OVERVIEW PERFORMANCE SUSTAINABILITY FINANCIALS APPENDIX 25 FINANCIAL INSTRUMENTS (continued) Managing interest rate benchmark reform and associated risks Overview A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘interest rate benchmark reform’). The Group has exposures to SOR on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. In Singapore, the Steering Committee for SOR and SIBOR transition to SORA (SC-STS) together with the Association of Banks in Singapore (ABS) and Singapore Foreign Exchange Market Committee (SFEMC), has identified the Singapore Overnight Rate Average (SORA) as the alternative interest rate benchmark to replace SIBOR and SOR in Singapore. The timeline for SORA to replace SOR and SIBOR is by the end of June 2023 and December 2024 respectively. During the year, the Group completed the process of amending its financial instruments with contractual terms indexed to SIBOR. The amendments to SOR and SIBOR financial instruments incorporated the new benchmark rate (i.e. SORA). Non-derivative financial liabilities Historically, the Group’s IBOR exposures to non-derivative financial liabilities included secured and unsecured bank loans indexed to SIBOR and SOR. The Group has modified its non-derivative financial liabilities indexed to SIBOR and SOR to reference to SORA during the year ended 31 December 2023. Capital management The primary objective of the Group’s capital management is to ensure that it maintains an optimal capital structure so as to maximise shareholders’ value. Capital consists of all equity. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares, and obtain new borrowings to leverage on lower cost of borrowings versus the Group’s weighted-average cost of capital or divest assets to reduce borrowings. Management monitors capital based on a set of financial ratios with the primary focus on gearing ratio. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings less cash and cash equivalents. There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Notes to the Financial Statements Year ended 31 December 2023 209 ANNUAL REPORT 2023
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