17 UNITHOLDERS’ FUNDS
(continued)
Capital reserve
(continued)
The capital reserve of the subsidiary can be used to make good previous years’ losses, if any,
and may be converted to paid-in capital of the subsidiary in proportion to the existing interests
of equity owners, provided that the balance after such conversion is not less than 25% of the
registered capital.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair
value of cash flow hedging instruments relating to forecast hedged transactions.
Capital management
The Manager reviews the Group’s and the Trust’s capital structure regularly, which the Group
defines as total Unitholders’ funds (excluding non-controlling interests) and the level of
distribution to Unitholders. The Group uses a combination of debt and equity to fund acquisition
and asset enhancement projects.
The objectives of the Manager are to:
a.
maintain a strong balance sheet by adopting and maintaining a target gearing range;
b. secure diversified funding sources from financial institutions and/or capital markets;
c.
adopt a proactive interest rate management strategy to manage risks related to interest rate
fluctuations; and
d. manage the foreign currency exposure of income and capital values of overseas assets
through hedging, where appropriate.
The Manager seeks to maintain a combination of debt and equity in order to balance the cost
of capital and the returns to Unitholders. The Manager also monitors the externally imposed
capital requirements closely and ensures the capital structure adopted comply with the
requirements.
The Group is subject to the Aggregate Leverage limit as defined in the Property Funds Appendix
of the CIS Code. The CIS Code stipulates that the total borrowings (the “Aggregate Leverage”)
of a property fund should not exceed 35.0% of the fund’s Deposited Property. The Aggregate
Leverage of a property fund may exceed 35.0% of the fund’s Deposited Property (up to a
maximum of 60.0%) only if a credit rating of the property fund from Fitch Inc., Moody’s or
Standard and Poor’s is obtained and disclosed to the public. The property fund should continue
to maintain and disclose a credit rating so long as its Aggregate Leverage exceeds 35.0% of the
fund’s Deposited Property.
The Group has a credit rating of Baa3 from Moody’s. The Aggregate Leverage of the Group as
at 31 December 2014 was 38.5% (2013: 34.0%) of the Group’s Deposited Property. This
complied with the Aggregate Leverage limit.
There were no changes in the Group’s approach to capital management during the year.
Pursuing Growth | 163
