Notes to The
Financial Statements
Year ended 31 December 2015
24 Financial instruments (Cont’d)
The Group is exposed to foreign currency risk arising from its investments in Japan and Malaysia. The income
generated from these investments and net assets are denominated in foreign currencies, mainly Japanese Yen
(“JPY”) and Malaysia Ringgit (“MYR”).
The Group’s exposure to foreign currency risk mainly arises from the distribution of net income denominated in
JPY from its investment properties located in Japan and its net investment in foreign operations denominated
in JPY. The Manager limits the Group’s exposure to adverse movements in foreign currency exchange rates by
using forward foreign exchange contracts to hedge the distribution of net income from its investments in Japan.
In addition, the Group borrows loans denominated in JPY to create a natural hedge for its JPY denominated
investments and that are designated as net investment hedge. For the purpose of refinancing JPY6,250 million
loans in 2014, the Group has drawn down a $75.2 million revolving credit facility and overlaid it with a cross
currency interest rate swap to realign it into an effective JPY loan so as to maintain the natural hedge.
The Group’s exposures to various foreign currencies (excluding the JPY denominated loans and a Singapore
dollar denominated loan which was overlaid with a cross currency interest rate swap to realign it into an effective
JPY loan that are designated as hedge of the Group’s net investment in Japan) are shown in Singapore dollar,
translated using the spot rate as at 31 December as follows:
JPY
MYR
Total
$’000
$’000
$’000
Group
2015
Trade and other receivables
1,668
19
1,687
Cash and cash equivalents
19,174
476
19,650
Trade and other payables
(25,386)
(493)
(25,879)
Deferred tax liabilities
(19,665)
(85)
(19,750)
Financial derivatives
37,808
–
37,808
Net statement of financial position exposure
13,599
(83)
13,516
2014
Trade and other receivables
1,750
27
1,777
Cash and cash equivalents
51,336
718
52,054
Trade and other payables
(25,736)
(526)
(26,262)
Deferred tax liabilities
(11,686)
(87)
(11,773)
Financial derivatives
25,550
–
25,550
Net statement of financial position exposure
41,214
132
41,346
132
ParkwayLife REIT
Annual Report 2015
