CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 FINANCIALS 182 183 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 YEAR ENDED 31 DECEMBER 2021 18 SHARE CAPITAL (CONT’D) Capital management policy The Group’s primary objective in capital management is to maintain a strong capital base so as to maintain investor, creditor and market confidence, and to continue to maintain the future development and growth of the business. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. For this purpose, the Group defines “capital” as including all components of equity, including non-controlling interests. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares or other financial instruments. The Groupmonitors capital using a net debt equity ratio, which is defined as net borrowings divided by total capital employed. Note 2021 2020 $’000 $’000 Gross borrowings 11,422,435 11,825,845 Cash and bank balances (including restricted cash and cash and cash equivalents included in assets held for sale) 17 (2,190,961) (3,237,149) Net debt 9,231,474 8,588,696 Total capital employed 9,332,029 9,242,457 Net debt equity ratio 0.99 0.93 No changes were made to the above objectives, policies and processes during the years ended 31 December 2021 and 2020. The Group derives income from its investments in the PRC. The conversion of the Chinese Renminbi is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. The Group has a subsidiary, CDL Hospitality Real Estate Investment Trust (H-REIT), which is part of CDL Hospitality Trusts (CDLHT), a stapled group comprising H-REIT and CDL Hospitality Business Trust (HBT), a business trust. H-REIT is subject to the aggregate leverage limit as defined in the Property Funds Appendix of the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS). The CIS Code stipulates that the total borrowings and deferred payments (together the Aggregate Leverage) of a property fund should not exceed 50.0% (2020: 50.0%) of its Deposited Property under a single-tier leverage limit provided. For this financial year, H-REIT has a credit rating of BB+ (2020: BB+) from Fitch Ratings. The Aggregate Leverage of H-REIT as at 31 December 2021 was 39.1% (2020: 36.2%) of H-REIT’s Deposited Property. This complied with the aggregate leverage limit as described above. The Group has a subsidiary, CDL Real Estate Asset Managers Pte. Ltd. (CREAM), which is subject to maintain at least $250,000 of base capital at all times pursuant to the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licenses) Regulations (Rg13) of the Securities and Futures Act (Cap. 289). The Monetary Authority of Singapore defines base capital as the sum of all paid-up capital, reserve funds, any unappropriated profit or loss in the latest audited accounts, and less any interim loss in the latest accounts of the company. CREAM has complied with the capital requirements during the current and prior year. Except for the above, neither the Company nor its subsidiaries are subject to externally imposed capital requirements. 19 RESERVES Group Company 2021 2020 2021 2020 $’000 $’000 $’000 $’000 Capital reserve 290,920 284,030 63,743 63,743 Fair value reserve 997 (2,421) (30,358) (33,150) Hedging reserve (1,532) (6,642) – (448) Other reserves 23,952 23,927 – – Share option reserve 15,423 15,318 – – Foreign currency translation reserve (140,411) (79,696) – – Accumulated profits 6,232,814 6,276,295 4,307,624 4,427,888 6,422,163 6,510,811 4,341,009 4,458,033 The capital reserve comprises mainly: (a) negative goodwill on the consolidation of subsidiaries which arose prior to 1 January 2017 under the previous accounting standards adopted; (b) issue expenses; and (c) reserves arising from the Group’s acquisition of non-controlling interests in subsidiaries. The fair value reserve comprises the cumulative net change in the fair value of equity instruments designated at FVOCI. The hedging reserve comprises the effective portion of the cumulative net changes in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred (net of tax). Other reserves comprise mainly reserves set aside by certain subsidiaries in compliance with the relevant regulations in the People’s Republic of China and share of other reserves of associates and joint ventures. The share option reserve comprises the cumulative value of employee services received for the issue of share options of a subsidiary and a joint venture. The foreign currency translation reserve comprises mainly: (a) foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the presentation currency of the Company; (b) the gain or loss on financial instruments used to hedge the Group’s net investment in foreign operations that are determined to be effective hedges; and (c) exchange differences on monetary items which form part of the Group’s net investment in foreign operations, provided certain conditions are met.
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