| Notes to the accounts 31 December 2006 |
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| 11. |
Investments |
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Equities |
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Bonds |
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Cash |
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Total |
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€'000 |
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€'000 |
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€'000 |
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€'000 |
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Market value at 1 January 2006 |
4 979 |
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3 463 |
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383 |
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8 825 |
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Foreign exchange differences |
125 |
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72 |
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6 |
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203 |
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Additions |
1 918 |
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1 009 |
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2 999 |
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5 926 |
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Disposals |
(1 639) |
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(1 001) |
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(2 928) |
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(5 568) |
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Investment management costs |
- |
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- |
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(53) |
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(53) |
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Net investment gain/(loss) |
910 |
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(192) |
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1 |
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719 |
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6 293 |
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3 351 |
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408 |
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10 052 |
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Historic cost at 31 December 2006 |
4 705 |
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3 430 |
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408 |
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8 543 |
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Financial instruments and financial risk |
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The ActionAid International trustees have a duty to maximise the benefit to poor people delivered through the resources it raises and to manage any risks to these resources that may arise from movements in market prices for financial instruments, changes in currency or interest rates. Funds are raised from individual supporters and other donors in a variety of currencies, principally Euro, British Pounds and US Dollars, and ultimately expended in those currencies and in the currencies in use in the countries in which ActionAid operates. |
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ActionAid International is exposed to risks, both through the assets chosen for investment and through our operations in various countries with different currencies. These risks, and our methods of managing them, are described below. |
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The investment objectives of the long term investments set out above, are contained in ActionAid International's investment policy. The objective is to achieve a higher rate of income (in the form of distributions and interest) than achieved on liquid assets whilst benefiting from capital growth. Risks arising from individual stock selection are managed through holding a portfolio of equities. The return on bonds is fixed in cash terms for the period that the bonds are held, but the fair value varies with changes in prevailing interest rates as well as market preferences between asset classes. The risks to bonds and equities are managed through the employment of professional fund managers mandated to actively manage the portfolio. |
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The majority of ActionAid International's reserves are held as cash or short term deposits, as set out in the balance sheet. Cash balances are held in a number of currencies, predominantly Euro, British Pounds and US Dollars. Exposure to exchange rate risk is not formally managed through the use of hedging instruments but is managed through a policy of holding currency broadly in proportion to the anticipated demand for currencies within the Group. Exposure to losses due to relative depreciation of the local currencies of the developing countries where we work is managed by retaining balances in relatively stable currencies until needed for expenditure in country. Short term bank deposits are at prevailing rates of interest and have maturities of less than three months. The exposure to interest rate risks from these deposits is not considered material. |
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Receivables and payables set out in notes 12 and 13 are denominated in a number of currencies. Exchange risk relating to these balances is managed in the manner described above in relation to cash and deposits. |
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