Notes to the financial statements
Year ended 31 March 2016
14 Derivative financial instruments (continued)
The Group enters into interest rate swaps to manage its exposure to interest rate movements on its floating rate interest-
bearing borrowings by swapping the interest expense on these borrowings from floating rates to fixed rates.
The Group held interest rate swaps with a total notional amount of $2,166.2 million (2015: $1,338.2 million) to provide
fixed rate funding for terms of less than 1 year to 10 years (2015: 1 to 10 years). The Group also held certain floating
rate interest rate swaps with an aggregate notional amount of $350.0 million (2015: $200.0 million) and basis interest
rate swaps with an aggregate notional amount of $268.9 million (2015: $Nil) for efficient portfolio management and to
maintain desired level of hedge and preferred floating benchmarks.
Where the interest rate swaps are designated as hedging instruments in qualifying cash flow hedges, the changes in
fair value of the interest rate swaps relating to the effective portion are recorded in Unitholders’ funds. For the financial
year ended 31 March 2016, a net change in fair value of $0.2 million (2015: $5.6 million) relating to the effective portion
of cash flow hedges were recognised in Unitholders’ funds. Fair value changes relating to the ineffective portion are
recognised in the Statement of Total Return.
As at 31 March 2016, the Group held cross currency swaps (“CCS”) with notional amounts of JPY24.6 billion and HKD1.76
billion (2015: JPY24.6 billion and HKD1.26 billion), respectively, to provide Singapore dollar funding for terms of 1 to 13.5
years (2015: 1 to 14.5 years). On maturity, an aggregate of $658.8 million (2015: $567.2 million) payable will be swapped
into JPY24.6 billion and HKD1.76 billion (2015: JPY24.6 billion and HKD1.26 billion) for the repayment of the underlying
foreign currency borrowings.
As at 31 March 2016, the Group also held CCS with notional amounts of AUD294.5 million as a hedge for its investment
in Australia for a term of 4.5 years (2015: Nil).
The Group had also entered into forward exchange contracts to manage its foreign currency risk. The notional amount of
the Group’s outstanding forward exchange contracts as at 31 March 2016 was AUD8.0 million (2015: $Nil).
Offsetting financial assets and financial liabilities
The disclosures set out in the tables below include derivative assets and derivative liabilities that are subject to an
enforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of
whether they are offset in the Statement of Financial Position.
The Group entered into International Swaps and Derivatives Association (ISDA) Master Agreements with various bank
counterparties (“ISDA Master Agreement”). In certain circumstances, following the occurrence of a termination event
as set out in the ISDA Master Agreement, all outstanding transactions under such ISDA Master Agreement may be
terminated and the early termination amount payable to one party under such agreements may be offset against amounts
payable to the other party such that only the net amount is due or payable in settlement of all transactions.
In accordance with financial reporting standards, the swaps presented below are not offset in the Statement of Financial
Position as the right of set–off of recognised amounts is enforceable only following the occurrence of a termination event
as set out in such ISDA Master Agreement. In addition, the Group and its counterparties do not intend to settle on a net
basis or to realise the assets and settle the liabilities simultaneously.
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A-REIT ANNUAL REPORT
2015/2016
