NOTES TO THE FINANCIAL STATEMENTS
(CONT’D)
31 DECEMBER 2015
28.
FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT’D)
28F.
Interest rate risk
The interest rate risk exposure is from changes in fixed rates and floating interest rates and it mainly concerns
financial liabilities which are both fixed rate and floating rate. The following table analyses the breakdown of the
significant financial instruments by type of interest rate:
Group
Trust
2015
2014
2015
2014
$’000
$’000
$’000
$’000
Financial liabilities with interest:
Fixed rates
447,082
472,886
–
–
Floating rates
241,930
151,473
141,930 151,473
Total at end of the year
689,012
624,359
141,930 151,473
The floating rate debt instruments are with interest rates that are re-set at regular intervals. The interest rates
are disclosed in the respective notes.
A proactive interest rate management policy has been adopted to manage the risk associated with the changes
in interest rates on the Group’s loan facilities.
In order to manage the interest rate risk, interest rate swaps are entered into to mitigate the fair value risk by
converting floating rate borrowings to fixed rate borrowings, as described in Notes 22A and 26A.
The Group does not designate interest rate derivatives as hedging instruments under a fair value hedge accounting
model as described in Note 2. The derivatives are carried at fair value and changes in the fair value are recognised
directly in the profit or loss. However, there is no impact to distributable income until realised.
Sensitivity analysis:
Group
2015
2014
$’000
$’000
Financial liabilities:
A hypothetical variation in interest rates by 10 (2014: 10) basis points with all other
variables held constant, would have an increase/decrease in total return before
tax for the year by
100
155
The analysis has been performed for floating interest rate over a year for financial instruments. The impact of a
change in interest rates on floating interest rate financial instruments has been assessed in terms of changing of
their cash flows and therefore in terms of the impact on net expenses. The hypothetical changes in basis points
are not based on observable market data (unobservable inputs).
ANNUAL REPORT 2015
129
