176
27 FINANCIAL INSTRUMENTS (CONT’D)
Interest rate risk
The Stapled Group’s exposure to changes in interest rates relate primarily to interest-earning financial assets and
interest-bearing financial liabilities. At the end of the financial year, the interest rate profile of the interest-bearing
financial instruments was:
HBT Group
H-REIT Group
Stapled Group
2015
2014
2015
2014
2015
2014
$’000
$’000
$’000
$’000
$’000
$’000
Fixed rate instruments
Financial assets
792
3,952
56,158
71,182
56,950
75,134
Financial liabilities
–
– (557,857)
(219,233)
(557,857)
(219,233)
Interest rate swap
–
–
– (100,311)
– (100,311)
792
3,952 (501,699)
(248,362)
(500,907)
(244,410)
Variable rate instruments
Financial assets
–
–
135,563
–
–
–
Financial liabilities
(135,563)
– (368,163)
(557,515)
(368,163)
(557,515)
Interest rate swap
–
–
–
100,311
–
100,311
(135,563)
– (232,600)
(457,204)
(368,163)
(457,204)
The H-REIT Manager’s and the HBT Trustee-Manager's strategy to manage the risk of potential interest rate volatility
is through the use of interest rate hedging instruments and/or fixed rate borrowings. The H-REIT Manager and HBT
Trustee-Manager will regularly evaluate the feasibility of putting in place the appropriate level of interest rate hedges,
after taking into account the prevailing market conditions.
Derivative financial instruments are used to manage exposures to interest rate risks arising from financing and investment
activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for
hedge accounting are accounted for as trading instruments.
Fair value sensitivity analysis for fixed rate instruments
The Stapled Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss.
The Stapled Group does not designate interest rate swap as hedging instruments under a fair value hedge accounting
model. Therefore, a change in interest rates at the end of the financial year would not affect total return.
Cashflow sensitivity analysis for variable rate instruments
A change of 100 basis points (bp) in interest rate at the end of financial year would increase/(decrease) total
comprehensive income (before any tax effects) and unitholders' fund of the HBT Group and total return (before any tax
effects) and unitholders’ funds of the H-REIT Group and the Stapled Group, by the amounts shown below. This analysis
assumes that all other variables remain constant.
NOTES TO THE FINANCIAL STATEMENTS
