4. FOREIGN EXCHANGE RISK
,-)2 4RUST WILL BE SUBJECTED TO FOREIGN EXCHANGE EXPOSURE
DUE TO CHANGES IN FOREIGN EXCHANGE RATES ARISING FROM FOREIGN
currency transactions and balances as well as changes in the
fair values from its investment in Indonesia. The value of
the Indonesian Rupiah has been subjected to fluctuations in
the past and may be subjected to fluctuations in the future.
4HE -ANAGER HAS A POLICY TO UNDERTAKE FOREIGN EXCHANGE
HEDGING OF THE EXPECTED DISTRIBUTIONS OF ,-)2 4RUST TO
MINIMISE ITS EXPOSURE TO MOVEMENTS IN EXCHANGE RATES
4HE 4RUST HAS ENTERED INTO FOREIGN EXCHANGE HEDGES BASED
on LMIR Trust’s estimated quarterly distributions, so as to
PROVIDE A DEGREE OF CERTAINTY THAT CHANGES IN THE EXCHANGE
rate between the Indonesian Rupiah and the Singapore
Dollar will not have a significant negative impact on the
DISTRIBUTIONS IN 3INGAPORE $OLLARS TO 5NITHOLDERS
5. CREDIT RISK
Credit risk relates to the potential earnings volatility caused
BY TENANTS INABILITY AND OR UNWILLINGNESS TO FULlLL THEIR
contractual lease obligations. To minimise the risk of tenant
default on rental payment, the Manager has put in place
standard operating procedures for debt collection and
recovery of debts. Other than the collection of security
deposits, in the form of cash or bankers guarantee,
the Manager also have a monitoring system and a set of
procedures on debt collection.
6. LIQUIDITY RISK
The Manager actively monitors LMIR Trust’s cash flow
position so as to ensure sufficient liquid reserves of
cash and credit facilities to meet short term obligations.
In addition, the Manager also observes and monitors
compliance with the Code on Collective Investment
Schemes issued by the Monetary Authority of Singapore
to govern limits on total borrowings.
Risk Management
34
LIPPO MALLS INDONESIA RETAIL TRUST ANNUAL REPORT 2014
