FRASERS HOSPITALITY TRUST ANNUAL REPORT 2015
181
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL PERIOD FROM 20 JUNE 2014 (DATE OF CONSTITUTION) TO 30 SEPTEMBER 2015
26.
FINANCIAL RISK MANAGEMENT (CONT’D)
(a)
Foreign currency risk (cont’d)
Sensitivity analysis
A 10% strengthening of the Singapore dollar against the following currencies during the financial period
would have decrease the total return by the amounts as shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant.
Singapore
Dollar
Australian
Dollar
Sterling
Pound
Malaysian
Ringgit
Japanese
Yen
At 30 Sep 2015
SGD’000 SGD’000 SGD’000 SGD’000 SGD’000
FHT and FH-REIT Group
Decrease in total return for the financial
period
– 10% strengthening of the Singapore
dollar
(8)
(13)
(91)
(7)
(186)
A 10% weakening of the Singapore dollar against the above currencies during the financial period would
have had the equal but opposite effect on the total return by the amounts shown above, on the basis that
all other variables remain constant.
(b)
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the Stapled Group’s financial
instruments will fluctuate because of changes in market interest rates.
The Stapled Group’s exposure to changes in interest rates relate primarily to its interest-earning financial
assets and interest-bearing borrowings. Interest rate risk is managed by the Managers on an ongoing
basis with the primary objective of limiting the extent to which net interest expense could be affected
by adverse movements in interest rates. The REIT Manager adopts a policy of fixing the interest rates for
a portion of its outstanding borrowings via the use of derivative financial instruments or other suitable
financial products.
Interest rate derivatives in respect of the Stapled Group’s borrowings have been entered into to achieve
an appropriate mix of fixed and floating rate exposures within the Stapled Group’s policy. Generally, the
maturities of these interest rate derivatives follow the maturities of the related borrowings.
As at 30 September 2015, the Stapled Group had interest rate derivatives with notional contract amount
of SGD 437,743,000.
Sensitivity analysis
A 100 basis points increase/(decrease) in the interest rates on the portion of the Stapled Group’s
borrowings where hedged accounting is not applied, with all other variables held constant, would
decrease/(increase) the Stapled Group’s total return before tax for the financial period by SGD 1,235,000.
(c)
Credit risk
Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle
its financial and contractual obligations with the Stapled Group, as and when they fall due.
