FORM 20-F/A Brookfield Property Partners L.P. - Brookfield Asset ...

NOTE 23: FINANCIAL INSTRUMENTS(a) Derivatives and hedging activitiesThe company’s subsidiaries use derivative and non-derivative instruments to manage financial risks, includinginterest rate, commodity, equity price and foreign exchange risks. The use of derivative contracts is governed bydocumented risk management policies and approved limits. The Business does not use derivatives for speculativepurposes. The Business uses the following derivative instruments to manage these risks:• Foreign currency forward contracts to hedge exposures to Canadian dollar, Australian dollar and Britishpound denominated investments in foreign subsidiaries and foreign currency denominated financialassets;• Interest rate swaps to manage interest rate risk associated with planned refinancings and existingvariable rate debt;• Interest rate caps to hedge interest rate risk on certain variable rate debt; and• Total return swaps on BPO’s shares to economically hedge exposure to variability in its share priceunder its deferred share unit plan.The company also designates Canadian Dollar financial liabilities of certain of its operating entities as hedges ofits net investments in its Canadian operations.Interest rate hedgingThe company has derivatives outstanding that are designated as cash flow hedges of variability in interest ratesassociated with forecasted fixed rate financings and existing variable rate debt.As at December 31, 2011, the company had derivatives representing a notional amount of US$1,599 million inplace to fix rates on forecasted fixed rate financings with maturities between 2014 and 2024 at rates between2.6% and 5.2%. As at December 31, 2010, the company had derivatives representing a notional amount of $85million in place to fix rates on forecasted fixed rate financings with a maturity between 2011 and 2021. Thehedged forecasted fixed rate financings are denominated in US$, C$ and A$.As at December 31, 2011, the company had derivatives with a notional amount of US$5,343 million in place tofix rates on existing variable rate debt at between 0.3% and 9.9% for debt maturities between 2012 and 2014. Asat December 31, 2010, the company had derivatives with a notional amount of $2,662 million in place to fix rateson existing variable rate debt at between 0.3% and 10.2% for debt maturities between 2011 and 2016.The fair value of the company’s outstanding interest rate derivative positions as at December 31, 2011 is a loss of$271 million (2010 – gain of $2 million). For the years ended December 31, 2011, and 2010, the amount ofhedge ineffectiveness recorded in interest expense in connection with the company’s interest rate hedgingactivities was not significant.Foreign currency hedgingThe company has derivatives designated as net investment hedges of its investments in foreign subsidiaries. As atDecember 31, 2011, the company had hedged a notional amount of £45 million at £0.64/US$ and A$135 millionat A$0.98/US$ using foreign currency forward contracts maturing between January and March of 2012. As atDecember 31, 2010, the company had designated a notional amount of £45 million at GBP0.64/US$, C$500 atC$1.00/US$ and A$1,100 at A$0.98/US$ using foreign currency contracts maturing in March 2011.The fair value of the company’s outstanding foreign currency forwards as at December 31, 2011 is a loss of $4million (2010 – loss of $64 million).In addition, as of December 31, 2011, the company had designated C$903 million (2010 – C$950 million) ofCanadian dollar financial liabilities as hedges of its net investment in Canadian operations.F-33