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Notes to the Financial Statements
26. Capital and financial risk management
Capital management
The Group’s objectives when managing capital are to optimise Unitholders’ value through the mix of available
capital sources which include debt and equity instruments whilst complying with statutory and constitutional
capital and distribution requirements, maintaining gearing and interest service coverage ratios within approved
limits. As a key part of the Group’s overall strategy, the Board of the Manager reviews the Group and the Trust’s
debt and capital management cum fnancing policy regularly so as to optimise the Group and the Trust’s funding
structure. The Board also monitors the Group and the Trust’s exposure to various risk elements by closely adhering
to clearly established management policies and procedures.
The Group is subject to the aggregate leverage limit as defned in Appendix 6 of the CIS Code (Property Fund
Appendix). The Property Fund Appendix stipulates that the total borrowings and deferred payments (together,
the “Aggregate Leverage”) of a property fund should not exceed 35.0% of its deposited property except that
the Aggregate Leverage of a property fund may exceed 35.0% of its deposited property (up to a maximum of
60.0%) if a credit rating of the property fund from Fitch Inc., Moody’s or Standard and Poor’s is obtained and
disclosed to the public. The Group’s aggregate leverage limit did not exceed 35.0% during the year, and was
28.0% (2011: 28.0%) as at 31 December 2012. In computing the aggregate leverage gearing ratio, the Trust has
considered the effect of hedging the net assets denominated in RMB.
There were no changes in the Group’s approach to capital management during the fnancial year.
Financial risk management
Overview
The Group’s returns are primarily from net operating income and capital appreciation of its assets. However,
these returns are exposed to financial risks including credit, liquidity, interest rate and foreign currency risks.
Financial risk management is integral to the whole business of the Group. The Group adopts an integrated approach
to manage the financial risks arising in the normal course of the Group’s business. The Group has written risk
management policies and guidelines, and established processes to monitor and manage significant exposures.
Risk management policies and processes are reviewed regularly to reflect changes in market conditions and
the Group’s activities.
The Group adheres to standardised accounting and fnancial policies and exercises effective controls over the
fnancial affairs of its subsidiaries. This is achieved by ensuring group-wide adherence to a comprehensive set
of guidelines covering contracts, policies and procedures and other requirements. Adequate measures are in
place to ensure that the reliability and integrity of fnancial information compiled from subsidiaries are kept intact.
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