14 SEPTEMBER 2012 NEW ZEALAND GAZETTE, No. 114 3287

ASB COMMUNITY TRUST

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

The Group’s investment portfolio mainly consisted of 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 has also established a credit line with ASB Bank Limited.

The Group’s financial liabilities comprise of Sundry Accounts Payable, Outstanding Grants Payable, and Loans from Community Trusts (and Subsidiary Company Current Account for the Trust). At balance date, all Accounts Payable were current, and are normally settled on the 20th of the month following invoice date. Outstanding Grants Payable are settled as the terms and conditions of payment for each grant are satisfied. Loans from Community Trusts will be transferred to a Limited Partnership which will own and operate a grants management system on behalf of a number of participating Community Trusts. The inter-group Current Account is between the Trust and its subsidiary company who transact on a regular basis.

Market Risk

Market Risk is the risk that the fair value of future cash flows from financial assets and liabilities 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 Group’s SIPO.

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 Group’s investment in global bonds is held in a pooled fund. As such movements in interest rates will be reflected in each pooled fund’s fair value asset pricing. NZ Bonds are held in a segregated account. The exposure to movement in the fair value of the Group’s bond portfolios is discussed in the note on Price Risk.

The Group’s cheque and call accounts are interest bearing. Any movement in interest rates on these accounts is minimal and is not considered to be material.

Currency Risk

Currency Risk is the risk that the fair value of, or future cash flows from foreign currency denominated financial assets and amounts owing under foreign currency denominated financial liabilities will fluctuate due to changes in foreign currency exchange rates. The Group is exposed to currency risk both directly through investments denominated in a foreign currency and also indirectly where investment funds invest in foreign currency securities. Global Equity Funds and Inflation Hedging Assets are 50% hedged and Hedge Funds are hedged within a range of 50-100%. Global Fixed Interest Investments are 100% hedged. Emerging Markets Equity Funds, Private Equity and Cash are not hedged. All hedging is back to the New Zealand dollar. Liabilities denominated in foreign currencies are fully hedged back to New Zealand dollars at the time that the obligation is entered into.

Implementation of hedging contracts for the investment portfolio follows the month end valuation of the portfolio. Any movements in markets during this period may result in the portfolio being under or over hedged. These are not considered material, and will have minimal impact on the fair value of or future cash flows from the Group’s financial assets.