financing activities (continued)
37 Capital commitments
At 31 December 2020, the Group had capital commitments not provided for in these financial statements as follows:
2020 2019
HK$ million HK$ million (a) Contracted for acquisition of property and future development expenditure
and the related costs of internal fixtures and fittings 16,486 8,570
Future development expenditure and the related costs of internal fixtures and
fittings approved by the Directors but not contracted for 14,186 22,972
30,672 31,542
(b) In relation to the capital commitments undertaken by joint ventures and certain associates attributable to the Group:
Contracted for acquisition of property and future development expenditure
and the related costs of internal fixtures and fittings 2,245 3,258
Future development expenditure and the related costs of internal fixtures and
fittings approved by the Directors but not contracted for 4,789 3,787
7,034 7,045
(a) Lessor
The Group leases out a number of land/building facilities. The leases typically run for an initial period of one to three years, with an option to renew the lease after that date at which time all terms are re-negotiated. Further details of the carrying value of the properties are contained in note 15.
The total future minimum lease payments under non-cancellable leases are receivable as follows:
2020 2019
HK$ million HK$ million
Within 1 year 4,389 4,685
After 1 year but within 2 years 2,777 3,078
After 2 years but within 3 years 1,300 1,558
After 3 years but within 4 years 481 627
After 4 years but within 5 years 233 279
After 5 years 398 233
9,578 10,460
(b) Lessee
The Group leases a number of building facilities under operating leases. The leases typically run for an initial period of one to five years, with an option to renew the lease after that date at which time all terms are re-negotiated.
At 31 December 2020, contingent liabilities of the Group were as follows:
(a) In connection with the sale of certain subsidiaries and shareholders’ loans to Sunlight REIT (the “Sale”) in December 2006, the Group entered into Deeds of Tax Covenant with Sunlight REIT. Under the Deeds of Tax Covenant, the Group has undertaken to indemnify Sunlight REIT for any tax liabilities relating to events occurred on or before the completion of the Sale (the “Completion”), clawback of commercial building allowances and capital allowances granted up to the Completion and re-classification of the properties before or upon the Completion. At 31 December 2020, the Group had contingent liabilities in this connection of HK$11 million (2019: HK$11 million).
(b) At 31 December 2020, the Group had contingent liabilities in respect of performance bonds, guarantees and undertakings for the due and proper performance of the obligations of the Group’s subsidiaries and projects amounting to HK$399 million (2019: HK$37 million), the increase of which is mainly attributable to the performance bonds undertaken by the Group in relation to its joint venture residential development project at The Kai Tak Development Area.
(c) At 31 December 2020, the Group had given guarantees to financial institutions in the aggregate amount of HK$1,578 million (2019: HK$1,302 million) on behalf of purchasers of property units of the Group’s development projects in mainland China in relation to which the related Building Ownership Certificate (房 產 證) had not yet been issued at 31 December 2020. Such guarantees will be released upon the issuance of the Building Ownership Certificate.
(d) At 31 December 2020, the Group had given an irrevocable, unconditional and several guarantee to the lending bank in relation to the repayment obligations by a joint venture engaged in the development of commercial properties in Citygate, Tung Chung, Lantau Island, Hong Kong, and in which the Group has a 20% interest, which entered into a loan facility agreement with such lending bank on 2 May 2017. The Group’s contingent liabilities in respect of the guarantee in relation to the amount drawdown on the loan facility, which is proportional to the Group’s attributable interest in the joint venture, amounted to HK$430 million (2019: HK$430 million).
(e) In accordance with a development agreement dated 21 November 2018 (“Development Agreement”) between the Urban Renewal Authority (“URA”) and a wholly-owned subsidiary of the Company (the “Developer”) in relation to a land parcel registered in the Land Registry as New Kowloon Inland Lot No. 6585, the Company shall irrevocably and unconditionally guarantee the Developer’s obligations under the Development Agreement in favour of URA which includes the construction and delivery by the Developer, on or before certain prescribed dates, of certain properties whose ownership shall be retained by URA absolutely for such purposes and usages to be decided by URA at its sole discretion.
(f) At 31 December 2020, the Group had given irrevocable, unconditional and several guarantees to the lending banks in relation to the repayment obligations by four joint ventures engaged in the development of residential properties at The Kai Tak Development Area, and in which the Group has 29.3% interest, 30% interest, 18% interest and 30% interest respectively, which entered into loan facility agreements with such lending banks on 8 July 2019, 4 December 2019, 1 June 2020 (which refinanced the previous loan facility pursuant to the loan facility agreement dated 18 June 2019) and 30 October 2020 respectively. The Group’s contingent liabilities in respect of the guarantees in relation to the maximum amounts which may be drawn down on the loan facilities, which are proportional to the Group’s attributable interests in these joint ventures, amounted to HK$1,670 million (2019: HK$1,670 million), HK$2,100 million (2019: HK$2,100 million), HK$1,314 million (2019: HK$906 million) and HK$2,940 million (2019: Nil), respectively.
In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party transactions during the year:
(a) Transactions with fellow subsidiaries
Details of material related party transactions during the year between the Group and its fellow subsidiaries are as follows:
2020 2019
HK$ million HK$ million
Rental income (note (iii)) 5 5
Other interest expense (note (i)) 28# 34#
Sales commission income (note (iii)) 5 7
Administration fee income (note (ii)) 11 11
(b) Transactions with associates and joint ventures
Details of material related party transactions during the year between the Group and its associates and joint ventures are as follows:
2020 2019
HK$ million HK$ million
Construction income (note (iii)) 138 6
Rental income (note (iii)) 23 21
Cash rental paid (note (iii)) 226 238
Management fee income (note (iii)) 2 4
Security guard service fee income (note (iii)) 32 31
Other interest income (note (i)) 446 193
Other interest expenses (note (i)) 72 27
Property management service fee income (note (iii)) – 1
Rental commission income (note (iii)) 6 16
(c) Transactions with related companies
(i) Details of material related party transactions during the year between the Group and its related companies which are controlled by private family trusts of a director of the Company are as follows:
2020 2019
HK$ million HK$ million
Income from sale of construction materials (note (iii)) 3 9
Rental income (note (iii)) 32# 14
Sales commission income (note (iii)) 5 –
(ii) The Group paid interest expenses (note (i)) in the aggregate amount of HK$16 million (2019: Nil) to a related company controlled by relatives of certain directors of the Company during the year ended 31 December 2020.
Notes:
(i) Interest income and expense are calculated on the balance of loans outstanding from time to time by reference to Hong Kong Interbank Offered Rate, Hong Kong dollar prime rate, Renminbi benchmark loan rates announced by the People’s Bank of China or interest rates stipulated in the loan agreements (as appropriate).
(ii) This transaction represents cost reimbursements or cost reimbursements plus certain percentage thereon as service fees.
(iii) In the opinion of the Directors, these transactions were carried out on normal commercial terms and in the ordinary course of business.
(iv) The amounts due to a fellow subsidiary at 31 December 2020 and 31 December 2019 are referred to in the Group’s consolidated statements of financial position at 31 December 2020 and 31 December 2019, and the terms of which are set out in note 32. The amount due to a related company at 31 December 2020 is referred to in the Group’s consolidated statement of financial position at 31 December 2020, and the terms of which are set out in note 33. The amounts due from/to associates and joint ventures at 31 December 2020 and 31 December 2019 are set out in notes 19, 20, 25 and 28.
(d) Transactions with Sunlight REIT
Details of the material related party transactions during the year between the Group and Sunlight REIT (which is deemed as a connected person of the Company under the Listing Rules as from 30 April 2009) are as follows:
2020 2019
HK$ million HK$ million Property and leasing management service fee income and other ancillary
property service fee income 46# 54#
Asset management service fee income 93# 102#
Cash rental paid 11 12
Security service fee income 4# 3#
(d) Transactions with Sunlight REIT (continued)
The above transactions were conducted in accordance with the terms of the respective agreements/deeds entered into between the Group and Sunlight REIT. At 31 December 2020, the net amount due from Sunlight REIT was HK$31 million (2019: HK$33 million) and is unsecured, interest-free and has no fixed terms of repayment. The amount is included in “Trade and other receivables” under current assets (note 25).
(e) Transactions with a director of the Company and a company owned by him
(i) Dr Lee Ka Kit, a director of the Company, made an advance (“advance”) of HK$44 million (2019:
HK$44 million) to Henderson (China) Investment Company Limited (“HCI”), an indirect wholly-owned subsidiary of the Group, for the purpose of funding HCI’s business operation in mainland China. The advance is unsecured, interest-free and has no fixed terms of repayment.
(ii) Dr Lee Ka Kit, through a company owned by him (the “entity”), has separate interest in an associate of the Group and through which the Group holds its interest in a development project in mainland China. The entity agreed to provide and had provided finance in the form of non interest-bearing advances to such associate in accordance with the percentage of its equity interest in such associate. At 31 December 2020, the advance by the entity to the abovementioned associate amounted to HK$80 million (2019: HK$80 million). Such amount is unsecured and has no fixed terms of repayment.
(f) Transactions with the close family members of directors of the Company
During the corresponding year ended 31 December 2019, the Group separately sold to the close family members of Mr Woo Ka Biu, Jackson and Madam Fung Lee Woon King, directors of the Company, completed property units for aggregate consideration of HK$29 million.
(g) Key management personnel
Remuneration for key management personnel are disclosed in note 8.
# These related party transactions (and, included in the rental income of HK$32 million from related companies during the year ended 31 December 2020 as referred to in note(c) above, an amount of HK$22 million) also constitute connected transactions and/or continuing connected transactions under the Listing Rules, details of which are set out in the paragraph headed “Interests in Transactions, Arrangements or Contracts and Connected Transactions/Continuing Connected Transactions” in the Report of the directors set out in the Company’s annual reports for the years ended 31 December 2020 and 31 December 2019.
(a) Statement of financial position
Note
31 DecemberAt 2020
At 31 December HK$ million HK$ million2019
Non-current assets
Investment properties 14 –
Interest in subsidiaries 18 146,647 154,757
Interest in associates 147 91
Interest in joint ventures 677 672
147,485 155,520
Current assets
Trade and other receivables 76 26
Cash and bank balances 2 2
78 28
Current liability
Trade and other payables 27 21
27 21
Net current assets 51 7
Total assets less current liability 147,536 155,527
Non-current liabilities
Amounts due to subsidiaries 27,003 27,607
Amounts due to associates – 2
Amounts due to joint ventures 34 30
27,037 27,639
NET ASSETS 120,499 127,888
CAPITAL AND RESERVE 41(b)
Share capital 41(c) 52,345 52,345
Retained profits 68,154 75,543
TOTAL EQUITY 120,499 127,888
Approved and authorised for issue by the Board of Directors on 23 March 2021.