NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 20 RESERVES (CONT’D) 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. 21 EQUITY COMPENSATION BENEFITS By a subsidiary Millennium & Copthorne Hotels Limited (M&C) The M&C Group used to operate a number of share option schemes, a majority of which were designed to link remuneration to the future performance of M&C Group. There were no options granted by M&C Group since 2020 in line with the final cash offer made by the Company to acquire the remaining interest in M&C at £6.85 per share (the “Final Offer”) in 2019 and any outstanding options are to close out per the final vesting dates. (i) Annual Bonus Plan Under the Annual Bonus Plan (“ABP”), deferred share awards were granted annually to selected employees of the M&C Group. Shares in M&C were to be transferred to participants as follows if they continue to be employed by the M&C Group: • 25% after years one and two; and • 50% after three years Following the cancellation of M&C ordinary shares on the London Stock Exchange’s main market for listed securities on 11 October 2019 (the “Delisting”), the shares awarded under the ABP will be cash settled at a fixed price of £6.85 per share in line with the Final Offer. 19 SHARE CAPITAL (CONT’D) Capital management policy (cont’d) As at 31 December 2021, the Group had a subsidiary, CDL Hospitality Real Estate Investment Trust (H-REIT), which is part of CDLHT, a stapled group comprising H-REIT and CDL Hospitality Business Trust (HBT), a business trust. H-REIT was 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 stipulated that the total borrowings and deferred payments (together the Aggregate Leverage) of a property fund should not exceed 50.0% of its Deposited Property under a single-tier leverage limit provided. In the prior year, H-REIT had a credit rating of BB+ from Fitch Ratings. The Aggregate Leverage of H-REIT as at 31 December 2021 was 39.1% of H-REIT’s Deposited Property. This complied with the aggregate leverage limit as described above. Following the Company’s distribution in specie of part of the CDLHT units that it held, to ordinary shareholders in May 2022 (notes 40, 44 and 45), CDLHT became an associate of the Group. The Group has a subsidiary, CDL Real Estate Asset Managers Pte. Ltd. (CREAM), which is required 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 Licences) 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. Under the Housing Developers (Control and Licensing) Act, in order to qualify for a housing developer’s licence, certain subsidiaries of the Group are required to maintain a minimum paid-up capital. These entities complied with the capital requirement during the current and prior year. Except for the above, neither the Company nor its subsidiaries are subject to externally imposed capital requirements. 20 RESERVES Group Company 2022 2021 2022 2021 $’000 $’000 $’000 $’000 Restated* Capital reserve 232,681 290,920 63,743 63,743 Fair value reserve 73,456 997 49,966 (30,358) Hedging reserve 17,355 (1,532) 18,272 – Other reserves 24,651 23,952 – – Share option reserve 15,482 15,423 – – Foreign currency translation reserve (334,364) (140,224) – – Accumulated profits 7,195,677 6,219,870 4,020,199 4,307,624 7,224,938 6,409,406 4,152,180 4,341,009 * Refer to Note 47 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 182 183
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