130 / 152
notes tothe
financial statements
128
STARHILL global reit ANNUAL REPORT FY 2016/17
Geographical segments
The Group’s operations and its identifiable assets are located in Singapore (consisting of Wisma Atria Property and Ngee
Ann City Property), Adelaide and Perth-Australia (consisting of Myer Centre Adelaide, David Jones Building and Plaza
Arcade), Kuala Lumpur-Malaysia (consisting of Starhill Gallery and Lot 10 Property), and others (consisting of the China
Property in Chengdu and three properties (2016: four properties) in Tokyo, Japan). Accordingly, no geographical segmental
analysis is separately presented.
Major tenants
The four largest tenants located at Ngee Ann City Property, Wisma Atria Property, Malaysia Properties and Australia
Properties accounted for approximately 46.1% (2016: 45.8%) of the Group’s gross rent as at 30 June 2017.
24. Capital and financial risk management
Capital management
The Group’s objective when managing capital is to optimise unitholders’ return through a mix of available capital sources.
The Group monitors capital on the basis of both the gearing ratio and interest service coverage ratio and maintains them
within the approved limits. The Group assesses its capital management approach as a key part of the Group’s overall
strategy, and this is continuously reviewed by the Manager. The Group’s gearing as at 30 June 2017 is 35.3% (2016: 35.0%)
and the interest service coverage ratio for the year ended 30 June 2017 is 4.2 times (2016: 4.4 times). The Manager intends
to continue with its prudent capital management.
The Trust has a corporate rating of BBB+ from Standard and Poor’s as at 30 June 2017 and remained within the aggregate
leverage limit of 45.0% stipulated by the Property Fund Appendix during the current year.
There were no changes in the Group’s approach to capital management during the current year.
Financial risk management
Overview
The Group’s returns are primarily from net operating income and capital appreciation of its assets. However, these returns
are exposed to financial risks including credit, liquidity, interest rate and foreign currency risks. Where appropriate, the
Manager may hedge against the volatility of interest costs, foreign currency net income and foreign currency investments.
The Group has a system of controls in place to create an acceptable balance between the cost of the financial risks
occurring and the cost of managing these risks. The Manager continuously monitors the Group’s financial risk management
process to ensure that an appropriate balance between risk and control is achieved. Financial risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.
The financial risk management policies contain the parameters and processes for managing these risks, and define the
roles and responsibilities of those who manage the process. The policies are described in greater detail below.
Credit risk
Credit risk is the potential financial loss resulting from the failure of a tenant or a counterparty to settle its financial and
contractual obligations to the Group, as and when they fall due.