Download Full Report - Ascendas REIT

Notes to the financial statements
Interest rate risk
A-REIT’s exposure to fluctuations in interest rates relates primarily to loans and borrowings. Interest rate risk is
managed on an on-going basis with the primary objective of limiting the extent to which net interest expense
could be affected by adverse movements in interest rates.
As at 31 March 2010, A-REIT has interest rates swaps with total notional contract amount of $1,390.7 million
(2009: $1,430.7 million) whereby A-REIT has agreed with counterparties to exchange, at specified intervals,
the difference between the floating rate pegged to the Singapore dollar SOR and fixed rate interest amounts
calculated by reference to the agreed notional amounts of the loans and borrowings. $946.8 million of the swaps
have been used to hedge the exposure to changes in the variability of interest rate fluctuations of its loans and
borrowings. A-REIT classifies these interest rates swaps as hedging instruments in qualifying cash flow hedges.
Sensitivity analysis
Effects of a 100 basis points (“bp”) movement in interest rates at the balance sheet date on Statement of Total
Return and Unitholders’ funds are shown in the table below. This analysis has not taken into account the effects
of qualifying borrowing costs which are capitalised as part of investment properties under development and
assumes that all other variables remain constant.
Statement of Total Return Unitholders’ funds
100 bp 100 bp 100 bp 100 bp
increase decrease increase decrease
$’000 $’000 $’000 $’000
2010
Variable rate instruments
- Finance costs (9,468) 9,468 - -
Interest rate swaps
- Finance costs 13,907 (13,907) - -
- Change in fair value of
financial derivatives 5,781 (5,781) 32,840 (32,840)
10,220 (10,220) 32,840 (32,840)
2009
Variable rate instruments
- Finance costs (15,905) 15,905 - -
Interest rate swaps
- Finance costs 14,307 (14,307) - -
- Change in fair value of
financial derivatives - - 50,509 (50,509)
(1,598) 1,598 50,509 (50,509)
8th Annual Report FY09/10
153