CapitaLand Ascott Trust 208 Notes to the Financial Statements For the financial year ended 31 December 2025 20 Stapled Securityholders’ Funds Foreign currency translation reserve The foreign currency translation reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign entities, effective portion of the hedging instrument which is used to hedge against the Stapled Group’s net investment in foreign operations as well as from the translation of foreign currency loans used to hedge or form part of the Stapled Group’s net investments in foreign entities. Capital reserve The subsidiaries incorporated in China are required to transfer 10% of their profits after tax, as determined under the accounting principles and relevant financial regulations of China, to a general reserve until the reserve balance reaches 50% of the subsidiary’s registered capital. The transfer to this reserve must be made before the distribution of dividends to shareholders. 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. Asset revaluation reserve The revaluation reserve relates to the revaluation of land and buildings, net of deferred tax. Capital management The Managers review the Stapled Group’s capital structure regularly, which the Stapled Group defines as total Stapled Securityholders’ funds (excluding non-controlling interests) and the level of distribution to Stapled Securityholders. To manage its aggregate leverage, the Stapled Group uses a combination of debt and equity to fund acquisition and asset enhancement projects. The objectives of the Managers 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 Managers seek to maintain a combination of debt and equity in order to balance the cost of capital and the returns to Stapled Securityholders. To manage its aggregate leverage, the Managers also monitor the externally imposed capital requirements closely and ensures that the capital structure adopted complies with the requirements. CapitaLand Ascott REIT is subject to the Aggregate Leverage limit as defined in the Property Funds Appendix of the CIS Code. From 28 November 2024, the CIS Code stipulates that the total borrowings and deferred payments (the “Aggregate Leverage”) of a property fund should not exceed 50.0% of the fund’s Deposited Property and the property fund should have a minimum interest coverage ratio of 1.5 times. As at the reporting date, CapitaLand Ascott REIT has a credit rating of BBB from Fitch Ratings (2024: BBB from Fitch Ratings). The Aggregate Leverage of the CapitaLand Ascott REIT Group as at 31 December 2025 was 40.1% (2024: 40.9%) of the CapitaLand Ascott REIT Group’s Deposited Property. This complied with the Aggregate Leverage limit. The aggregate leverage of the Stapled Group as at 31 December 2025 was 37.7% (2024: 38.3%). There were no changes in the Stapled Group’s approach to capital management during the year.
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