✨ Financial Statements Continuation
NEW ZEALAND GAZETTE, No. 131
21 AUGUST 2008
3433
Foreign currency exchange risk
The Group’s exposure to foreign currency risk can be summarised as follows:
| USD | AUD | EURO | |
|---|---|---|---|
| 2008 | |||
| Foreign currency risk: | |||
| Investments | 52,646 | 60,901 | 10,037 |
| Net balance sheet exposure before hedging activity | 52,646 | 60,901 | 10,037 |
| Forward exchange contracts: | |||
| Notional amounts | 231 | – | 827 |
| Net unhedged exposure | 52,877 | 60,901 | 10,864 |
| USD | AUD | EURO | |
|---|---|---|---|
| 2007 | |||
| Foreign currency risk: | |||
| Investments | 95,669 | 60,908 | 7,082 |
| Net balance sheet exposure before hedging activity | 102,751 | 60,908 | 7,082 |
| Forward exchange contracts: | |||
| Notional amounts | (3,944) | – | (56) |
| Net unhedged exposure | 91,725 | 60,908 | 7,026 |
The foreign currency risk of certain investments is managed within the fund. The trust is unable to quantify the extent that this risk is managed.
Interest risk – 2008
Interest rate risk at 31 March 2008 occurs in the following investments:
| Carrying amount $000 | Average interest % | Percentage covered by interest rate swaps | |
|---|---|---|---|
| New Zealand cash | 187,773 | 7.75 | 10% |
| New Zealand fixed interest | 103,619 | 5.80 | – |
| Global bonds | 32,883 | 6.50 | – |
| Emerging market debt | 22,431 | 7.50 | – |
| Alternative assets | 18,926 | 10.50 | 21% |
| 365,632 |
Interest risk – 2007
Interest rate risk at 31 March 2007 occurs in the following investments:
| Carrying amount $000 | Average interest % | Percentage covered by interest rate swaps | |
|---|---|---|---|
| New Zealand cash | 158,118 | 8.5 | 36% |
| New Zealand fixed interest | 124,276 | 6.5 | – |
| Global bonds | 30,146 | 6.5 | – |
| Emerging market debt | 13,030 | 8.0 | – |
| Alternative assets | 65,834 | 11.25 | 15% |
| 391,404 |
Interest rate risk is managed by cross currency interest rate swaps. At 31 March 2008, the Group had interest rate swaps denominated in Australian dollars of A$20,500,000 (2007 – A$20,500,000), US dollars of US$2,000,000 (2007 – US$13,000,000) and Euros of E9,000,000 (2007 – E13,000,000). In 2007, the Group also had New Zealand dollar denominated interest rate swaps of $30,000,000. At balance date, the remaining term on the interest rates swaps did not exceed 4 years.
Capital management
The Group’s capital includes core real capital base reserve, accumulated income reserve and capital base reserve.
The Group’s policy is to maintain a strong capital base so as to maintain investor confidence and to sustain future development of the Trust.
The Group is not subject to any externally imposed capital requirements.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the board of trustees.
There have been no material changes in the Group’s management of capital during the period.
Sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates will have an impact on profit.
At 31 March 2008, it is estimated that a general increase of one percentage point in interest rates would increase the Group’s profit before income tax by approximately $4,500,000 (2007 – $5,375,000). Interest rate swaps have been included in this calculation.
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NZ Gazette 2008, No 131
✨ LLM interpretation of page content
🏢
Canterbury Community Trust Financial Statements for the Year Ended 31 March 2008
(continued from previous page)
🏢 State Enterprises & Insurance28 July 2008
Financial Statements, Trust, Charity, Canterbury, Community Benefits, Revenue, Liabilities, Income Statement, Cash Flows, Accounting Policies, Credit Risk, Liquidity Risk, Market Risk, Foreign Currency Risk, Interest Rate Risk