NEW ZEALAND GAZETTE, No. 105

29 AUGUST 2014

ASB COMMUNITY TRUST

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014

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 Group’s Investment Portfolio mainly consists 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, and Outstanding Grants Payable. 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. The Trust has a Current Account with its subsidiary company which records regular transactions.

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 exposure to the risk of change in market interest rates relates primarily to the Group’s investment in bonds. The Group’s investments in global bonds are held in a pooled fund and a segregated account. NZ Bonds are held in a segregated account. As such movements in interest rates will be reflected in the fair value asset pricing of each pooled fund or each underlying bond within the 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.