✨ Financial Risk Management Report
3918 NEW ZEALAND GAZETTE, No. 143 25 SEPTEMBER 2008
Concentrations of risk arise when a number of financial instruments or contracts are entered into with the same counterparty or where a number of counterparties are engaged in similar business activities, geographic regions, or similar economic features that would influence their ability to meet their contractual obligations by reason of changes in economic, political or other conditions.
The trust manages credit concentration risks through:
● a diversified and non-correlated basket of investments across traditional and alternative classes
● through the use of a multi-fund manager approach to investments in its portfolio
● and by ensuring compliance with the individual mandate requirements of each investment.
The trust’s custodian reviews the portfolio for compliance against each investment mandate on a regular basis and reports findings to the trust’s management and board of trustees. Fund of fund managers ensure that underlying product fund managers comply with fund mandates.
The credit quality of trust’s New Zealand bond portfolio is managed by the trust using Standard & Poor’s rating categories.
| AAA to AA | A+ to A– | BBB | 2008 | 2007 | |
|---|---|---|---|---|---|
| $000 | $000 | ||||
| NZ bonds: | |||||
| Interest bearing securities | 15.4% | 33,056 | 36,827 | ||
| Corporate bonds | 30.0% | 5.2% | 0.9% | 77,488 | 86,328 |
| Government bonds | 40.2% | 86,289 | 96,135 | ||
| Local authority | 3.7% | 1.0% | 10,088 | 11,239 | |
| SOE | 2.4% | 1.2% | 7,727 | 8,609 | |
| Global bonds: | AAA to AA | A+ to A– | |||
| Corporate bonds | 3.0% | – | 3,608 | ||
| Government bonds | 42.0% | – | 50,516 | ||
| Swaps | 41.0% | – | 49,314 | ||
| Municipal bonds | 1.0% | – | 1,203 | ||
| MBS | 10.0% | 3.0% | – | 15,636 | |
| Cash portfolio: | AAA to AA | A+ to A– | |||
| Promissory notes | 24.7% | 14,708 | 19,852 | ||
| Bank bills | 64.1% | 38,172 | 51,519 | ||
| Cash | 11.2% | 6,670 | 9,002 |
This segmented global bond fund was liquidated during the year.
Hedging
Hedging is split evenly between the following counterparties:
| S&P Rating | |
|---|---|
| ANZ Banking Group Limited | AA |
| Bank of New Zealand Limited | AA |
| Westpac New Zealand Limited | AA |
Liquidity Risk
Liquidity risk is the risk that the trust will encounter difficulties in meeting the obligations associated with its financial liabilities. This risk is managed through the trust’s investment in a diversified portfolio of financial assets.
The trust’s investment portfolio during the year under review consisted of only listed securities which under normal market conditions are readily convertible to cash. In addition, the trust maintains sufficient cash and cash equivalents to meet normal operating requirements.
The trust’s financial liabilities comprise trade and other payables, and committed but unpaid grants.
At balance date, all trade and other payables were current, and are normally settled on the 20th of the month following invoice date.
Committed but unpaid grants are held as current liabilities pending the satisfaction of conditions under which the grant was made. At balance date, committed but unpaid grants totalled $80.68 million. These committed but unpaid grants had the following profile:
| Financial Year Approved | Number of Grants Outstanding | Value $000 |
|---|---|---|
| 2002 | 1 | 12 |
| 2005 | 2 | 92 |
| 2006 | 15 | 16,004 |
| 2007 | 89 | 20,667 |
| 2008 | 455 | 43,905 |
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NZ Gazette 2008, No 143
✨ LLM interpretation of page content
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ASB Community Trust Financial Performance Statement
(continued from previous page)
💰 Finance & Revenue26 May 2008
Financial Liabilities, Investment Portfolio, Risk Management, Trust Funds