5 SEPTEMBER 2012 NEW ZEALAND GAZETTE, No. 109 3123

performance of each asset class is measured against an appropriate internationally accepted standard or index for each asset class.

Global Equities:
This portfolio is measured against the MSCI World Indices, and is 50% hedged back to New Zealand Dollars by State Street Global Advisors.

New Zealand Bonds:
The New Zealand Bond Portfolio is managed in-house. The Investment Guidelines provide strict limits on the underlying investment categories, along with credit and duration restrictions. The portfolio is measured against the NZX Government Stock Index.

Cash:
The Cash Portfolio is managed in-house. The investment guidelines places limits on the underlying investment categories, along with credit and duration restrictions. The portfolio is measured against the NZX 90 day bank bill index.

The SIPO sets out the following risks and mitigations:
Interest rate risk, reinvestment risk, default risk, currency risk, inflation risk, market volatility risk, market downturn risk, manager risk and timing risk. Comprehensive strategies are in place to mitigate each of these risks.

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

Group
| | AAA to A | A+ to A- | BBB | NR | 2012 | 2011 |
|----------------|----------|----------|-----------|-----|-----------|------------|
| NZ Corporate | 57.4% | 0 | 21.6% | 21% | 5,420,211 | 5,695,191 |
| Bonds | | | | | | |
| Term Deposits | 100% | | | | 3,620,000 | 3,280,000 |

Parent
| | AAA to A | A+ to A- | BBB | NR | 2012 | 2011 |
|----------------|----------|----------|-----------|-----|-----------|------------|
| NZ Corporate | 57.4% | 0 | 21.6% | 21% | 5,420,211 | 5,695,191 |
| Bonds | | | | | | |
| Term Deposits | 100% | | | | 3,350,000 | 3,100,000 |

Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities. This risk is managed through the Group’s investment in a diversified portfolio of financial assets. The Foundation’s investment portfolio consists of only listed securities which under normal market conditions are readily convertible to cash. In addition the Group maintains sufficient cash and cash equivalents to meet normal operating requirements.

Summary of Quantitative Risks relating to Financial Instruments
Global Equities are held in pooled funds on the following basis:

• 35% North America
• 35% Europe and the United Kingdom
• 30% Asia and Japan

Hedging
The fund manager, State Street Global Assets uses financial instruments to reduce exposure to fluctuations in foreign currency denominated assets which indirectly impact the value of the Foundation’s pooled funds. Forward exchange contracts are entered into to hedge foreign currency denominated assets. These are converted to the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the Statement of Financial Performance. The Group does not hold any derivatives.

Financial Liabilities
The Foundation’s financial liabilities comprise accounts payable, and grants approved but not yet paid. At balance date, all accounts other payable were current, and are normally settled on the 20th of the month following invoice date.
Grants approved but not yet paid are held as current liabilities pending the satisfaction of conditions under which the grant was made. At balance date grants approved but not yet paid totalled $256,497 (2011: $305,915).

Maturity analysis of Financial Liabilities
Financial liabilities comprise accounts payable, accrued employees entitlements and grants that have been approved but not yet paid. All are considered to be current. No conditions placed on grants to be satisfied before payment would prevent payment within the next 12 months.

14 Capital Commitments and Contingent Liabilities
The Group had no capital commitments or contingent liabilities at balance date. (2011: Nil).

15 Operating Lease Commitments – Lessor
The ground floor of the building is tenanted to a third party. Lease payments due until the first renewal date amount to $16,000. There is no fixed lease term for the portion of the building tenanted by the Foundation.

16 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 2012 (2011: Nil).