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Forest NSW Annual Report 2012

Forests NSW Consolidated Annual Financial Reports Year ended 30 June 2012 ABN 43 141 857 613 Notes to and forming part of the financial statements For the year ended 30 June 2012 manages this risk through monitoring future strategic rather than trading purposes. Apart cash flows and maturities planning to ensure from Forests NSW investment in Timber & adequate holding of high quality liquid assets. Carbon Plantations Pty Ltd, Forests NSW has no The objective is to maintain a balance between direct equity investments. continuity of funding and flexibility through Forests NSW only holds units in the Hour Glass the use of overdrafts, loans and other advances. Investment Cash Facility trust. This trust only During the current and prior years, there were invests in Cash & money market instruments no defaults or breaches on any loans payable. that have an investment horizon up to 1.5 years No assets have been pledged as collateral. (June 2011 – Up to 1.5 years). Forests NSW exposure to liquidity risk is The unit price of each facility is equal to the deemed insignificant based on prior periods’ total fair value of net assets held by the facility data and current assessment of risk. divided by the total number of units on issue Market Risk published daily. NSW TCorp, as trustee forfor that facility. Unit prices are calculated and Market risk is the risk that the fair value or each of the above facilities, is required to act future cash flows of a financial instrument in the best interest of the unit holders and will fluctuate because of changes in market to administer the trusts in accordance with prices. Forests NSW exposures to market risk the trust deeds. NSW TCorp. has appointed are primarily through interest rate risk on external managers to manage the performance the agency borrowings and other price risks and risks of each facility in accordance with associated with the movement in the unit a mandate agreed by the parties. However, price of the Hour Glass Investment facilities. NSW TCorp, acts as manager for part of the Forests NSW has only minimal exposure to Cash Facility. A significant portion of the foreign currency risk and does not enter into administration of the facilities is outsourced to commodity contracts. an external custodian. Interest rate risk Forests NSW exposure to risk, as it allowsInvestment in the Hour Glass facilities limits Exposure to interest rate risk arises primarily diversification across a pool of funds, with through Forests NSW interest bearing liabilities. different investment horizons and a mix of This risk is minimised by undertaking mainly investments. fixed rate borrowings, primarily with NSW NSW TCorp. provides sensitivity analysis TCorp. Forests NSW does not account for any information for each of the facilities, using fixed rate financial instruments at fair value historically based volatility information. The through the Statement of Comprehensive NSW TCorp. Hour Glass Investment facilities are Income or as available for sale. Therefore designated at fair value through profit or loss for these financial instruments, a change in and therefore any change in unit price impacts interest rates would not affect the Statement directly on profit (rather than equity). of Comprehensive Income or equity. A reasonable possible change of +/- 1% is used, consistent with current trends in interest rates. The basis will be reviewed annually and amended where there is a structural change in the level of interest rate volatility. The agency exposure to interest rate risk is set out below. Forests NSW exposure to interest rates is set out in notes 8 and 23. Exposures arise from liabilities bearing variable interest rates as the Forests NSW intends to hold fixed interest assets and liabilities to maturity. Interest rate exposure is limited to interest rates available at the time of entering into arrangements with NSW Treasury Corporation. The assets or liabilities are held until maturity. Other price risk – T Corp Hour Glass Investment facilities Exposure to ‘other price risk’ primarily arises through investment with NSW TCorp. Hour Glass Investment facilities, which are held for 64 Forests NSW Annual Report 2011–12 Social, Environmental and Economic Performance


Forest NSW Annual Report 2012
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