipalGroupPropertiesAt31stDecember2011
150 SwirePropertiesAnnualReport|2011
Completed properties for investment in Hong Kong Lot number
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Retail and Office (continued)
7. CommercialareasinStagesI-XofTaikooShing
SML1sAss1,SML1sARPSML1sB,SML2sCRPSML2sCss2SML2sD,SML2RPQBML2&Ext.sJss1QBML2&Ext.sJss3QBML2&Ext.sLQBML2&Ext.sNQBML2&Ext.sQss4&ss5QBML2&Ext.sQss2sCQBML2&Ext.sSss1QBML2&Ext.sHss1QBML2&Ext.sHss3sAQBML2&Ext.sKss3sAQBML2&Ext.sUss1QBML2&Ext.sKss3RPQBML2&Ext.sKss4sA&RPQBML2&Ext.sTss1&RPQBML2&Ext.sURPQBML2&Ext.sKss9& ss10&ss11&ss13&ss16(part)
2081/2899 – 331,079 3,826 1977-85 Neighbourhoodshops,schoolsandcarparkingspaces.
8. DevonHouse,TaiKooPlace
QBML1sEss2(part)QBML1sFss1(part)QBML1sFRP(part)ML703sN(part)
2881 70,414(part)
803,452 311 1993 OfficebuildinglinkedtoQuarryBayMTRstationbyafootbridge.
9. DorsetHouse,TaiKooPlace
QBML1sQ(part)QBML1sRRP(part)QBML1sS(part)QBML1sTss1(part)QBML1sTss2(part)QBML1sTRP(part)QBML1sU(part)QBML1sW(part)QBML1RP(part)
2881 238,582(part)
609,540 215 1994 OfficebuildinglinkedtoDevonHouse.
10.LincolnHouse,TaiKooPlace
QBML1sQ(part)QBML1sRRP(part)QBML1sS(part)QBML1sTss1(part)QBML1sTss2(part)QBML1sTRP(part)QBML1sU(part)QBML1sW(part)QBML1RP(part)
2881 238,582(part)
333,353 164 1998 OfficebuildinglinkedtoPCCWTower.
11.OxfordHouse,TaiKooPlace
QBML1sCss4QBML1sCss7(part)QBML2&Ext.sD
2881/2899 33,434 501,253 182 1999 OfficebuildinglinkedtoSomersetHouse.
12.CambridgeHouse,TaiKooPlace
QBML1sEss2(part)QBML1sFss1(part)QBML1sFRP(part)ML703sN(part)
2881 70,414(part)
268,795 – 2003 OfficebuildinglinkedtoDevonHouse.
13.OneIslandEast,TaiKooPlace
QBML1sCss5QBML1sCss6QBML2&Ext.sFQBML2&Ext.sGQBML2&Ext.sHss6sBRPQBML2&Ext.sHRPQBML2&Ext.RPQBIL15sD
2881/2899 109,929 1,537,011 – 2008 OfficebuildinglinkedtoCornwallHouse.
14.IslandPlace,500King’sRoad,NorthPoint
IL8849(part) 2047 106,498(part)
150,223 288 1996 Floorareashownrepresentsthewholeshoppingcentrepodium,ofwhichtheGroupowns60%.
15.StarCrest,9StarStreet,Wanchai
IL8853(part) 2047 40,871(part)
13,112 83 1999 Floorareashownrepresentsthewholeoftheretailarea.
SwirePropertiesAnnualReport|2011 151
Completed properties for investment in Hong Kong Lot number
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Retail and Office (continued)
16.21-29WingFungStreet,Wanchai
IL526sAss1sCIL526sAss1sBRPIL526sAss1sBss1IL526sAss2IL526sAss3
2856 2,967 14,039 – 1992/2006
Floorareashownrepresentstheexistingbuildings.
17.8Queen’sRoadEast,Wanchai(formerlycalledSincereInsuranceBuilding)
IL5250IL7948IL7950
2089/2103/2113
4,612 81,346 – 1968 Officebuildingwithgroundfloorretail.
Totalheldthroughsubsidiaries 10,278,975 6,494
18.PCCWTower,TaiKooPlace
QBML1sQ(part)QBML1sRRP(part)QBML1sS(part)QBML1sTss1(part)QBML1sTss2(part)QBML1sTRP(part)QBML1sU(part)QBML1sW(part)QBML1RP(part)
2881 238,582(part)
620,148 217 1994 OfficebuildinglinkedtoDorsetHouse.Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns50%.
19.625King’sRoad,NorthPoint
IL7550 2108 20,000 301,065 84 1998 Officebuilding.Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns50%.
20.TungChungCrescent(Site1),TungChung,Lantau
TCTL1(part) 2047 331,658(part)
36,053 – 1998/1999
Floorareashownrepresentstheretailspace,ofwhichtheGroupowns20%.
21.Citygate(Site2),TungChung,Lantau
TCTL2(part) 2047 358,557(part)
Retail:462,439
Office:160,522
1,156 1999/2000
A160,522squarefootofficetowerabovea462,439squarefootshoppingcentreofwhichtheGroupowns20%.(PartofSite1andSite2Northincludedonpages153and152respectively)
Totalheldthroughjointlycontrolledcompanies 1,580,227 1,457
– ofwhichattributabletotheGroup 592,409
Techno-centres
22.TaiKooPlace QBML1sQ(part)QBML1sRRP(part)QBML1sS(part)QBML1sTss1(part)QBML1sTss2(part)QBML1sTRP(part)QBML1sU(part)QBML1sW(part)QBML1RP(part)
2881 238,582(part)
285 Datacentres/offices/logisticswarehousing
WarwickHouse 554,934 1979
CornwallHouse 338,369 1984 FloorareaexcludestheeightfloorsownedbytheGovernment.
SomersetHouse 923,364 1988 GeneralBuildingPlanapprovalwasobtainedtoredevelopSomersetHouseintoaGradeAofficewithatotalgrossfloorareaofabout895,000squarefeet.
Totalheldthroughsubsidiaries 1,816,667 285
ScheduleofPrincipalGroupPropertiesAt31stDecember2011
152 SwirePropertiesAnnualReport|2011
Completed properties for investment in Hong Kong Lot number
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Residential
23.PacificPlaceApartments,88Queensway
IL8582&Ext.(part) 2047 203,223(part)
443,075 – 1990 270servicedsuiteswithintheConradHongKongHoteltower.
24.RockyBank,6DeepWaterBayRoad
RBL613RP 2099 28,197 14,768 – 1981 Sixsemi–detachedhouses.
25.HouseB,36IslandRoad,DeepWaterBay
RBL507&Ext.(part) 2097 20,733(part)
2,644 – 1980 Onedetachedhouse
26.Eredine,38MountKellettRoad
RBL587&Ext.(part) 2038 51,430(part)
23,224 7 1965 7apartmentunits
Totalheldthroughsubsidiaries 483,711 7
Hotels
1. EAST,TaikooShing QBML2&Ext.sRRP(part)QBML2&Ext.sRss1sA(part)QBML2&Ext.sQRP(part)QBML2&Ext.sQss7sA(part)QBML2&Ext.sQss7RP(part)QBML2&Ext.sQss2sB(part)QBML2&Ext.sQss2sAss1 (part)QBML2&Ext.sQss2sARP (part)QBML2&Ext.sJRP(part)
2899 146,184(part)
199,633 – 2009 345–roomhotel
2. TheUpperHouse,PacificPlace
IL8571(part) 2135 115,066(part)
158,738 – 2009 117–roomhotelabovetheJWMarriottHotel.
Totalheldthroughsubsidiaries 358,371
3. JWMarriottHotel,PacificPlace
IL8571(part) 2135 115,066(part)
525,904 – 1988 602–roomhotel,inwhichtheGroupownsa20%interest.
4. ConradHongKongHotel,PacificPlace
IL8582&Ext.(part) 2047 203,223(part)
555,590 – 1990 513–roomhotel,inwhichtheGroupownsa20%interest.
5. IslandShangri-LaHotel,PacificPlace
IL8582&Ext.(part) 2047 203,223(part)
605,728 – 1991 565–roomhotel,inwhichtheGroupownsa20%interest.
Totalheldthroughassociatedcompanies 1,687,222
– ofwhichattributabletotheGroup 337,444
6. NovotelCitygateHongKongHotel,Citygate(Site2North)
TCTL2(part) 2047 358,557(part)
236,653 7 2005 440–roomhotel,inwhichtheGroupownsa20%interest.
Totalheldthroughjointlycontrolledcompanies 236,653 7
– ofwhichattributabletotheGroup 47,331
SwirePropertiesAnnualReport|2011 153
Completed properties for sale in Hong Kong Lot number
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
1. 5StarStreet,Wanchai
IL2837sCss1(part)IL2837sCRP(part)
2078 2,316(part)
1,996 – 2010 Floorareashownrepresentstheunsoldresidentialportion.
Totalheldthroughsubsidiaries 1,996 –
2. MTRCTungChung(Package1),Lantau
– TungChung Crescent(Site1)
TCTL1(part) 2047 331,658(part)
– 75 1998/1999
75unsoldcarparkingspaces,ofwhichtheGroupowns20%.
Totalheldthroughjointlycontrolledcompanies – 75
–ofwhichattributabletotheGroup –
Other holdings
1 BelairMonte,Fanling
FSSTL126(part) 2047 223,674(part)
Retail:47,751
17 1998 Floorareashownrepresentsthewholeoftheretailarea,ofwhichtheGroupowns8%.
47,751 17
–Attributableholding 3,820
Completed properties for investment in Mainland China Address
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Retail
1. SanlitunVillage(VillageSouth)
19SanlitunNorthRoad,ChaoyangDistrict,Beijing
2044(2054forCarpark)
566,332(part)
776,909 451 2007 Shoppingcentrewithrestaurantsandcinema.Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns80%.
2. SanlitunVillage(VillageNorth)
11SanlitunNorthRoad,ChaoyangDistrict,Beijing
2044(2054forCarpark)
566,332(part)
519,399 410 2007 Shoppingcentrewithrestaurants.Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns80%.
3. BeaumondeRetailPodium
75TianheEastRoad,TianheDistrict,Guangzhou
2044 174,380(part)
90,847 100 2008 Shoppingcentrewithrestaurantsandcarparkingspaces.
4. TaiKooHui NorthofTianheRoadandwestofTianheEastRoad,TianheDistrict,Guangzhou
2051 526,941(part)
1,484,743 718 2011 Shoppingcentrewithrestaurants.Floorareashownrepresentstheretailportion,ofwhichtheGroupowns97%.
Totalheldthroughsubsidiaries 2,871,898 1,679
ScheduleofPrincipalGroupPropertiesAt31stDecember2011
154 SwirePropertiesAnnualReport|2011
Completed properties for investment in Mainland China Address
Leasehold expiry
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Office
1. TaiKooHui NorthofTianheRoadandwestofTianheEastRoad,TianheDistrict,Guangzhou
2051 526,941(part)
1,723,424 – 2011 Floorareashownrepresentstheofficeportion,ofwhichtheGroupowns97%.
Totalheldthroughsubsidiaries 1,723,424 –
2. INDIGO SouthofJiangTaiRoadandeastofJiuxianqiaoRoad,ChaoyangDistrict,Beijing
2054 631,072(part)
595,464 411 2011 Phasedopeningfromthe4thquarterof2011.Floorareashownrepresentstheofficeportion,ofwhichtheGroupowns50%.
Totalheldthroughjointlycontrolledcompanies 595,464 411
– ofwhichattributabletotheGroup 297,732
Hotel
1. TheOppositeHouse 11SanlitunNorthRoad,ChaoyangDistrict,Beijing
2044(2054forCarpark)
566,332(part)
169,463 32 2007 99-roomhotel
Totalheldthroughsubsidiaries 169,463 32
Completed properties for investment in the United States Address
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Hotel
1. MandarinOriental SouthBrickellKey,Miami,Florida 120,233 345,000 600 2000 326-roomluxuryhotelincentralMiami,inwhichtheGrouphasa75%interest.
Totalheldthroughjointlycontrolledcompany 345,000 600
– ofwhichattributabletotheGroup 258,750
Completed properties for sale in the United States Address
Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
1. ASIA 900BrickellKey,Miami,Florida 173,531 Residential:67,728
55 2008 36-storeyresidentialcondominiumtowercomprising123unitswith5-storeyparkinggarage.Asat31stDecember2011,93unitswereclosed.
2. RiverCourt FortLauderdale,Florida 21,750 Retail/Office:12,586
38 1966 DevelopmentsiteinFortLauderdaleacquiredinOctober2006,inwhichtheGrouphasa75%interest.
Totalheldthroughsubsidiaries 80,314 93
SwirePropertiesAnnualReport|2011 155
Property developments for investment in Hong Kong Lot number
Leasehold expiry
Site area in square feet Use
Gross floor area in
square feetNumber of car parks
Stage of completion
Expected completion
date Remarks
1. 28HennessyRoad(formerlycalledTaiSangCommercialBuilding),Wanchai
ML23IL2244RPIL2245RP
2843 9,611 Office 145,390 – Superstructureinprogress
2012 Floorareashownrepresentsaproposedofficebuilding.
2. 23TongChongStreet(formerlycalledWahYuenBuilding),QuarryBay
ML703sI 2881 8,664 ResidentialRetail
62,09912,983
75,082
–
–
Preparationofdemolitioninprogress
2014 Floorareashownrepresentsaservicedapartmentbuildingabovearetailpodium.
Totalheldthroughsubsidiaries 220,472 –
Property developments for sale in Hong Kong Lot number
Leasehold expiry
Site area in square feet Use
Gross floor area in
square feetNumber of car parks
Stage of completion
Expected completion
date Remarks
1. 2ASeymourRoad(AZURA)MidLevelsWest
IL577sCIL577sDIL577sEIL577sFIL577sGIL577sHIL577sIIL577sJIL577sLss1IL577sLss2IL577sLss3IL577sLRPIL577sM
2857 22,957 Residential 206,306 45 Superstructureinprogress
2012 Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns87.5%.Comprises126residentialunitsofwhich98residentialunitswerepre-soldasat31stDecember2011.
2. 63SeymourRoad(ARGENTA)MidLevelsWest
IL2300 2856 7,975 Residential 75,805 28 Superstructureinprogress
2013 Floorareashownrepresentsaproposedresidentialtowerwith31storeysabovepodium.
Completed properties for investment in the United Kingdom Site area in square feet
Gross floor area in square feet
Number of car parks
Year of completion Remarks
Hotel
1. TheMontpellierChapterCheltenham(formerlycalledHotelKandinsky,Cheltenham)
34,875 36,662 24 2010(refurbishment)
61-roomfreeholdhotelinCheltenham.
2.TheMagdalenChapter,Exeter(formerlycalledHotelBarcelona,Exeter)
46,888 23,030 10 2001 59-roomfreeholdhotelinExeter.Currentlyunderrefurbishment.
3. HotelSeattle,Brighton 22,755 48,416 – 2003 71-roomhotelinBrighton.35-yearleaseholdcommencedinSeptember2002.
4. AvonGorgeHotel,Bristol 71,547 87,608 20 1855 75-roomfreeholdhotelinBristol.Floorareaincludesanexternalterrace.
Totalheldthroughsubsidiaries 195,716 54
ScheduleofPrincipalGroupPropertiesAt31stDecember2011
156 SwirePropertiesAnnualReport|2011
Property developments for sale in Hong Kong Lot number
Leasehold expiry
Site area in square feet Use
Gross floor area in
square feetNumber of car parks
Stage of completion
Expected completion
date Remarks
3. 25A,25B,27,27A,27B,29,29A,31,33,35SeymourRoad,14-16CastleRoad,MidLevelsWest
IL424sBss1RPIL424sBRPIL425s7ssAIL425s7ssBIL425s7ssCIL425s7ssDIL424sCRPIL424sDRPIL424RP
2854 20,756 Residential 165,792 – Foundationinprogressfor
partofthesite
2014 Floorareashownrepresentsaproposedresidentialtowerwith45storeys(including1refugefloor)abovepodium.
4. 92,92A,94,96,98,100,102CaineRoad,18,18A,20,20A,22,22ACastleRoad,MidLevelsWest
IL425s1RPIL425s2IL425s3IL425s4IL425s5ss1IL425s5RPIL425RP
2854 21,726 Residential 195,531 43 Foundationinprogress
2016 Floorareashownrepresentsaproposedresidentialtowerwith45storeys(including1refugefloor)abovepodium.
5. SaiWanTerrace,1-9and2-10SaiWanTerrace,TaikooShing
SIL761 2057 28,490 Residential 151,944 69 Substructureinprogress
2013 Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns80%.Comprisestwoproposedresidentialtowerswith19storeysabovepodium.
6. ResidentialSitesinCheungSha,Lantau
Lot724andLot726inDD332
2061 161,029 Residential 64,412 – VacantSite 2015 Tendersforsalewereawardedtothecompanyon8thDecember2011.ThepurchasetransactionwascompletedinJanuary2012.FloorareashownrepresentsthetotalgrossfloorareapermittedundertheConditionsofSale.
Totalheldthroughsubsidiaries 859,790 185
7. 148ArgyleStreet,Kowloon
KIL3303sA 2083 17,712 Residential 88,555 56 Substructureinprogress
2013 Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns50%.
8. 8-10WongChukHangRoad,Aberdeen
AIL338AIL339
21192120
25,500 Industrial 382,500 39 Foundationcompleted
Onhold Floorareashownrepresentsthewholedevelopment,ofwhichtheGroupowns50%.
Totalheldthroughjointlycontrolledcompanies 471,055 95
– ofwhichattributabletotheGroup 235,528
SwirePropertiesAnnualReport|2011 157
Property developments for investment in Mainland China Address
Leasehold expiry
Site area in square feet Use
Gross floor area in
square feetNumber of car parks
Stage of completion
Expected completion
date Remarks
1. TaiKooHui NorthofTianheRoadandwestofTianheEastRoad,TianheDistrict,Guangzhou
2051 526,941(part)
HotelServiced
Apartment
588,231
52,797
641,028
–
Superstructureworks
completed.Internalfitting
outworksinprogress
2012 263-roomhoteland24servicedapartments.Aculturalcentreof629,414squarefeetistobebuiltandhandedovertotheGuangzhouGovernmentuponcompletion.Floorareasshownrepresenttheportionsofdevelopmentunderdevelopment,ofwhichtheGroupowns97%.Theretailandofficeportionswereopenedinthe3rdquarterof2011.
Totalheldthroughsubsidiaries 641,028 –
1.DazhongliProject SouthofWestNanjingRoadandeastofShimenyiRoad,JingánDistrict,Shanghai
2049(Retail/Hotel)2059
(Office)
676,091 RetailOfficeHotel
1,062,7191,809,934596,745
3,469,398
1,217
1,217
Pilingworksinprogress
2016 Pilingworkscommencedinthe4thquarterof2011.Floorareasshownrepresentthewholedevelopment,ofwhichtheGroupowns50%.
2. INDIGO SouthofJiangTaiRoadandeastofJiuxianqiaoRoad,ChaoyangDistrict,Beijing
2044(Officeandcarparks:2054)
631,072(part)
RetailHotel
939,493358,269
1,297,762
834
834
Internalfittingoutworksin
progress
2012 Phasedopeningfromthe4thquarterof2011.Floorareasshownrepresenttheportionsofdevelopmentunderdevelopment,ofwhichtheGroupowns50%.
3. DaciTempleProject DaciTempleArea9DongdaStreetJinjiangDistrictChengdu
2050 761,869(part)
RetailHotel
ServicedApartment
1,174,465156,090
74,670
1,405,225
1,000
1,000
Siteformationinprogress
2014 Floorareasshownrepresenttheretail,hotelandservicedapartmentportionsofthedevelopment,ofwhichtheGroupowns50%.
Totalheldthroughjointlycontrolledcompanies 6,172,385 3,051
– ofwhichattributabletotheGroup 3,086,192
ScheduleofPrincipalGroupPropertiesAt31stDecember2011
158 SwirePropertiesAnnualReport|2011
Property developments for sale in Mainland China Address
Leasehold expiry
Site area in square feet Use
Gross floor area in
square feetNumber of car parks
Stage of completion
Expected completion
date Remarks
1.DaciTemple DaciTempleArea9DongdaStreetJinjiangDistrictChengdu
2050 761,869(part)
Office 1,284,075 499 Siteformationinprogress
2014 Floorareashownrepresentstheofficeportionofthedevelopment,ofwhichtheGroupowns50%.
Totalheldthroughjointlycontrolledcompanies 1,284,075 499
– ofwhichattributabletotheGroup 642,038
Property developments for sale in the United States Site area in square feet Use
Gross floor area in square feet
Number of car parks
Expected completion date Remarks
1. SouthBrickellKey,Miami,Florida
105,372 Residential 421,800 395 – DevelopmentsiteincentralMiamiacquiredinJanuary1997alongwiththeMandarinOrientalsite.Plansforcondominiumtowercurrentlyonhold.
2. DevelopmentSite,FortLauderdale,Florida
182,191 Residential/Office/Hotel
787,414 1,050 – DevelopmentsiteinFortLauderdaleacquiredinOctober2006,inwhichtheGrouphasa75%interest.
3. BrickellCitiCentreMiami,Florida
393,678(part)
PhaseI Condominium 1,100,000 1,200 2015 TworesidentialdevelopmentsitesinBrickellCiticentre,anurbanmixedusedevelopmentlocatedintheBrickellfinancialdistrict.Constructionfortheoveralldevelopmentisscheduledtocommenceinmid-2012.
Totalheldthroughsubsidiaries 2,309,214 2,645
Property developments for investment in the United States Site area in square feet Use
Gross floor area in square feet
Number of car parks
Expected completion date Remarks
1. BrickellCitiCentreMiami,Florida
393,678(part)
PhaseI Retail Office Serviced Apartment Hotel
PhaseII Office
520,000221,000
108,000200,000
742,000
1,791,000
1,235285
–
380
1,241
3,141
2015
2018
BrickellCitiCentreisanurbanmixedusedevelopmentlocatedintheBrickellfinancialdistrict,comprisedofretail,offices,hotel,servicedapartmentsandresidentialcondominiums.Constructionisscheduledtocommenceinmid-2012.
Totalheldthroughsubsidiaries 1,791,000 3,141
SwirePropertiesAnnualReport|2011 159
Glossary
Terms
Gross borrowingsTotalofloans,bonds,overdraftsandperpetualcapitalsecurities.
Net debtGrossborrowingsnetofbankdepositsandbankbalances.
Equity attributable to the Company’s shareholderEquitybeforenon-controllinginterests.
Underlying equity attributable to the Company’s shareholderReportedequitybeforenon-controllinginterests,adjustedfortheimpactofdeferredtaxonchangesinthefairvalueofinvestmentproperties,unrecognisedvaluationgainsonhotelsheldaspartofmixed-usedevelopments,revaluationofinvestmentpropertiesoccupiedbytheGroupandcumulativedepreciationofinvestmentpropertiesoccupiedbytheGroup.
Underlying profitReportedprofitadjustedfortheimpactofchangesinthefairvalueofinvestmentpropertiesandtheassociateddeferredtax.
Net assets employedTotalequityplusnetdebt.
Ratios
Earnings/(loss)pershare
=
Profit/(loss)attributabletotheCompany’sshareholder
Weightedaveragenumberofsharesinissueduringtheyear
Returnonaverageequityattributableto
theCompany’sshareholder
=
Profit/(loss)attributabletothe
Company’sshareholder
AverageequityduringtheyearattributabletotheCompany’s
shareholder
Returnonaverageunderlyingequityattributabletothe
Company’sshareholder
=
Underlyingprofit/(loss)attributableto
theCompany’sshareholder
Averageunderlyingequityduringtheyearattributabletothe
Company’sshareholder
Interestcover =Operatingprofit/(loss)
Netfinancecharges
Cashinterestcover =
Operatingprofit/(loss)
Totalofnetfinancechargesandcapitalisedinterest
Dividendcover =
Profit/(loss)attributabletotheCompany’sshareholder
Dividendspaidandproposed
Gearingratio =Netdebt
Totalequity
160 SwirePropertiesAnnualReport|2011
FinancialCalendarandInformationforInvestors
RegisteredOfficeSwirePropertiesLimited33rdFloor,OnePacificPlace88QueenswayHongKong
RegistrarsComputershareHongKongInvestorServicesLimited17MFloor,HopewellCentre183Queen’sRoadEastHongKongWebsite:www.computershare.com
StockCodeHongKongStockExchange 1972
AuditorsPricewaterhouseCoopers
FinancialCalendar2012Sharestradeex-dividend 2ndAprilShareregisterclosedfor2011firstinterimdividendentitlement 5thAprilAnnualReportavailabletoshareholders 10thAprilPaymentof2011firstinterimdividend 3rdMayShareregisterclosedforattendingandvotingatAnnualGeneralMeeting 7th-10thMayAnnualGeneralMeeting 10thMayInterimresultsannouncement August20122012firstinterimdividendpayable October2012
InvestorRelationsE-mail:ir@swireproperties.com
PublicAffairsE-mail: pad@swireproperties.comTel: (852)2844-3888Fax: (852)2918-9960Website:www.swireproperties.com
RequestforFeedbackInorderthatwemayimproveourreporting,wewouldbegratefultoreceiveyourcommentsonourpublicannouncementsanddisclosuresviae-mailtoir@swireproperties.com.
C M Y K SPAR Cover 1C 3 Mar 2012C M Y K SPAR Cover 1C with 97% White 3 Mar 2012
www.swireproperties.comThe Upper HouseHong Kong
Annual R
eport 2011
Stock Code: 1972
Annual Report
2011
We are a leading developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China, with a well-established record of creating long-term value by transforming urban areas.
Our business comprises three main areas:
Property Property Hotel Investment Trading Investment