Notes to the Consolidated Financial Statements
For the year ended 31 December 2010
20.Available-for-sale investments (continued)
At the end of the reporting period, all the listed securities are stated at fair values which have been determined by reference to closing prices quoted in active markets.
Unlisted investments represent unlisted equity investments and club debentures. They are measured at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates is so widespread that the Directors are of the opinion that their fair values cannot be measured reliably since significant subjective judgments are required in valuing their underlying assets.
Straight debt HK$’000
Embedded derivatives HK$’000
2,298,417 145,880 (23,400) –
28,410 – – 272,202
2,326,827 145,880 (23,400) 272,202
2,420,897 153,680 (23,400) –
2,721,509 153,680 (23,400) 458,208
– – 458,208
21.Investment in convertible bonds
At 1 January 2009 Interest income recognised during the year Interest received Change in fair value
At 31 December 2009 Interest income recognised during the year Interest received Change in fair value
At 31 December 2010
On 3 June 2008, the Group subscribed an aggregate principal amount of HK$2,340 million 1% guaranteed convertible bonds due 2013 (“Bonds”) issued by Champion REIT. Details of the transaction were set out in the announcement of the Company dated 28 May 2008 and 3 June 2008.
The Bonds entitle the holders to convert them into units of Champion REIT at any time on or after 3 June 2009 up to the date which is seven days prior to 3 June 2013 at conversion price adjusted to HK$3.83 per unit on 13 October 2009 and re-adjusted to HK$3.69 per unit on 25 May 2010. If the holder has elected to convert the Bonds, the issuer shall have an option to pay to the holders in whole or in part an amount of cash equal to the market values of the number of units deliverable. If the Bonds have not been converted, redeemed by the issuer or the holders or purchased and cancelled, they will be redeemed on 3 June 2013 at 123.94% of the outstanding principal amount. Interest of 1% will be paid semi-annually in arrears on 3 June and 3 December each year, commencing on 3 December 2008.
The Bonds have been split between a straight debt receivable component and embedded derivatives. The effective interest rate of the straight debt receivable component is 6.27% per annum.
The fair value of the embedded derivatives at the end of the reporting period is based on valuation carried out by an independent valuer. The fair value is determined based on the Binomial model using assumptions, some of which are supported by observable market data, including dividend yield of 4.64% (2009: 8.02%), unit price of Champion REIT at HK$4.59 (2009: HK$3.30), risk-free rate of 0.83% (2009: 2.09%) in respect of the Bonds, and expected volatility of 39.75% (2009: 39.93%) with reference to Champion REIT’s historical volatility of the past 2.5 years (2009: 3.5 years).
Great Eagle Holdings Limited