Jupiter Annual Report 2010 - Jupiter Asset Management

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Financial statements – continuation | Notes to the financial statements 34. Financial risk management continued Interest rate risk sensitivity analysis Interest rate risk sensitivity analysis on the consolidated income statement has been performed on the basis of a 50 bps rise in interest rates at the beginning of the year. The following table demonstrates the sensitivity to a possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact on floating rate borrowings). There is only an immaterial impact on the Group’s equity. 31 December 2010 31 December 2009 Increase/decrease in basis points bps Effect on profit before tax £m Increase/decrease in basis points bps Effect on profit before tax £m LIBOR 50 1.6 50 1.1 The sensitivity analysis takes account of the relevant derivative transactions the Group has entered into in order to provide a hedge against such movements and takes into account the economic cash flow impact. ■■Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract leading to a financial loss in its operating activities. The Group is exposed to credit risk primarily for trade receivables and from its financing activities, including deposits with banks and financial institutions and other financial instruments. Fee receivables arise principally within the Group’s investment management business and amounts are monitored regularly. Historically, default levels have been insignificant and the Group’s maximum exposure to credit risk is represented by the carrying value of its financial assets (see the trade and other receivables note). Trade and other receivables that are past due are not considered to be impaired. The Group’s exposure to credit risk at 31 December is shown below: Group 31 December 2010 £m 31 December 2009 £m Derivative financial instruments 0.9 – Trade and other receivables (excluding prepayments and deferred acquisition and commission costs) 83.1 55.0 Cash and cash equivalents 220.3 223.4 Total credit risk exposure 304.3 278.4 Company 31 December 2010 £m 31 December 2009 £m Trade and other receivables (excluding prepayments and deferred acquisition and commission costs) 263.7 – Cash and cash equivalents 28.3 – Total credit risk exposure 292.0 – Annual Report & Accounts 2010 98 Jupiter Fund Management plc
Financial statements – continuation | Notes to the financial statements 34. Financial risk management continued With regard to credit risk related to financial instruments and cash deposits, the Group’s policy is to place deposits only with financial institutions, which satisfy minimum ratings and other criteria set by the Balance Sheet Management Committee. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty failure. The Risk Committee monitors the Group’s counterparty exposures. The Group’s maximum exposure to credit risk for the components of the balance sheet at 31 December 2010 and 31 December 2009 is the carrying amounts as illustrated in the cash and cash equivalents note and in the trade and other receivables note. The table below contains an analysis of current and overdue financial assets for the Group: At 31 December 2010 At 31 December 2009 Financial assets Derivative financial instruments £m Trade and other receivables £m Cash and cash equivalents £m Total £m Derivative financial instruments £m Trade and other receivables £m Cash and cash equivalents £m Total £m Not past due 0.9 66.3 220.3 287.5 – 47.1 223.4 270.5 0-3 months past due – 14.1 – 14.1 – 6.5 – 6.5 3-6 months past due – 2.7 – 2.7 – 1.4 – 1.4 6-12 months past due – – – – – – – – Greater than 12 months past due – – – – – – – – Total 0.9 83.1 220.3 304.3 – 55.0 223.4 278.4 The table below contains an analysis of financial assets as rated by Fitch Ratings for the Group. At 31 December 2010 At 31 December 2009 Financial assets Derivative financial instruments £m Trade and other receivables £m Cash and cash equivalents £m Total £m Derivative financial instruments £m Trade and other receivables £m Cash and cash equivalents £m Total £m AAA – – – – – – – – AA 0.9 – 174.0 174.9 – – 211.7 211.7 A – – 46.3 46.3 – – 11.7 11.7 BBB – – – – – – – – Not rated – 83.1 – 83.1 – 55.0 – 55.0 Total 0.9 83.1 220.3 304.3 – 55.0 223.4 278.4 The financial assets are predominately graded A or better and the portfolio has no exposure to emerging markets, sub-investment grade assets or any asset-backed securities. Trade and other receivables which are not rated comprise of fees receivable for fund management. Annual Report & Accounts 2010 99 Jupiter Fund Management plc
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Jupiter Annual Report 2010 - Jupiter Asset Management

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