NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2025 10 FINANCIAL DERIVATIVES (CONT’D) The Group has entered into interest rate swaps to manage its exposure to interest rate movements on its floating rate interest-bearing borrowings by swapping the interest expense on these borrowings from floating rates to fixed rates. As at the reporting date, the notional principal amount of the financial instruments was US$280.0 million (2024: US$380.0 million). The changes in fair value of the interest rate swaps are recognised in profit or loss for the financial year. Offsetting financial assets and financial liabilities The Group entered into derivative transactions under International Swaps and Derivatives Association (“ISDA”) master netting agreements. In general, under such agreements, the amounts owed by each counterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances – e.g. when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions. The above ISDA agreements do not meet the criteria for offsetting in the Statements of Financial Position. This is because they create a right of set-off of recognised amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties. In addition, the Group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously. The following table sets out the carrying amounts of recognised financial instruments that are subject to an enforceable master netting arrangement, irrespective of whether they are offset in the Statements of Financial Position: Gross amounts of recognised financial instruments Gross amounts of recognised financial instruments offset in the Statement of Financial Position Net amounts of financial instruments presented in the Statement of Financial Position Related financial instruments that are not offset Net amount US$’000 US$’000 US$’000 US$’000 US$’000 Group and Trust 2025 Financial asset Interest rate swap 3,091 − 3,091 − 3,091 Financial liability Interest rate swap (95) − (95) − (95) 2,996 − 2,996 − 2,996 2024 Financial assets Interest rate swaps 14,662 − 14,662 − 14,662 / 132 / EXPANDING HORIZONS
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