CapitaLand Investment Limited - Annual Report 2021

259 CapitaLand Investment Limited 258 Annual Report 2021 Notes to the Financial Statements Notes to the Financial Statements 35 FINANCIAL GUARANTEE CONTRACTS AND CONTINGENT LIABILITIES The Group accounts for its financial guarantees as insurance contracts. At the reporting date, the Group does not consider that it is probable that a claim will be made against the Group under the financial guarantee contracts. Accordingly, the Group does not expect any net cash outflows resulting from the financial guarantee contracts. The Group and the Company issue guarantees only for subsidiaries and joint ventures. The Group The Company 2021 2020 2021 2020 $’M $’M $’M $’M (a) Guarantees given to banks to secure banking facilities provided to: – subsidiaries – – 4,626 – – joint ventures 5 5 – – 5 5 4,626 – (b) Undertakings by the Group: (i) As at 31 December 2021, a subsidiary of the Group provided an indemnity for banker’s guarantee issuance on a joint and several basis, in respect of term loan and revolving loan facilities amounting to $162 million (2020: $162 million) granted to a joint venture. As at 31 December 2021, the total amount outstanding under the facilities was $155 million (2020: $148 million). (ii) As at 31 December 2021, two subsidiaries of the Group have pledged their shares in joint ventures for term loan and revolving facilities of $1,062 million (2020: $606 million) obtained by the joint ventures. As at 31 December 2021, the outstanding amount was $933 million (2020: $508 million). (iii) As at 31 December 2021, a subsidiary of the Group in China, whose principal activity is the trading of development properties, would in the ordinary course of business act as guarantors for the bank loans taken by the buyers to finance the purchase of residential properties developed by this subsidiary. As at 31 December 2021, the outstanding notional amount of the guarantees amounted to $16 million (2020: $30 million). (iv) As at 31 December 2020, a subsidiary of the Group has pledged its shares in an associate for the $500 million term and revolving loan facilities obtained by the associate, with the total amount outstanding under the facilities amounting to $484 million. The associate became a subsidiary in 2021 and the revolving loan facilities were refinanced. As at 31 December 2021, the share pledge has been discharged. (v) As at 31 December 2020, two subsidiaries of the Group have pledged its shares and redeemable preference shares in an associate for a term loan facility obtained by the associate amounting to $1,078 million. The associate became a subsidiary in 2021 and the term loan facility was refinanced. As at 31 December 2021, the share pledges have been discharged. 35 FINANCIAL GUARANTEE CONTRACTS AND CONTINGENT LIABILITIES (continued) (c) Government assistance In response to the economic impacts of the COVID-19 pandemic, the governments of the Japan, France and United States of America introduced various financial support schemes, which provided guarantees for bank loans borrowed by the Group’s subsidiaries amounting to $46 million (2020: $52 million) issued by the respective banks during the year. The interest rates of the loans ranged from 0.21% to 1.11% (2020: 0% to 1.11%). The Group determined that the interest rates for an equivalent loan issued on an arm’s length basis without the guarantee would have ranged from 0.5% to 1.2% (2020: 0.4% to 2.5%). There are no unfilled conditions or contingencies for the government assistance as at 31 December 2021. 36 SIGNIFICANT RELATED PARTY TRANSACTIONS For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the direct and indirect ability to control the party, jointly control or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or significant influence. Related parties may be individuals or other entities. The Group considers the directors of the Company, Group CEO and key management officers of the corporate office as well as CEOs of the businesses to be key management personnel in accordance with SFRS(I) 1-24 Related Party Disclosures . Prior to the listing of the Company in September 2021, most of the key management personnel were directors or employees of the immediate holding company or related corporations and no consideration was paid to these companies for services rendered by the key management personnel, as the services provided by them to the Company and the Group were incidental to their responsibilities to the larger group. In addition to the related party information disclosed elsewhere in the financial statements, there were significant related party transactions which were carried out in the normal course of business on terms agreed between the parties as follows: The Group 2021 2020 $’M $’M Related corporations of ultimate holding company Management fee income 7 1 Utilities expenses (1) (1) Telecommunication expenses (5) (7) Receivables included in trade and other receivables 2 * Immediate holding company Management fee income 3 – IT support services income 9 10 Management fee expenses (24) (31) Administrative support services expenses (5) (6) Others 4 (5)