NOTES TO THE
FINANCIAL STATEMENTS
Year ended 31 December 2014
24 FINANCIAL INSTRUMENTS (CONT’D)
Risk management framework
The Manager has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Group has a system of controls in place to create an acceptable balance between the cost of risks
occurring and the cost of managing the risks. The Manager continually monitors the Group’s risk management
processes to ensure an appropriate balance between risks and controls is achieved. Risk management policies
and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.
Credit risk
Credit risk is the risk of financial loss to the Group if a lessee or deposit taking financial institution fails to meet
its contractual obligations, and arises principally from the Group’s receivables from lessees and cash and cash
equivalents placed with these financial institutions.
Trade and other receivables
The investment properties in Singapore are leased to one master lessee, PHS, a related corporation of the Manager
of the Trust. The investment properties in Japan are leased to several nursing home operators and a master lessee
in respect to the pharmaceutical product distributing and manufacturing facility. The Manager is of the opinion that
there were no conditions that cast doubt over the recoverability of the Group’s trade receivables. The maximum
exposure to credit risk is represented by the carrying value of these receivables on the statement of financial
position.
Cash and cash equivalents
Cash and fixed deposits are placed with financial institutions which are regulated.
At the reporting date, except as disclosed in Note 7, there were no significant concentration of credit risk. The
maximum exposure to credit risk is represented by the carrying value on the statement of financial position.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
The Manager monitors and maintains a level of cash and cash equivalents deemed adequate to finance the
Group’s operations and to cater for the fluctuations in cash flow requirements. Typically, the Group ensures that it
has sufficient cash on demand to meet expected operational expenses for a reasonable period of time, including
the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot
reasonably be predicted, such as natural disasters. In addition, the Manager also monitors and observes the CIS
Code issued by the MAS concerning limits on total borrowings.
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