NOTES TO THE FINANCIAL STATEMENTS
(CONT’D)
31 DECEMBER 2015
26.
DERIVATIVE FINANCIAL INSTRUMENTS (CONT’D)
26A.
Interest rate swaps
The notional amount of interest rate swaps for 2015 was $155,000,000 (2014: Nil). They are designed to convert
floating rate borrowings to fixed rate exposure. The Group pays the fixed interest rates, ranging from 1.85% to
1.88% per annum, and receives a variable rate equal to the Singapore swap offer rate (“SOR”) on the notional
contract amount (Level 2). The interest rate swaps will expire on 16 December 2018. Information on the maturities
of the borrowings is provided in Note 22A.
26B.
Currency option contracts
Notional
amounts
Maturity
Fair value
Reference
currency
2015 2014
2015
2014 2015 2014
$’000 $’000
$’000 $’000
Currency Option
Contracts
33,481 3,556
Indonesian
Rupiah
February 2016
to February 2017 February 2015 215 109
Currency Option
Contracts
38,632 10,134
Indonesian
Rupiah
February 2016
to February 2017 February 2015 (162)
7
Currency Option
Contracts
83,702 10,134
Indonesian
Rupiah
February 2016
to February 2017 February 2015 (525)
(146)
155,815 23,824
(472)
(30)
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 loans 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 derivative financial instruments
The derivative 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 interest rate swaps 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.
The fair value (Level 2) of currency option contracts is based on option models. The valuation technique uses
market observable inputs including forward rate curves and annualised volatility of exchange rate.
ANNUAL REPORT 2015
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