✨ Financial Statements Notes
Otago Community Trust
Notes to the financial statements
in New Zealand Dollars ($000's)
2. 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. This portfolio consists of marketable securities which, under normal 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 donations.
At balance date the ratio of financial assets to financial liabilities was 50:1 (2010 30:1).
3. Market Risk
Market Risk is the risk that the fair value of future cash flows from financial assets will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and market prices. Market risk is managed and monitored using sensitivity analysis and minimised by ensuring that all investment activities are undertaken in accordance with established mandate limits and the investment strategies set out in the Trust's Statement of Investment Performance Objectives.
3.1 Interest Rate Risk
Interest Rate Risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial assets. The Trust's investment in global bonds is held in a pooled fund. Movements in interest rates will be reflected in each pooled fund's fair value asset pricing. NZ Bonds are held in segregated accounts. The exposure to movement in the fair value of the Trust's bond portfolios is discussed in the commentary on Price Risk.
The Trust's self managed cash and deposit accounts are interest bearing. Any movement in interest rates on these accounts is minimal and is not considered to be material.
3.2 Currency Risk
Currency risk is the risk that the fair value of, or future cash flows from financial assets will fluctuate due to changes in foreign currency exchange rates.
At balance date the Trust's exposure to currency risk was as follows:
| 2011 | 2010 | |
|---|---|---|
| Foreign currency denominated financial assets | 162,928 | 155,210 |
| Less foreign currency contracts | 162,928 | 155,210 |
| Total Unhedged Exposure at 31 March | - | - |
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NZ Gazette 2011, No 101
✨ LLM interpretation of page content
💰
Otago Community Trust Financial Statements for 2011
(continued from previous page)
💰 Finance & RevenueFinancial Instruments, Credit Risk, Investment Management, Financial Assets, Financial Liabilities