Petroleum Fund of Timor-Leste Notes to the financial statements
for the year ended 31 December 2013
12. Financial risk and management objectives and policies continued
Summarised sensitivity analysis
The following table summarises the sensitivity of the Funds operating profit and net assets attributable to unitholders to interest rate risk. The analysis is based on reasonably possible movements in the benchmark with all other variables held constant and the fair value of the Funds
portfolio moving according to the movement in the benchmark. The reasonably possible movements in the risk variables have been determined based on the investment managers’ best estimates, having regard to a number of factors, including historical levels of changes in
market index, security prices andor benchmark returns and interest rates. However, actual movements in the risk variables may be greater or less than anticipated due to a number of factors, including unusually large market shocks resulting from changes in the performance of the
economies, markets and securities to which the variable is exposed. As a result, historic variations in risk variables are not a definitive indicator of future variations in the risk variables.
Interest rate risk Impact on operating profit Net assets
As at 31122013: -1.00 As at 31122013: +1.00
As at 31122012: -1.00 As at 31122012: +1.00
31 December 2013
95,711,524 95,711,524
31 December 2012 384,848,370
384,848,370 The Petroleum Fund has determined that a fluctuation in interest rates of 1 is reasonably possible within a given one-year time period, given
the economic environment in which the Fund operates. In determining the impact of an increasedecrease in net assets arising from market risk, management of the Fund has considered prior period
and expected future movements of the portfolio based on market information.
iii Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Petroleum Fund invests in fixed income and equity securities that are denominated in currencies other than the United States dollar.
Accordingly, the Fund’s assets may be affected favourably or unfavourably by fluctuations in currency rates. Therefore, the Fund is necessarily subject to foreign exchange risks.
The assets of the Petroleum Fund to which the Fund had significant currency exposure at balance date, reported in United States Dollar equivalents, are set out in the following table:
As at 31122013 USD
EUR AUD
GBP JPY
Other Currencies
Total
Cash and cash equivalents 47,225,621
10,131,782 1,826,965
3,343,558 2,367,857
5,289,322 70,185,105
Equity securities 2,913,563,696
668,865,807 162,180,483
496,089,872 468,696,730
623,955,974 5,333,352,562
Interest bearing securities 8,112,364,538
444,651,310 145,008,543
146,555,355 136,010,191
586,562,474 9,571,152,411
Receivables 3,900,335
2,848,135 459,382
1,281,558 446,234
2,176,623 11,112,267
Payables 2,327,814
8,623,945 -
36,116 13,147,595
9,741,593 33,877,063
Total physical exposure 11,074,726,376
1,117,873,089 309,475,373
647,234,227 594,373,417
1,208,242,800 14,951,925,282
Forward exchange contracts - buy foreign currency
6,314,652 -
- -
12,990,124 9,441,116
28,745,892 - sell foreign currency
22,391,135 -
- -
4,935,470 1,245,264
28,571,869
Total derivative exposure 16,076,483
- -
- 8,054,654
8,195,852 174,023
Total net exposure 11,058,649,893
1,117,873,089 309,475,373
647,234,227 602,428,071
1,216,438,652 14,952,099,305
Exposure of Fund net assets 73.97
7.48 2.07
4.33 4.03
8.13 100
- 26 -
Petroleum Fund of Timor-Leste Notes to the financial statements
for the year ended 31 December 2013
12. Financial risk and management objectives and policies continued
c Market risk continued iii Currency risk continued
As at 31122012 USD
EUR AUD
GBP JPY
Other Currencies
Total
Cash and cash equivalents 51,798,633
1,188,297 999,083
2,077,287 1,868,318
2,952,671 60,884,289
Equity securities 1,597,055,893
365,700,839 114,973,957
305,523,070 260,955,141
390,519,028 3,034,727,928
Interest bearing securities 8,676,319,344
- -
- -
- 8,676,319,344
Receivables 1,923,694
994,919 338,187
2,165,112 341,917
713,871 6,477,700
Payables 2,726,118
- -
19,309 -
412,726 3,158,153
Total physical exposure 10,324,371,446
367,884,055 116,311,227
309,746,160 263,165,376
393,772,844 11,775,251,108
Forward exchange contracts - buy foreign currency
4,307,942 -
- -
- 340,772
4,648,714 - sell foreign currency
340,751 -
- 1,321,927
2,888,555 -
4,551,233
Total derivative exposure 3,967,191
- -
1,321,927 2,888,555
340,772 97,481
Total net exposure 10,328,338,637
367,884,055 116,311,227
308,424,233 260,276,821
394,113,616 11,775,348,589
Exposure of Fund net assets 87.71
3.12 0.99
2.62 2.21
3.35 100
Summarised sensitivity analysis
The Petroleum Fund is primarily exposed to the Euro, Australian Dollars, Pound Sterling and Japanese Yen. The following table details the Petroleum Funds sensitivity to a 10 increase and decrease in the United States Dollar against the relevant
foreign currencies. 10 is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10 change in foreign currency rates. The sensitivity analysis includes cash and cash equivalents, interest receivable and qualifying instruments. A negative number below
indicates a decrease in profit where the United States Dollar strengthens 10 against the relevant currency. For a 10 weakening of the United States Dollar against the relevant currency, there would be a comparable impact on the profit, and the balances below would be a
positive. The analysis presumes that all other variables, in particular interest rates, remain constant.
As at 31122013
USD As at
31122012 USD
EUR impact 111,787,309
36,788,405 AUD impact
30,947,537 11,631,123
GBP impact 64,723,423
30,842,423 JPY impact
60,242,807 26,027,682
Other currencies impact 121,643,865
39,411,362
Total currencies impact 389,344,941
144,700,995
This is mainly attributable to the exposure outstanding on all relevant foreign currencies relating to cash and cash equivalents, interest receivable and qualifying instruments in the Petroleum Fund at the end of the reporting period.
- 27 -
Petroleum Fund of Timor-Leste Notes to the financial statements
for the year ended 31 December 2013
12. Financial risk and management objectives and policies continued