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Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2015

NOTE 17

FINANCIAL RISK MANAGEMENT (continued)

The Responsible Entity uses different methods to measure and manage different types of risks to which the Trust is exposed. These include

monitoring levels of exposure to interest rates, liquidity and credit risk. The Responsible Entity enters into interest rate swaps to manage the

interest rate risk arising from the Trust's operations. The Responsible Entity seeks to deal only with creditworthy counterparties and these

assessments are regularly reviewed. Liquidity risk is monitored through the use of future rolling cash flow forecasts.

NOTE 18

INTEREST RATE RISK MANAGEMENT

The Trust is exposed to interest rate risk on its borrowings and derivative financial instruments. The risk is managed by the Responsible Entity by

maintaining an appropriate mix between fixed and floating rate interest bearing liabilities. Fixed rate debt is achieved through the use of derivative

financial instruments approved by the Board. These activities are evaluated regularly to ensure that the Trust is not exposed to interest rate

movements that could adversely impact its ability to meet its financial obligations and to ensure compliance with borrowing covenants.

(i) Summary of floating interest rate positions at balance date

The Trust has interest rate risk on borrowings which are typically floating rate debt. The exposures at reporting date together with the interest rate

risk management transactions are as follows:

30 Jun 15

30 Jun 14

Interest payable

Note

$’000

$’000

Principal amounts of all interest bearing liabilities:

Non current – Loans payable – secured

9

209,900

206,200

209,900

206,200

Principal amounts of fixed interest rate instruments:

Fixed rate derivatives

– A$

18(ii)

149,000

156,000

149,000

156,000

At 30 June 2015, the Trust has hedged 71% (2014: 76%) of its interest payable exposure by way of interest rate swaps of varying durations with

floating exposure of $60,900,000 payable (2014: $50,200,000) at an average rate of 3.54%, including margin (2014: 4.21%). Changes to the fair

value of the derivatives due to interest rate movements are set out in Note 18(ii).

30 Jun 15

30 Jun 14

Interest rate sensitivity

$’000

$’000

The sensitivity of interest expense to

changes in floating interest rates is as follows:

Interest rate

movement

(Increase)/decrease

in interest expense

–2.0%

1,218

1,004

–1.0%

609

502

–0.5%

305

251

0.5%

(305)

(251)

1.0%

(609)

(502)

2.0%

(1,218)

(1,004)

(ii) Summary of fixed interest rate positions at balance date

Notional principal amounts and contracted rates of the Trust’s interest rate swaps:

30 Jun 15 30 Jun 15

30 Jun 14 30 Jun 14

Swaps contracted

as at the reporting date

and outstanding at

Notional

principal

amount

$’000

Average

rate

Notional

principal

amount

$’000

Average

rate

A$ payable

30 June 2014

A$(156,000)

5.46%

30 June 2015

A$(149,000)

4.65%

A$(109,000)

5.42%

30 June 2016

A$(149,000)

4.28%

A$(89,000)

5.39%

30 June 2017

A$(117,000)

3.91%

A$(57,000)

5.25%

30 June 2018

A$(90,000)

2.78%

30 June 2019

A$(70,000)

2.80%

30 June 2020

A$(40,000)

2.73%

The Trust’s interest rate swaps do not meet the accounting requirements to qualify for hedge accounting treatment. Changes in fair value

have been reflected in the statement of comprehensive income. At 30 June 2015, the aggregate fair value is a payable of $6,219,511 (2014:

$7,628,014). The change in fair value for the year ended 30 June 2015 was $1,408,503 (2014: $2,264,935).

20 / Carindale Property Trust

Annual Report 2015