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LIPPO MALLS INDONESIA RETAIL TRUST ANNUAL REPORT 2014
26. DERIVATIVES FINANCIAL INSTRUMENTS (CONT’D)
26B. Currency option contracts
Principal
Fair value
2014
2013
Reference
currency
Maturity
2014
2013
$’000
$’000
$’000
$’000
Currency Option Contracts
3,556
17,340
Indonesian
Feb 2014 -
109
643
Rupiah
Feb 2015
Currency Option Contracts
10,134
49,419
Indonesian
Feb 2014 -
7
(71)
Rupiah
Feb 2015
Currency Option Contracts
10,134
49,419
Indonesian
Feb 2014 -
(146)
(511)
Rupiah
Feb 2015
23,824
116,178
(30)
61
The purpose of the currency option contracts is to mitigate the fluctuation of income denominated in Indonesian
Rupiah arising from (i) dividends received or receivable by the Singapore subsidiaries, and (ii) capital receipts from
repayment of shareholders loan to Singapore subsidiaries.
Currency derivatives are utilised to hedge significant future transactions and cash flows. The Trust is a party to a
variety of foreign currency options in the management of its exchange rate exposures. The instruments purchased
are primarily denominated in the currency of the entity’s principal market. As a matter of principle, the Trust does not
enter into derivative contracts for speculative purposes.
26C. Fair values of derivatives financial instruments
The derivatives financial instruments are not traded in an active market. As a result, their fair values are based on
valuation techniques currently consistent with generally accepted valuation methodologies for pricing financial
instruments, and incorporate all factors and assumptions that knowledgeable, willing market participants would
consider in setting the price (Level 2).
The fair value (Level 2) of currency option contracts is based on option model. The valuation technique uses market
observable inputs including forward rate curves and annualised volatility of exchange rate.
In 2013, the fair value (Level 2) of interest rate swap was measured on the basis of the current value of the difference
between the contractual interest rate and the market rate at the end of the reporting year. The valuation technique
used market observable inputs including interest rate curves.
27. FINANCIAL RATIOS
Group
Trust
2014
2013
2014
2013
Expenses to average net assets ratio –
excluding performance related fee
(1)
0.56%
0.53%
0.52%
0.55%
Expenses to average net assets ratio –
including performance related fee
(1)
1.02%
1.05%
0.96%
1.08%
Portfolio turnover ratio
(2)
–
–
–
–
(1)
The annualised ratios are computed in accordance with the guidelines of Investment Management Association of Singapore. The expenses
used in the computation relate to expenses at the Group and Trust levels excluding any property related expenses, borrowing costs,
foreign exchange losses (gains), tax deducted at source and costs associated with the purchase of investments.
(2)
Turnover ratio means the number of times per year that a dollar of assets is reinvested. It is calculated based on the lesser of purchases or
sales of underlying investments of a scheme expressed as a percentage of daily average net asset value.
Notes to the Financial Statements
(Cont’d)
31 December 2014
