# 28 Derivative financial instruments

<table><tr><td rowspan="2"></td><td rowspan="2">Note</td><td>2020</td><td>2019</td></tr><tr><td>HK$’m</td><td>HK$’m</td></tr><tr><td>Derivative financial assets</td><td></td><td></td><td></td></tr><tr><td>Cross currency swaps</td><td>(a)</td><td>0.2</td><td>34.4</td></tr><tr><td>Interest rate swaps</td><td>(b)</td><td>1,493.0</td><td>–</td></tr><tr><td>Fuel price swaps</td><td></td><td>–</td><td>5.6</td></tr><tr><td>Foreign currency forward contracts</td><td></td><td>0.6</td><td>–</td></tr><tr><td>Put option</td><td>(c)</td><td>478.9</td><td>–</td></tr><tr><td></td><td></td><td>1,972.7</td><td>40.0</td></tr><tr><td>Represented by</td><td></td><td></td><td></td></tr><tr><td>Non-current assets</td><td></td><td>1,972.0</td><td>34.4</td></tr><tr><td>Current assets</td><td></td><td>0.7</td><td>5.6</td></tr><tr><td></td><td></td><td>1,972.7</td><td>40.0</td></tr><tr><td>Derivative financial liabilities</td><td></td><td></td><td></td></tr><tr><td>Cross currency swaps</td><td>(a)</td><td>(92.9)</td><td>–</td></tr><tr><td>Interest rate swaps</td><td></td><td>(3.6)</td><td>(15.3)</td></tr><tr><td>Fuel price swaps</td><td></td><td>(141.5)</td><td>(5.3)</td></tr><tr><td>Foreign currency forward contracts</td><td></td><td>(0.4)</td><td>(11.5)</td></tr><tr><td></td><td></td><td>(238.4)</td><td>(32.1)</td></tr><tr><td>Represented by</td><td></td><td></td><td></td></tr><tr><td>Non-current liabilities</td><td></td><td>(140.7)</td><td>(8.3)</td></tr><tr><td>Current liabilities</td><td></td><td>(97.7)</td><td>(23.8)</td></tr><tr><td></td><td></td><td>(238.4)</td><td>(32.1)</td></tr></table>

# (a) Cross currency swaps

As at 30 June 2020, the Group has certain cross currency swap contracts designated as cash flow hedges against its foreign currency risk in respect of cash flows from certain bond investments and bank loan with total notional amount of US\$122.9 million (2019: Nil) and HK\$1,005.7 million (2019: Nil), respectively, and with maturities ranging from 2020 to 2029. These cross currency swap contracts are entered with several counterparties over the counter. The Group seeks to hedge the foreign currency risk by the exchange of payments denominated in targeted currency, and applies a hedge ratio of 1:1. The existence of an economic relationship between the cross currency swap contracts and the highly probable forecast transactions/actual transaction is determined based on their currency amounts and the timing of their respective cash flows. The terms of the cross currency swap contracts have been negotiated to match the terms of the underlying bond investments and bank loan. The cash flow hedges were assessed to be highly effective and the related cumulative losses in the hedge reserve amounted to HK\$72.9 million (2019: Nil).

# 28 Derivative financial instruments (continued)

# (b) Interest rate swaps

As at 30 June 2020, the Group’s insurance business has certain forward starting swap contracts designated as cash flow hedges against its interest rate risk in respect of bonds to be purchased in the future. Under the contracts, the Group’s insurance business will be entitled to receive fixed rate of around 4% to 5% per annum, and required to pay floating rate of 3-month LIBOR, in USD published by the British Banker’s Association. The total notional amount was US\$450.0 million (2019: Nil).The cash flow hedge was assessed to be highly effective and the related cumulative gains in the hedge reserve amounted to HK\$477.9 million (2019: Nil).

The Group’s insurance business seeks to hedge the interest rate risk by the exchange of payments benchmarked against the targeted fixed interest rate. The Group’s insurance business applies an approximate hedge ratio of 1:1 and determines the existence of an economic relationship between the forward starting swap contracts and the debt security investments by matching their critical terms, including the reference interest rates and interest payments.

As at 30 June 2020, the Group’s insurance business received HK\$1,582.0 million (2019: Nil) cash and bank balance from counterparties (note 39) as collateral which are repayable on demand. Interest is calculated on overnight federal fund rate and payable to counterparties.

# (c) Put option

As at 30 June 2020, the Group’s insurance business holds a put option to sell or dispose of an equity investment held by the Group, which is classified as financial assets at FVOCI, at a specified price within a specified transaction period. As at 30 June 2020, the fair value of the underlying equity investment amounted to HK\$252.3 million (2019: Nil).

# 29 Other non-current assets

<table><tr><td rowspan="2"></td><td rowspan="2">Note</td><td>2020</td><td>2019</td></tr><tr><td>HK$’m</td><td>HK$’m</td></tr><tr><td>Deposits paid for acquisition of a subsidiary</td><td>50(b)</td><td>–</td><td>3,120.0</td></tr><tr><td>Security deposits</td><td></td><td>400.7</td><td>852.2</td></tr><tr><td>Deferred tax assets</td><td>40</td><td>22.8</td><td>28.0</td></tr><tr><td>Policy loans</td><td></td><td>478.4</td><td>–</td></tr><tr><td>Others</td><td></td><td>296.8</td><td>3.3</td></tr><tr><td></td><td></td><td>1,198.7</td><td>4,003.5</td></tr></table>