SBN HOLDINGS LIMITED Annual Report 2022

74 NOTES TO THE ANNUAL FINANCIAL STATEMENTS continued 2. Derivative instruments continued 2.3 Financial instruments held-for-hedging Derivatives and other financial instruments held-for-hedging 2.3.1 Where all relevant criteria are met, derivatives are classified as derivatives held-for-hedging and hedge accounting is applied to remove the accounting mismatch between the derivative (hedging instrument) and the underlying instrument (hedged item). All qualifying hedging relationships are designated at fair value. The group applies hedge accounting in respect of interest rate risk. Derivatives designated as hedging instruments in fair value hedging relationships 3. Trading assets mm 3.1 Classification GROUP 2022 Interest rate risk fair value hedging relationships SBN HOLDINGS LIMITED Annual report 2022 GROUP COMPANY 2022 N$'000 2021 N$'000 2022 N$'000 2021 N$'000 Government, municipality and utility bonds Treasury bills 17 572 474 621 578 822 Reverse repurchase and other collateralised agreements Total 474 621 23 190 619 584 Fair value Maturity Assets N$'000 Liabilities N$'000 Net fair value N$'000 Less Between than 1 year N$'000 Contract/ Fair value 1 and Over 5 notional gain/ 4. Financial investments 5 years N$'000 years N$'000 amount¹ (loss) N$'000 N$'000 Interest rate swaps Total 2021 Interest rate risk fair value hedging relationships Interest rate swaps 1 430 Total 1 430 1 (4 500) (4 500) (4 500) 49 300 (4 500) (4 500) (4 500) 49 300 1 430 1 430 1 430 1 430 99 924 (4 695) 99 924 (4 695) The notional amount is the sum of the absolute value for both derivative assets and liabilities. The amount cannot be used to assess the market risk associated with the positions held and should be used only as a means of assessing the group's participation in derivative contracts. The notional amount is directly impacted by the JIBAR interest rate benchmark reform. 2.3.2 Hedged items classified as fair value hedges 2.3.3 GROUP 2022 Interest rate risk fair value hedging relationships Deposits and current accounts Total 2021 Interest rate risk fair value hedging relationships Deposits and current accounts Total Fair value liabilities N$'000 Accumulated fair value (loss)/gain at 31 December N$'000 Fair value (loss)/gain used to test hedge ineffectiveness N$'000 Accumulated fair value hedge adjustments N$'000 (47 169) 2 131 2 131 2 131 (47 169) 2 131 2 131 2 131 (101 371) 4 739 4 739 4 739 (101 371) 4 739 4 739 4 739 Hedge ineffectiveness recognised in profit or loss Hedge ineffectiveness in qualifying hedge relationships arises predominantly due to the presence of costs contained within hedging instruments. This ineffectiveness was recognised in net interest income together with the gains and losses on the underlying hedged item according to the nature of the risk being hedged as follows: GROUP Fair value hedges Interest rate risk fair value hedging relationships Net interest income 2022 N$'000 2021 N$'000 (2 369) 44 Ineffectiveness relating to highly probable forecast transactions no longer expected to occur during both 2022 and 2021 amounted to N$nil. There was no material ineffectiveness relating to basis in relation to foreign currency hedging relationships during 2022 and 2021. GROUP COMPANY 2022 N$'000 2021 N$'000 2022 N$'000 Government bonds and treasury bills Mutual funds and unit-linked investments Total 3 742 926 3 969 129 1 180 088 1 701 417 4 923 014 5 670 546 Accounting classification: Net debt financial investments measured at amortised cost Gross debt financial investments measured at amortised cost Less: ECL for debt financial investments measured at amortised cost 39 415 39 426 39 415 39 426 Financial investments measured at FVTPL - mandatory Debt financial investments measured at FVOCI Total 1 180 088 1 701 417 3 703 511 3 929 703 4 923 014 5 670 546 2021 N$'000 75

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