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Wool Stocktake : AWI Annual Report 2007-08
notes to the FinAnciAl stAtements 2 financial Risk management (continued) Group sensitivity Based on the financial instruments held at the 30 June 2008, had the Australian dollar weakened/strengthened by 10% against the main trading currencies with all other variables held constant, the Group’s income statement exposure would have been effected as follows in the following table: cny aud eQuiv $’000 gRouP 10% Higher 10% Lower 167 (204) 30 June 2008 euR aud eQuiv $’000 92 (112) usd aud eQuiv $’000 301 (367) Parent entity The parent entity operates predominately in Australia and has no significant exposure to foreign exchange risk. (ii) Cash flow and fair value interest rate risk The Group’s main interest rate risk arises from term deposit investments. The company’s investment policy is to maintain a prudent and conservative investment profile that is risk averse. As at reporting date, the Group’s exposure to interest rate risk and the effective weighted average interest rates are as follows: 30 June 2008 WeigHted aveRage inteRest Rate % cash on hand - interest bearing cash on hand - non-interest bearing* funds invested - term deposits funds invested - floating rate notes net exposure to cash flow interest rate risk 6.32% 7.78% 30 June 2007 BaLance $’000 91 4,985 59,819 – 64,895 * The majority of the non-interest bearing cash is held in overseas jurisdictions where restrictions for repatriation and low interest regimes exist. Group sensitivity At 30 June 2008, if interest rates had changed by -/+100 basis points from the year end rates with all other variables held constant, post tax profit for the year would have been $598,000 lower/higher (2007 - change of 100 bps: $810,000 lower/higher), mainly as a result of higher/lower interest income from cash and cash equivalents. Parent entity sensitivity The parent entity’s main interest rate risk arises from cash and cash equivalents which includes current assets available for sale. At 30 June 2008, if interest rates had changed by -/+ 100 basis points from the year end rates with all other variables held constant, post tax profit would have been $595,000 lower/ higher (2007 - change of 100 bps: $810,000 lower/higher) as a result of lower interest income from these financial assets. (b) Credit risk The Group has no significant concentrations of credit risk and the credit risk is managed on a group basis. It arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to manufacturers and retailers, including outstanding receivables and committed transactions. Australian Wool Innovation Limited’s funds investment policy is conservative and designed to minimise principal, interest rate and currency risk. Risk of principal amounts invested is minimised by only investing in securities or deposits with Standard and Poor’s ratings AAA, AA and A for long term and A1 and A2 for short term. Risk of loss due to adverse interest rate movements is minimised by investing in securities or deposits with a maximum term of 90 days. Funds invested at 30 June 2008 were predominantly in Australian dollars thereby minimising any foreign exchange risk. 6.58% 6.58% WeigHted aveRage inteRest Rate % 5.64% cny aud eQuiv $’000 – – 30 June 2007 euR aud eQuiv $’000 – – usd aud eQuiv $’000 – – BaLance $’000 1,270 11 35,991 45,000 82,272 84 FINANCIALS AWI 07/08
AWI Annual Report 2008-09
Annual Report 2006-07