New Zealand Gazette – 2010 – No. 110

Page 2962

✨ Financial Risk Management

NEW ZEALAND GAZETTE, No. 110

30 AUGUST 2010


Market downturn risk	The risk that the markets suffer a severe and prolonged periods of negative performance.
	Cash and bond assets are held to ensure that distributions can be maintained short-term.
	Assers are diversified across the asset classes and across the economic regions of the world.
	The Foundation seeks specific independent advice on the market outlook as required, but a least annually.
Manager Risk	The risk that the discretionary active decisions of a single manager prove to be wrong or that the manager fails.
	Where discretionary decisions are delegated, a specific mandate documents their application.
	The exposure to any single manager is limited. An index approach is adopted for overseas shares.
	Assers are held separate to the manager’s own assets under trust.
Timing Risk	The risk that investments are made as the market is about to fall, or sold as the markets are about to rise.
	Money is moved into new investments or volatile assets classes over time in multiples typically no more than 5%.

The credit quality of Foundation’s New Zealand Bond portfolio is managed by the Foundation using Standard & Poor’s rating categories:

NZ Bonds and Term Deposits	AAA to A	A+ to A-	BBB	NR	2010
					$
Corporate Bonds	27%	41%	14%	18%	5,748,391
Term Deposits	100%				3,780,000
					5,363,513
					4,220,000

Hedging:
Hedging is managed by State Street Global Advisors under the following guidelines:
The ideal currency hedged position, solely from a return point of view, is to be unhedged when the NZ dollar is depreciating and to be hedged when it is appreciating.
The Foundation’s policy looks to set the actual hedging level relative to that shown below:

Currency level relative to the long-term average level	Medium term trend/momentum
	Upwards
Above +2 standard deviations	50% hedging
+1 to +2 standard deviations	50% hedging
0 to +1 standard deviations	63% hedging
-1 to 0 standard deviations	75% hedging
-2 to -1 standard deviations	75% hedging
Below -2 standard deviations	75% hedging

Liquidity Risk
Liquidity Risk is the risk that the Foundation will encounter difficulties in meeting the obligations associated with its financial liabilities. This risk is managed through the Foundation’s investment in a diversified portfolio of financial assets.
The Foundation’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 Foundation maintains sufficient cash and cash equivalents to meet normal operating requirements.
The Foundation’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 totaled $403,630. These committed but unpaid grants had the following profile:

Financial Year Approved	Number of Grants Outstanding	Value $
2006	1	187,709
2007	2	25,000
2009	4	17,200
2010	24	173,720
Total	31	403,630

Committed but unpaid grants at 31 March 2009 had the following profile:

Financial Year Approved	Number of Grants Outstanding	Value $
2006	1	197,000
2007		10,000
2009	22	352,152
Total	23	559,152

11 Capital Commitments and Contingent Liabilities
Other than committed grants, the Foundation expects to spend between $25,000 and $30,000 on a donations management system. To date $16,080 has been capitalised. (2009, nil)

12 Material Events after balance date
There were no material events after balance date which required adjustment to the Financial Statements for the year ended 31 March 2010 (2009 Nil).