Notes to The
Financial Statements
Year ended 31 December 2015
6 Financial derivatives
Group and Trust
2015
2014
$’000
$’000
Current derivative assets
–
398
Non-current derivative assets
2,647
10,515
Total derivative assets
2,647
10,913
Current derivative liabilities
–
(193)
Non-current derivative liabilities
(3,457)
(2,436)
Total derivative liabilities
(3,457)
(2,629)
Total derivative (liabilities)/assets (net)
(810)
8,284
Group
Trust
2015
2014
2015
2014
%
%
%
%
Percentage of derivative assets to unitholders’ funds
0.3
1.1
0.3
1.0
Percentage of derivative liabilities to unitholders’ funds
0.3
0.3
0.3
0.2
Interest rate swaps
The Group manages its exposure to interest rate movements on its floating rate loans and borrowings by entering
into interest rate swaps. As at the reporting date, the Group has interest rate swaps with a total notional principal
of $485,845,600 (2014: $538,641,600) to provide fixed rate funding for terms of 1 to 5 years (2014: 1 to 6 years) at
a weighted average effective interest rate of 0.61% (2014: 0.32%) per annum.
As at 31 December 2015, where the interest rate swaps are designated as the hedging instruments in qualifying
cash flow hedges, the effective portion of the changes in fair value of the interest rate swaps amounting to $0.5
million loss (2014: $0.9 million loss) was recognised in the hedging reserve. During the financial year, the changes
in fair value of interest rate swaps, where hedge accounting was discontinued or not practised, amounted to $0.1
million gain (2014: $0.1 million loss) was charged to the Statement of Total Return.
Forward foreign exchange contracts
The Group manages its exposure to foreign currency movements on its net income denominated in Japanese Yen
from its investments in Japan by using forward foreign exchange contracts to provide a hedge to the distribution
of income from its investment in Japan, net of Japanese Yen financing costs.
At the reporting date, the Group has outstanding forward foreign exchange contracts with aggregate notional
amounts of approximately $41.8 million (2014: $32.9 million). The change in fair value of $4.2 million loss (2014:
$0.1 million gain) was charged to the Statement of Total Return.
Cross currency interest rate swap
At the reporting date, the Group has a cross currency interest rate swap (“CCIRS”) with notional principal of $75.2
million (2014: $75.2 million) to manage its foreign currency risk and interest rate risk arising from the refinancing
of the maturing Japanese Yen debts using Singapore dollar facilities in 2014. To maintain a natural hedge, the
Group utilised a CCIRS to realign the $75.2 million Singapore dollar revolving credit facility back into an effective
JPY6,250 million Japanese Yen denominated loan to match its underlying Japanese Yen denominated assets.
The Group had in-substance bifurcated the CCIRS and applied hedge accounting for net investment hedge and cash
flowhedge,where thechanges in fair valueof theCCIRSof $6.2million loss (2014: $4.7milliongain) and$1.6milliongain
(2014: $0.1million loss) were recognised in the foreign currency translation reserve and hedging reserve, respectively.
114
ParkwayLife REIT
Annual Report 2015
