✨ Financial Statements
2634 NEW ZEALAND GAZETTE, No. 98 5 AUGUST 2013
Otago Community Trust
Notes to the financial statements
For the year ended 31 March 2013
in New Zealand Dollars ($000’s)
18 Financial Instruments (continued)
3.3 Pricing Risk
Pricing risk is the risk that the fair value of financial assets will increase or decrease as a result of changes in market prices, whether these changes are caused by factors specific to individual stocks or factors affecting all financial assets in the market. Price risks arise from the Trust’s investment portfolio (the Fund). As reported in the section on Significant Accounting Policies, the financial assets are valued at fair value as determined by reference to their quoted bid price at the reporting date, wherever this information is available.
Sensitivity to fluctuations in income for the Trust’s Fund arising from market risk are set out in the following tables provided by the Trust’s investment consultant, Russell Investment Group Limited.
Sensitivity Analysis for the Trust’s Portfolio 31 March 2013
Based on the actual asset allocation of the Trust’s Portfolio as at 31 March 2013, the long term expected return for the portfolio (ignoring fees and value add from active management) is currently 5.7% per annum. There is approximately a 68% probability that the return in any one year will be within the range of -0.8% to 12.2%.
As at 31 March 2013 the Trust’s portfolio was valued at NZ$225.3m. Assuming the short-term return distribution approximates the long-term return distribution, then for the year 1 April 2013 to 31 March 2014 there is approximately 68% probability that the Trust’s revenue from investment activities will lie in the range of -$1.8m to $27.5m, with an expected value of $12.8m.
Sensitivity Analysis for the Trust’s Portfolio 31 March 2012
Based on the actual asset allocation of the Trust’s portfolio as at 31 March 2012, the long term expected return for the portfolio (ignoring fees and value add from active management) is currently 6.2% per annum. There is approximately a 68% probability that the return in any given year will be within the range of -0.6% to 13.0%.
As at 31 March 2012 the Trust’s portfolio was valued at $208.6m. Assuming the short-term return distribution approximates the long-term return distribution, then for the year 1 April 2013 to 31 March 2013 there is an approximately 68% probability that the Trust’s revenue from investment activitied will lie in the range of -$1.3m to $27.1m, with an expected value of $12.9m.
These sensitivity analyses are based on the volatility of each asset class and the Fund as a whole, as measured by plus or minus one standard deviation. The overall effect of the Trust’s diversified portfolio is to reduce volatility and stabilise investment returns over time.
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NZ Gazette 2013, No 98
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Otago Community Trust Financial Statements
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🏢 State Enterprises & InsuranceFinancial statements, Pricing risk, Sensitivity analysis, Investment portfolio, Market risk, Financial instruments