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Notes to the Financial Statements
26. Capital and financial risk management (Cont'd)
Financial risk management (Cont'd)
Liquidity risk (Cont'd)
As at 31 December 2012, the Group has fully drawn down its $388.5 million trust term loan facilities and $55.0
million of the money market facilities. The Group has also drawn down RMB115.2 million of the three-year
unsecured term loan facility.
The Group also monitors and observes the Property Fund Appendix issued by MAS concerning limits on total
borrowings.
Interest rate risk
The Manager adopts a proactive interest rate management policy to manage the risk associated with changes
in interest rates on the Group’s loan facilities while also seeking to ensure that the ongoing cost of debt remains
competitive.
At 31 December 2012, the Group has interest rate swaps (“IRS”) with notional contract amount of $250.5 million
(2011: $285.5 million). The Group pays a fxed rate interest and receives a variable rate equal to the Swap Offer
Rate (“SOR”) on the notional contract amount. The Group classifes the IRS as cash fow hedges to hedge the
exposure to changes in the variability of interest rate fuctuations on certain of its term loans.
The term loans and the underlying IRS have the same terms and conditions.
The Manager proactively seeks to minimise the level of interest rate risk by locking the majority of the Group’s
borrowings at fixed rates. As at 31 December 2012, the Group has locked in approximately 68.8% (2011: 70.5%)
of its borrowings at fixed rates.
Fair value sensitivity analysis for fixed rate instruments
The Group does not designate interest rate derivatives as hedging instruments under a fair value hedge accounting
model. Therefore a change in interest rates at the reporting date would not affect the statement of total return.
Cash flow sensitivity analysis for variable rate instruments
The net change in fair value of the interest component of IRS as at 31 December 2012 of $0.7 million (2011: $1.6
million), representing the effective portion of the cash flow hedge, has been recognised directly in the hedging
reserve. As at 31 December 2011, $1.4 million representing the ineffective portion of the cash flow hedge, has
been recognised directly in the statement of total return.
Effects of a 100 basis point* (“bp”) movement in interest rate and at the reporting date as at 31 December 2012
would increase/(decrease) statement of total return and unitholders’ funds by the amounts shown in the following
page. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The
analysis is performed on the same basis for 2011.
* 100 basis point is equivalent to 1 percentage point
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