Annual Report 2011 - Hongkong Land

Treasury Policy
The Group manages its treasury activities within
established risk management objectives and policies
using a variety of techniques and instruments. The
main objectives are to manage exchange, interest rate
and liquidity risks and to provide a degree of certainty
in respect of costs. The investment of the Group’s
cash balances is managed so as to minimise risk
while seeking to enhance yield.
The Group’s Treasury operations are managed as
cost centres and are not permitted to undertake
speculative transactions unrelated to underlying
financial exposures. Appropriate credit guidelines
are in place to manage counterparty credit risk.
When economically sensible to do so, borrowings
are taken in local currencies to hedge foreign
currency exposures on investments. A portion of
borrowings is denominated in fixed rates. Adequate
headroom in committed facilities is maintained
to facilitate the Group’s capacity to pursue new
investment opportunities.
Funding
The Group is well financed with strong liquidity
and gearing of 10%, down from 12% in 2010.
The decrease in gearing was due to the higher
shareholders’ funds resulting from the increase in value
of investment properties. Interest cover, calculated as
the underlying operating profits, including the Group’s
share of joint ventures’ operating profits, divided by
net financing charges including the Group’s share of
joint ventures’ net financing charges, was strong at
10.3 times, compared with 11.7 times in 2010.
Year-end debt summary*
Net debt 2,359 2,358
17% 19% 16% 12% 10%
2007 2008 2009 2010 2011
Net debt
Equity
Net debt as a percentage of equity
2011 2010
US$m US$m
US$ convertible bonds 57 373
US$ bonds/notes 1,151 1,707
US$ bank loans – 1
HK$ bonds/notes 609 530
HK$ bank loans 673 335
S$ bonds/notes 446 449
S$ bank loans 391 330
Gross debt 3,327 3,725
Cash 968 1,367
* Before currency swaps
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